The RwB Coalition has always closely followed hydropower development in Indonesia, participated in CSO-led assessments, co-sponsored appeals to major international finance institutions. The desision of Norvegian Pension fund is a very important testimony and precedent. We republish this exellent account by Mongabay.
- The Norwegian state pension fund has recommended excluding a major Chinese hydropower developer from further investment, due to its association with a dam in Indonesia that threatens the world’s rarest great ape.
- The dam is being built by a subsidiary of Chinese state-owned multinational Power Construction Corporation of China Ltd. (PowerChina) in the only known habitat of the critically endangered Tapanuli orangutan, a species with a total population of less than 800.
- The Norwegian pension fund’s ethics council launched an investigation into the project and concluded that it will “have a destructive and permanent impact on the environment, which will pose a serious threat to the survival of this orangutan species as well as other critically endangered species.”
- Environmentalists say Norway’s recommendation further reinforces the risks the dam project poses on the orangutan and should prompt the project’s main backers, the Chinese and Indonesian governments, to abandon the project.
JAKARTA — Major investors continue to sour on a hydropower project being built in an orangutan habitat in Indonesia, with the powerful Norwegian state pension fund the latest to call for cutting ties.
On July 6, the fund, the largest sovereign wealth fund in the world, with $1.4 trillion in assets, announced its recommendation to exclude investments in Chinese state-owned multinational Power Construction Corporation of China Ltd. (PowerChina).
PowerChina is a major player in the international hydropower industry, with operations in more than 130 countries. One of those countries is Indonesia, where a PowerChina subsidiary, Sinohydro Corporation, is building a massive dam in the Batang Toru forest in northern Sumatra, the only known habitat of the critically endangered Tapanuli orangutan (Pongo tapanuliensis).
As of the end of 2022, the Norwegian Government Pension Fund Global held a 0.03% stake, valued at 40.3 million krone ($4 million), in the listed equity of PowerChina. (Shares not held by the Chinese government are listed on the Shanghai Stock Exchange.)
The Norwegian pension fund’s ethics council justified its exclusion recommendation on concerns about the Batang Toru project’s impact on the orangutans and the environment.
“The Council concludes that the construction of the hydropower project in Batang Toru will have a destructive and permanent impact on the environment, which will pose a serious threat to the survival of this orangutan species as well as other critically endangered species,” it said in a statement.
The $1.6 billion Batang Toru project, part of the Chinese-backed Road and Belt Initiative, was meant to go into operation in 2022, but has been delayed to 2026 because of pandemic-related setbacks. Sinohydro, which is building the dam, will also operate it once it’s finished through the Indonesian company PT North Sumatera Hydro Energy (NSHE), essentially a special purpose vehicle for the Chinese construction giant.
Scientists have repeatedly warned that the project threatens the Tapanuli orangutan, a species only formally described as a new species in 2017. At the time it was described, scientists immediately declared it the most threatened great ape species in the world.
There are fewer than 800 individuals remaining in the wild today, all found in a habitat that’s been fragmented into three subpopulations: the west, east and south blocks of Batang Toru.
Scientists say that the hydropower dam and its transmission lines will jeopardize the connectivity between the three subpopulations, which would dramatically cut the diversity of the ape’s gene pool. This will likely lead to inbreeding, disease and the eventual extinction of each subpopulation, they say.
NSHE has said the project would not devastate the Batang Toru ecosystem or the orangutan habitat, and that it complies with standards set by the World Bank’s International Finance Corporation (IFC), including guidelines on biodiversity conservation.
The Norwegian pension fund’s ethics council used those same standards to assess the fate of its investment in PowerChina and came up with different findings. It noted that the dam project area lies within not just a known orangutan habitat, but also a key biodiversity area with rich ecosystems that are home to unique wildlife such as the Tapanuli orangutan and the Sumatran tiger (Panthera tigris sumatrae).
The Batang Toru forest is also known for its “unique assemblage of primates,” being the only place on Earth where three exceedingly rare ape species — Tapanuli orangutans, agile or black-handed gibbons (Hylobates agilis) and siamang gibbons (Symphalangus syndactylus) and orangutans — live within the same geographic area.
Per the IFC’s standards, the fact that the Batang Toru forest is a known orangutan habitat should on its own be enough to qualify it as a critical habitat. And building a project in a critical area is “acceptable only in exceptional circumstances, and individuals from the IUCN Species Survival Commission (SSC) Primate Specialist Group (PSG) Section on Great Apes (SGA) must be involved in the development of any mitigation strategy,” according to the standards.
By that measure, the project should have avoided the Batang Toru forest in the first place if it really sought to comply with IFC standard, the IUCN said in 2020.
In a 2018 report by NSHE and an NGO called Pusaka Kalam, the authors concluded that “the project sites used to develop Batang Toru HPP [hydropower project] are seldomly used by orangutans, hence cannot be categorized as orangutan main habitats,” and that the orangutan population in the project area was probably very small.
However, the IFC found that Tapanuli orangutan densities were 26-57% higher in forests in the hydro project’s footprint than elsewhere in its range. Therefore, the IFC concluded, the potential environmental impacts of the project were too high.
Even if the project didn’t lie in the core area for the Tapanuli orangutan, it’s still crucial to avoid building a dam there, according to the Norwegian pension fund’s ethics council. This is because the Tapanuli orangutan is down to just 5% of its historic range, which means that any further reduction would inevitably increase the threat to the ape population, the council said.
“There is no doubt that construction of a 78-m [256-foot] high dam with associated reservoir and infrastructure will result in huge, and irreversible, changes in what has been a pristine landscape partly covered in dense rainforest,” the council said in its full recommendation, which cited extensively from Mongabay’s years-long reporting on the project. “The consequences for all the endangered species that depend on this area could therefore be enormous.”
The council previously gave PowerChina the opportunity to prove that the company had complied with the IFC’s standards in constructing the hydropower dam. In November 2022, and again in December of that year, the council contacted PowerChina to request information about the project and the environmental assessments the company had performed.
However, PowerChina didn’t reply to the council’s queries or disclose how it implemented its guidelines, or what it was doing to reduce environmental damage or avoid accidents in the Batang Toru project.
“The Council takes it as read that the company does not comply with the IFC biodiversity standard and notes that several financial institutions, including the IFC and Bank of China, have declined to finance the hydropower project due to the environmental risks involved,” the council said.
The council also noted that PowerChina had failed to provide information about the string of worker accidents plaguing the project as well as about how it was addressing the matter.
At least 17 people have died in accidents related to the project, including in two tunnel collapses last year that killed two workers and a landslide in 2021 that claimed the lives of three workers and 10 locals.
These casualties indicate that PowerChina’s safety measures are inadequate, the council said.
Despite the accidents and concerns over safety, PowerChina in its 2021 environmental and social governance report said it hadn’t a major production safety accident that year.
“There were no major or severe safety production accidents throughout the year, the foundation of safety production was strengthened and the level of safety production was effectively improved,” the report said.
The council said the failure to mention these incidents at its subsidiary’s project site indicated that PowerChina didn’t deem the accidents to be serious despite the casualties.
“The Council considers that this helps to undermine the credibility of the company’s health and safety systems and safety culture,” the council said.
Call for action
Amanda Hurowitz, the senior director for Asia at U.S.-based campaign group Mighty Earth, said the Norwegian pension fund’s divestment decision is in line with the global target of halting and reversing biodiversity loss by 2030, as enshrined in the Kunming-Montreal Global Biodiversity Framework.
Conversely, proceeding with the project would go against the spirit of the framework, she said, which was signed by 196 countries, including China and Indonesia, at the U.N. Biodiversity Conference (COP15) in Montreal.
“Anyone who looks closely will come to the same conclusion reached by the Norwegian pension fund: investing in this project means funding the destruction of one of our closest relatives in the natural world,” Hurowitz said. “It’s unconscionable.”
While the amount of Norway’s investment in PowerChina is small, the pension fund’s decision still sends a signal to the main backers of the dam project, China and Indonesia, to scrap the project, according to Indonesian environmental and human rights advocacy group Satya Bumi.
“While the amount might not be significant, the Norwegian pension fund’s action should be an important indicator for the Indonesian government in seeing the Batang Toru project,” Satya Bumi executive director Andi Muttaqien told Mongabay. “The governments of China and Indonesia should have done the same [by abandoning the project].”
China, as the co-host of the COP15 UN Biodiversity Conference where the global biodiversity target was adopted, should show its commitment to protect biodiversity by scrapping the project, he added.
“Investing in the project means funding the destruction of the habitat of the Tapanuli orangutan, the rarest great ape species in the world with fewer than 800 individuals remaining,” Andi said.
Besides the hydropower project, the Batang Toru ecosystem is also threatened by a geothermal power plant and a gold mine, according to Dana Prima Tarigan, the director of North Sumatra-based environmental NGO Green Justice Indonesia.
The Martabe gold mine, located in the west block of the orangutan habitat, was bought by U.K. conglomerate Jardine Matheson Holdings Ltd. (Jardines) in 2018 through its Indonesian subsidiary, Astra International, the largest conglomerate in the Southeast Asian country. The mine, in turn, is operated by an Astra International subsidiary, PT Agincourt Resources.
Mining operations began in 2012 and the project is currently looking to expand its operations, with deforestation detected within the mining concession in recent years.
According to Mighty Earth, the vast majority of the most recent forest loss in the Martabe concession was detected within the habitat of the Tapanuli orangutan and areas mapped as high carbon stock (HCS) forest.
With the presence of a number of large projects within the Batang Toru ecosystem, Dana said the government should review the existing licenses in the region.
“There’s a lot of biodiversity depending on the Batang Toru forest,” he said.