Sahabat Alam Malaysia (SAM) welcomes the announcement last month by the Norwegian Ministry of Finance to exclude Malaysian-based Samling Global Limited from its Government Pension Fund Global (GPFG) investment portfolio.

The pension fund is described as Europe’s largest institutional investor that held 2,792 billion kronor (approximately RM1.5 trillion) in international stocks and bonds as of end of June.

While it is a national embarrassment, the decision based on recommendation from the GPFG’s Council on Ethics should serve as a wake-up call to many quarters in Malaysia.

The Council carried out its own investigation and concluded that the company’s operations in the rainforests of Sarawak – Malaysia, and Guyana contributed to illegal logging and severe environmental damage.

Out of Samling’s 15 logging concessions covering an area of 1.4mil ha in Sarawak, the investigation selected five concession areas for further examination that entailed field surveys and analyses of satellite images. Samling harvests more than 2.3 million m3 of timber a year, over 80 per cent of which is felled in Sarawak.

Among the ‘extensive and repeated breaches’ committed by Samling in its operation in Sarawak as documented by the Council’s own investigation were:

• Illegal logging in an area officially declared as an extension to Pulong Tau National Park, Sarawak.

• Illegal road construction and logging in steep slope areas where such logging is prohibited.

• Re-entry logging without an Environmental Impact Assessment.

• Logging outside of concession boundaries, and within the buffer zone close to the Indonesian border.

The assessment by the Council also noted that the Malaysian auditor-general has documented illegal logging in another two of Samling’s concessions in the latter’s 2008 annual report.

Assessment of Samling’s on-the-ground practices showed that the violations detected in the investigated concessions showed signs of being systematic as well as the risk that it will continue in the future, indicating systematically irresponsible behaviour on the part of the company.

SAM calls upon the Sarawak government to view the findings seriously and take appropriate actions under its own forestry and environmental laws to bring Samling to justice.

While Samling Global is listed in the Hong Kong Stock Exchange, its subsidiary Lingui Development Bhd is listed on the main board of the Kuala Lumpur Stock Exchange (KLSE).

The Securities Commission and Bursa Malaysia, therefore, have an obligation to conduct an investigation into the revelations and accusations of the Norwegian’s pension fund.

The Securities Commission’s non-mandatory Code of Corporate Governance (Revised 2007) is a reflection that in order for Malaysian companies to remain attractive to foreign investments, it is vital that our so-called corporate citizens adopt sustainable practices in their daily operations.

Bursa Malaysia has also been toying with the idea of a Social Responsibility Index for many years but there seems to be a serious lack of political will to get it off the ground, attributable to the lack of appetite for doing business responsibly in the Malaysian corporate world, particularly those in the resource extraction sector like timber.

It is high time that the Securities Commission pay attention to the conduct of logging companies to protect not only the general good name of Malaysian companies but also the integrity of the country’s natural resources that ought to be the heritage of all Malaysians, now and in the future.

We urge the Federal Government and the relevant authorities to investigate the violations raised in the council’s report and ensure that appropriate actions are taken to reform the forestry sector particularly in Sarawak.

The GPFG Council of Ethics’ report can be viewed here .

The writer is president, Sahabat Alam Malaysia .