Summary: MUFG breaches peatland protection by financing Indonesian palm oil expansion, violating its NDPE policy and risking environmental harm.
Japanese financial giant Mitsubishi UFJ Financial Group (MUFG) has breached its sustainability pledge by funding palm oil expansion on Indonesia’s carbon-rich peatlands. An investigation by Rainforest Action Network (RAN) revealed MUFG’s Indonesian subsidiary provided US$281 million in loans to a notorious palm oil company, causing significant environmental damage.
Why Peatlands Matter for the Environment
Peatlands are waterlogged wetlands that store more carbon than all other vegetation types combined. Covering about 3 million km² globally, peat soils hold over 600 gigatons of carbon—roughly 30% of the world’s soil carbon. Destroying peatlands releases greenhouse gases, worsening climate change and increasing risks like floods and water contamination.
MUFG’s Funding Violates Its NDPE Commitment
In 2021, MUFG committed to a ‘No Deforestation, No Peat and No Exploitation’ (NDPE) policy. This policy prohibits financing palm oil projects that convert peatlands. Despite this, satellite data shows MUFG’s subsidiary Danamon financed Tunas Baru Lampung (TBLA), which cleared 7,800 hectares of peatlands from 2020 to 2023 for plantations. This deforestation contributed to transboundary haze pollution from fires burning over 14,500 hectares in 2023 alone.
Implications for Business and Sustainability
TBLA’s ecological damage has led major palm oil traders to stop sourcing from the company. The Indonesian government has also sued TBLA for over US$41 million in damages caused by peatland fires. MUFG’s failure to enforce its sustainability policies raises questions about its commitment to human rights and environmental protection. This incident increases scrutiny on financial institutions involved in unsustainable agriculture.
Although MUFG claims to conduct rigorous client assessments and promote sustainable palm oil certification, these breaches reveal gaps in policy enforcement. NDPE policies are rare among Asian banks. Strong, transparent environmental standards present opportunities for institutions to lead and attract sustainability-minded investors.
In summary, MUFG’s peatland deforestation financing breach highlights the urgent need for stronger enforcement of sustainability commitments in the financial sector. As climate concerns rise, banks adopting robust environmental policies can support sustainable commodities, protect ecosystems, and reduce climate risks while benefiting from green finance markets.
Source: Eco-Business