Issue 193: Singapore-Listed Palm Oil Stocks Catch Biodiesel Spark

by Kenneth Lim (Business Times) This week in ESG: Analysts raise forecasts for crude palm oil as Iran war continues -- Shares of Singapore-listed palm oil companies have climbed steadily so far this year as the war in Iran further elevates the price of the commodity.

The fortuitous mix of supportive fundamentals could provide the palm oil companies with a precious opportunity to burnish their sustainability credentials ahead of a future where deforestation policies and nature reporting gain prominence.

One of the beneficiaries of the fossil fuel supply disruptions that have arisen from the Middle East conflict has been the uber useful palm oil.

One of the key drivers behind the stock rallies has been the price of palm oil itself. The average spot month settlement price of crude palm oil (CPO) futures on Bursa Malaysia increased from 4,043.82 Malaysian ringgit per tonne in December 2025 to RM4,570.36 per tonne in April 2026, a 13 per cent hike.

That pricing strength rests on three factors, two of which are related to the Iran war. The first is that the closure of the Strait of Hormuz has driven up energy prices; since palm oil can be substituted for mineral oils in some fuels and consumer products, higher oil and gas prices also tend to raise prices for palm oil.

The second factor is that the ongoing supply disruption has strengthened South-east Asian governments’ resolve on biodiesel adoption. Most notably, Indonesian Agriculture Minister Andi Amran Sulaiman said on April 19 that Indonesia will stop importing subsidised low-grade diesel from July 1 as the country imposes a mandate for B50 biodiesel. The number in B50 is the percentage of biofuel blended with mineral diesel, and B40 is the current mandate in Indonesia.

Malaysia also said in April that it will gradually raise its biodiesel mandate to B15 from the current B10 policy. Thailand currently subsidises B20 fuel.

The third factor is weather related. The general expectation is that higher surface temperatures due to the El Nino effect this year could hurt palm oil production, which would raise prices.

Moving alongside those supportive factors are sustainability-related issues where the impact on the business hinges on how well the company meets market and regulatory expectations.

One of the more imminent ones is the European Union Deforestation Regulation (EUDR), which aims to ban imports that originate from recently deforested land or have contributed to forest degradation. Products that use palm oil are among those covered by the rule.

This week, the European Union completed a simplification review of the long-delayed rule and issued a draft for public comment. Among the proposed changes is an expansion of the scope to include more palm oil derivatives, including soap.

Perhaps more important is that the December 2026 implementation timeline is still intact. The good news is that the palm oil companies will now have greater visibility about the timing and the requirements of the new law. But the work to achieve compliance – and to protect revenue – lies ahead.

Another major transition event worthy of attention is ongoing progress towards standards for nature reporting.

In April, the International Sustainability Standards Board, which drafts global accounting rules on sustainability disclosures, agreed to propose a practice statement on nature-related disclosures. An exposure draft is expected to be put up for public comment in October.

The practice statement will not change requirements of the existing sustainability reporting standards, and instead provide guidance on how to disclose nature-related risks and opportunities within the current rules. But it is one step in a committed journey by the accounting body to address nature reporting.

The policy trajectory suggests that the palm oil companies will have to be more conscientious about their nature-related disclosures. This will take more resources, but if done well it could also raise a company’s profile with investors that incorporate nature factors into their deployment decisions. The number and sophistication of those investors is likely to grow, in the same way that sustainability and climate factors are now integrated into the assessments by most major fund managers. READ MORE