Moody’s: Support for RSPO-compliant firms

PETALING JAYA: Oil palm planters, particularly companies which comply with tighter sustainability standards of the Roundtable on Sustainable Palm Oil (RSPO), will have better support in their credit profile ratings, according Moody’s Investors Service.

Three Moody’s-rated palm oil producers – Sime Darby Plantation Bhd ( Baa1 stable), IOI Corp Bhd ( Baa2 stable) and Indonesia’s Sawit Sumbermas Sarana Tbk PT ( B1 stable) – are pursuing full RSPO certification and are unlikely be affected by the recent RSPO revised principles and criteria (P&C).

“Therefore, the companies are likely to be in compliance with the revised RSPO requirements ahead of the 12-month grace period.

“Among our rated issuers, Sime Darby Plantation is best positioned for sustainability practices.

“It is the largest producer globally of certified sustainable palm oil, producing 20% of global output, and one of the founding members of the RSPO,” said Moody’s in a report.

The rating agency added that IOI Corp, another RSPO founding member, had enhanced its sustainability practices.

Last month, the RSPO officially closed its complaint from 2016 in recognition of IOI’s continued commitment to a number of practices, including no development in high conservation value areas.

Amid growing awareness and demand for sustainable palm oil production, Moody’s expected companies that have RSPO certification to be better positioned to benefit from the favourable long-term outlook for palm oil demand.

According to Oil World, an independent global research firm on oil seeds, global palm oil consumption will rise to 85 million tonnes by 2025 from 62 million tonnes in 2016.

The RSPO is an association of palm oil industry stakeholders that promotes the growth and use of sustainable palm oil products.

Key elements of the updated criteria are related to halting deforestation, protecting peatlands and strengthening labour rights.

The RSPO’s P&C offers a generic standard that defines the criteria for the manufacturing of sustainable palm oil at the palm oil mill and production standards applied during the planting and harvesting process.

It is one of the most widely-used certification standards globally and seeks to address environmental, social and governance (ESG) issues in the palm oil sector.

“We expect that palm oil producers with well-established sustainability practices will have an edge in terms of better access to larger customers, which are increasingly adopting more stringent sustainability policies, and to funding, as the ESG criteria are becoming increasingly important considerations for investors and lenders,” said Moody’s.

Among our rated issuers, Sime Darby Plantation is best positioned for sustainability practices. Moody’s Investors Service