Concept for the Regenerative Palm Oil Framework: Financing the shift from do no harm to regenerative palm oil production

Posted on 02 October 2023

The purpose of this document is to outline a possible framework for regenerative palm oil. The goal is to guide the development of sustainable financial products that encourage adopting leading practices that benefit people, biodiversity, and the environment.

A proposed definition of regenerative palm oil in the framework is as follows: “palm oil production that maintains crop profitability, contributing to the social/economic wellbeing of communities and workers, as well as seeking to enhance biodiversity, ecosystem services, climate resilience and carbon sequestration, as part of a landscape approach”.

The concept of 'enhancing biodiversity' or achieving a 'nature-positive' state relative to the original ecosystem is not feasible while land is actively used for palm oil cultivation. This framework therefore aims to encourage actions that help achieve improved biodiversity or a nature-positive outcome as compared to the initial baseline before implementing actions that are outlined under this framework. This includes transitioning from degraded non-palm oil land to regenerative plantations or from RSPO-certified plantations to regenerative ones with measurable biodiversity gains. Notably, this framework, as a requirement, complements RSPO certification and excludes support for plantations involved in deforestation or conversion post-2018. 

It is intended to help inform financial institutions in their engagement with operators in the palm oil supply chain. In addition to ongoing efforts to tackle sector risks and establish standard sustainability criteria (such as avoiding deforestation and conversion in production), this framework could learn from emerging successful models to support the growth of leading regenerative palm oil operations.

  • Early examples of the application of regenerative approaches in palm oil production, including agroforestry or chemical-free production demonstrated higher yields or profitability for smallholders[1], or savings in herbicide costs, increased biodiversity, and diversified income streams through livestock husbandry in both smallholder settings and industrial estates.[2]
  • There is preliminary evidence of further cost savings through regenerative practices: reliance on organic fertiliser or renewable energy will reduce production costs of palm oil. 
  • Evidence from implementation in Sabah[3] indicates the establishment of wildlife corridors can lead to declining crop losses.[4]
  • Other assessments point to lowered climate vulnerability attributable to healthy soils and benefits accruing from good community relations.[5]

The framework recommends that financiers seek an independent third-party expert opinion on any adaptation or adoption of this framework for their use. The sections covered in this framework are consistent with those outlined in the Green Bonds Principles from the International Capital Markets Association. Client-facing teams working with the palm oil sector could use this framework to identify potential regenerative palm oil financing opportunities amongst eligible plantation companies or smallholder cooperatives, including through relationships with traders, buyers, and retailers. Additionally, partnerships with organisations engaging with small scale producers might help to identify where these practices could be implemented with greatest impact.

Though regenerative palm oil operations exist, as do plantations with some regenerative practices applied, the commercial financing of the transition to regenerative production of palm oil remains a concept on paper. We propose this framework is used to inform pilots that bring together financial institutions, actors in the palm oil supply chain, and other stakeholders to collaborate and test the real-world applicability of this framework and the benefits it can derive.

WWF has developed a framework for regenerative palm oil as a part of the Climate Solutions Partnership, a collaboration between HSBC, the World Resources Institute and WWF.

 

Notes: 

[1] SAF Dende smallholders in Brazil obtained 29% higher FFB yields and oil contents in agroforestry plots compared to monoculture oil palm (https://www.embrapa.br/en/busca-de-noticias/-/noticia/60140370/dende-em-sistemas-agroflorestais-e-produtivo-e-gera-servicos-ambientais). WildAsia’s WAGS-Bio programme in Sabah yielded a 30% increase in gross profit compared to conventional smallholder plots (https://oilpalm.wildasia.org/spiral/bio/). 

[2] Tohiran K. et al. (2017) Targeted cattle grazing as alternative to herbicides for controlling weeds in bird-friendly oil palm plantations. Agronomy for Sust. Development. 37; Gabdo B. & Ablatif, I. (2013) Analysis of the Benefits of Livestock to Oil Palm in an Integrated System: Evidence from Selected Districts in Johor, Malaysian. J. of Agric. Sci. 5

[3] Sabah: A Global Leader in Sustainable Palm Oil | WWF Malaysia

[4]  As part of the collaboration between Sabah Softwoods Berhard and WWF Malaysia https://wwf.panda.org/wwf_news/?345010/WWF-Malaysia-and-Sabah-Softwoods-Berhad-Signs-Agreement-for-Wildlife-Corridor a wildlife corridor was established which reduced crop losses from roughly RM 500’000 per year to RM 5’000 over a 6 year period.

[5] Evidence from other commodities points to reduced climate vulnerability of healthy soils (Nature-related financial risk: use case https://www.cisl.cam.ac.uk/files/robeco-cisl_nature-related_financial_risk_use_case_-_land_degradationl.pdf). Likelihoods of disruption of operations or grievance cases as a result of land conflicts are reduced, if communities are treated fairly and are involved in resource management (Abram N. et al. (2017) Oil palm-community conflict mapping in Indonesia: A case for better community liaison in planning for development initiatives. Applied Geography. 78.)