Global Witness has rebuked leading financial services firm Credit Suisse over its new investment in Vietnamese firm Hoang Anh Gia Lai (HAGL), whose rubber plantations in Cambodia have been linked to illegal logging and land grabs by the London-based environmental campaign group.
In a statement, Global Witness said Credit Suisse had in late May swapped its HAGL bonds to acquire more than 10 percent of the company’s shares. The bonds for shares swap was conducted only weeks after the campaign group released the results of a lengthy investigation into HAGL’s alleged abuses in Cambodia.
Global Witness said the swap made Credit Suisse the second- largest investor in HAGL—after its founder and chairman, Doan Nguyen Duo—which is a violation of the company’s human rights commitments, including its professed adherence to the U.N. Global Compact.
The compact calls on businesses to adhere to “universally accepted principles” covering human rights, labor, the environment and corruption.
“This is very worrying. Credit Suisse became a major shareholder in HAGL just when any responsible investor would be blacklisting them,” said Megan MacInnes, Global Witness’ land team leader. “What kind of checks can Credit Suisse have done if it thought this was a good time to provide finance to a company like HAGL?”
According to Global Witness, the Swiss bank told the campaign group that it was now legally obligated to keep the shares for at least a year. The firm also told Global Witness that “no specific concerns were identified” when it reviewed HAGL’s operations before buying the bonds and that it carried out no additional due diligence review before swapping them for shares in May.
On Thursday, Credit Suisse added that its shares were merely a hedge against HAGL’s investments and that the bonds had been purchased years ago.
“Credit Suisse’s holding is for the purpose of hedging transactions it has entered into with its clients,” a spokesperson said by email. “Credit Suisse’s bond holding was first acquired in 2011, about two years before Global Witness made public its views on the company.
The bank declined to make any additional comment.
In its May report, Rubber Barons, Global Witness accused HAGL’s plantations in Cambodia of violating local laws by failing to consult with local communities, not completing environmental impact assessments and clear felling healthy forest both on and off of legal land concessions, all with “disastrous consequences” for the environment and the area’s indigenous communities.
Six months later, seeing little progress from HAGL to mend its ways, Global Witness called on Deutsche Bank, the International Finance Corporation and others to divest from the firm.
Deutsche Bank has subsequently dropped the majority of the $4.5 million stake it held in HAGL through its DWS Vietnam Fund.
In today’s statement, Global Witness said it had been informed by the Liechtenstein-based asset management firm CBR Investments that it too had decided to sell its entire position in HAGL days after Rubber Barons was released.
Because Credit Suisse is legally obligated to hold its HAGL shares for 12 months, Global Witness said it is not asking the bank to divest now but should do so once the term was up. But it did urge the bank to review its due diligence procedures “to ensure its investments fund fair and sustainable development models rather than land grabs and deforestation.”
For its part, HAGL has insisted that it has followed all local laws in operating its Cambodian plantations and denies any wrongdoing.