(ECA Watch, 30 November 2016, Ottawa) In a report dated November 30th 2016 the Dutch National Contact Point (NCP), official monitoring body of the OECD Guidelines for Multinational Enterprises in the Netherlands, found that the Dutch official ECA, Atradius State Business (ADSB), may not have exercised sufficient due diligence or fulfilled its duty to use its leverage over its client, the Dutch dredging company Van Oord Marine, to prevent or mitigate possible adverse impacts of its dredging activities in Brazil's Suape Industrial Port Complex, two projects insured with ADSB by Van Oord.
Following lengthy discussions mediated by the Dutch NCP between ADSB, Van Oord and Dutch ECA Watch member Both ENDS, together with Brazilian NGOs representing the affected communities and the Brazilian NCP, the report notes that "adverse impacts have occurred", but avoids taking an "opinion on the parties' respective degree of responsibility for this", believing that "the Brazilian NCP has the primary responsibility to ascertain the causality of the adverse impacts referred to in the complaint."
The Dutch NCP found that ADSB is an MNE under the OECD Guidelines and that ADSB "is 'directly linked' to the possible adverse impacts 'contributed to or caused by a business relationship' (Van Oord) under paragraph II.A.11, and therefore, has an
independent duty to use its leverage on such business relationships to prevent or mitigate adverse impacts resulting from the dredging activities." This is an important precedent, as national ECAs have traditionally claimed to exercise due diligence on the social and environmental impacts of the projects they support solely via the OECD Export Credit Working Group's Common Approaches, a set of non-binding recommendations which apply only to a limited set of OECD ECA supported projects and are monitored by a secretive ECA peer review body akin to foxes choosing which hen houses they might protect.
Both ENDS submission on the “Gaps between the Common Approaches and the OECD Guidelines” has been shared with the Dutch NCP, the OECD and other interested stakeholders. It should be noted that the OECD Guidelines are grounded in an OECD Council Decision that has a similar status to a treaty or a convention. A Council Decision is therefore firmly anchored in international law. Unlike the OECD Guidelines, the Common Approaches are incorporated in an OECD council recommendation, which is a political commitment only, and not anchored in international law. In addition, the Common Approaches only call for a one-time due diligence moment, while the OECD Guidelines clearly call for an ongoing process.
The OECD Guidelines oblige government established NCPs to contribute to the resolution of issues that arise from alleged non-observance of the Guidelines in specific instances and have built-in grievance mechanisms. In this case, the Dutch NCP has recommended that an evaluation of outcomes of the discussions and agreements of the parties be conducted in October 2017, ensuring that there is ongoing follow-up on the adverse impacts that have been alleged: lack of consultation with affected communities, the destruction of fisheries, endangerment of fishing crews, unannounced deep sea explosions, soil and water contamination, lack of mitigating and compensatory measures and remuneration for lost livelihoods and lands, etc.
(Bank Track, Nijmegen, 30 November 2016) Members of Banktrack wrote to the Chair of the Equator Principles Association earlier this month, to urge the Association at its upcoming Annual Meeting to address two distinct and important issues: Equator Principles Financial Institutions (EPFIs) must take long overdue, concrete steps to strengthen their climate commitments; and Banktrack's deep concern about the involvement of a substantial number of EPFIs in the financing of the Dakota Access Pipeline (DAPL). ECA Watch considers this an important issue, as many ECAs work closely together in underwriting investments of private banks in the fossil fuel sector. The portfolios of some ECAs consist of more than 50% underwriting for fossil fuel related transactions. To effectively contribute to stopping climate change from going from bad to worse, ECAs urgently need to change track. DNB, Norway's largest bank, has sold off about $3 million in assets, but its banking division is still responsible for offering the Bakken pipeline companies up to $460 million dollars in credit, over 10 percent of the $3.8 billion Dakota Access pipeline construction costs. The New York Times reported on November 8 that in their battles with the banks, environmentalists have scored some early victories. Earlier this year, JPMorgan Chase announced that it would no longer finance new coal-fired power plants in the United States or other wealthy nations, a retreat that followed similar announcements by Bank of America, Citigroup and Morgan Stanley. The banks’ move away from coal, however, appeared motivated as much by the plunging profitability of coal as by concerns over climate change. Another Banktrack letter signed by over 400 organizations from more than 50 countries, including many members of ECA Watch, has just gone out to a broader set of banks expressing deep concern about their participation in a $2.5 billion credit agreement led by Citibank with Dakota Access LLC and Energy Transfer Crude Oil Company LLC.
(Guardian, 30 November 2106, Washington) resident Barack Obama has staked his legacy on the environment, positioning his administration as the most progressive on climate change in US history. However, an obscure agency within his own administration has quietly spoiled his record by helping fund a steady outpouring of new overseas fossil fuel emissions – effectively erasing gains expected from his headline clean power plan or fuel efficiency standards. Since January 2009, the US Export-Import Bank has signed almost $34bn worth of low-interest loans and guarantees to companies and foreign governments to build, expand and promote fossil fuel projects abroad.
(China Dialogue, London, 15 November 2016) G20 countries have financed US$76 billion in coal projects in the past nine years. With more projects in the pipeline, they should stop coal financing or risk creating stranded assets, writes Natural Resources Defense Council's Chen Han... As the threat of climate change looms, the world must transition to cleaner energy as quickly as possible and avoid burning most fossil fuel reserves. Coal is of particular concern. It accounts for 40% of global carbon emissions from fossil fuel use, which is more than any other individual source. Despite last year’s Paris Agreement, G20 countries – the world’s largest economies – continue to invest in projects that increase the world’s dependence on coal. Last month we noted that OECD ECAs are scheduled to limit support to so called less environmentally friendly coal-fired power projects after January 2017.
(Friends of the Earth Japan, 10 November 2016, Jakarta) On November 10, 2016, three villagers affected by "Cirebon coal-fired power plant project in West Java, Indonesia" (*1) handed their objection to the Japan Bank for International Cooperation (JBIC) at its Representative Office in Jakarta. They also took their protest action in front of Japanese Embassy, calling on JBIC not to decide its loan for the expansion project in Cirebon which is slated to commence the construction within this year or early next year. In the Project, the Unit 1 power plant (660 MW, invested by Marubeni), for which JBIC provided its loan, has already caused serious damages to the community’s livelihood, such as small-scale fishing and salt making. In addition, the expansion or Unit 2 power plant (1000 MW, invested by Marubeni and Chubu Electric Power) has been criticized for the issue of land acquisition and the illegality of its environmental permission.
(Friends of the Earth Japan, 17 November 2016, Tokyo) Within the next couple of months, the Japan Bank for International Cooperation (JBIC) will decide whether to fund two giant dirty coal-fired power plants in Indonesia. These power plants will have a total capacity of 3000 Megawatts. They are the Cirebon 2 coal-fired power plant is in West Java and the Tanjung Jati B coal-fired power plant is in Jepara, Central Java. Six months ago, JBIC approved funding for one of Southeast Asia’s largest coal-fired power plants in Batang in Central Java, which is already having terrible negative social and environmental impacts, and will make a massive contribution to climate change. French Bank Crédit Agricole also wants to join JBIC in funding the coal power plant in Cirebon and the Tanjung Jati B power plant. This is in spite of a very recent public commitment made by Crédit Agricole to stop providing finance to new coal plants. Civil society groups from across the world, including Friends of the Earth France, Banktrack and Oxfam France, have criticized the double standards of Crédit Agricole in making new climate commitments a few weeks before COP22 in Marrakech, whilst continuing with its coal finance business as usual. They argue Crédit Agricole must not finance these two damaging power plants.
(Jubilee Australia, 21 November 2016, Sydney) Jubilee Australia has urged Efic to reject an application to take part in financing a new coal project in the Waterberg region of South Africa. Efic announced in September that it was considering financing the Boikarabelo mine, a project of the Joint Australian-South African company ResGen. 'We were encouraged to see that Efic had not to our knowledge financed a major fossil fuel project since 2009,' said Jubilee Director Luke Fletcher, 'which we felt was a step in the right direction.' 'But this new project would be a disaster for the planet. It would open up the entire Waterberg region, the fourth largest coal deposit in the world, to exploitation. If this project continues, we will have no chance of keeping global warming below the 1.5 degree threshold agreed to in Paris last year.'
(Environmental Finance, 15 November 2016, Washington) On a promising note, the US recently led successful opposition to official partnerships between the GCF and export credit agencies. In arguing against the GCF partnering with the Export-Import Bank of Korea, US board member Leonardo Martinez-Diaz said: "We do not think it is proper to channel [GCF resources] through entities whose job is export promotion." Touché! But the US should consistently apply that principle; it currently counts some US export credit agency financing toward its contribution to the $100 billion.
(Manufacturing Net, 4 November 2016, New Jersey) Small ecommerce business need better export credit support for online export working capital loans. 97% of American micro and small businesses that sell on eBay export, as opposed to the 1% of brick-and-mortar U.S. businesses that export... The rise of online sellers and online lenders is an opportunity for export credit agencies... Export credit agencies (ECAs) have traditionally helped finance exporters with such means as by guaranteeing bank-issued export working capital loans an exporter uses to pay for raw materials, labor and inputs that go to fulfilling the export order. However, onerous Know-Your-Customer/Anti-Money Laundering rules and Basel III capital standards are today squeezing banks’ profit margins, reducing their appetite for small business loans – right when there are more and more small businesses in need of export credit. E-commerce undoes geographic distance that has kept buyers blind to far-flung sellers for centuries. By 2020, 6.1 billion people will have smartphones with which to get online and shop, up by 3 billion netizens from today’s levels. Is the world ready to facilitate small business trade on that scale?
[Editorial comment: Or of that nature? Similar state subsidy arrangements could facilitate a transition to trade amongst cooperative producers and consumers based on the commons and local production and needs, vs consumer glitz and multinational corporate megaprojects which feed global warming.]
(Financial Times, 27 October 2016, Tehran) A senior Iranian official has accused European governments of not being fully committed to implementation of a nuclear deal with Iran, blaming them for stymieing investment into the Islamic republic. Asghar Fakhrieh Kashan, deputy transport minister, told the Financial Times that European financing agencies were failing to support businesses keen to invest in the oil-rich country. Export credit agencies were demanding premiums on insurance that made banks insist on putting “unacceptable” terms in contracts related to political risk, he said.
(CCH Daily, 24 November 2016) Financial support for UK exporters will double through UK Export Finance (UKEF), the UK's export credit agency. The Treasury's Autumn Statement included details of an additional £79.4m in funding over the lifetime of this Parliament for the Department for International Trade (DIT) to build capacity to support the UK’s exit from the EU and negotiations for the best possible global trading arrangements for the UK. The DIT will use the money to develop and deliver an independent international trade policy. The Treasury said the new measures will see UKEF’s total risk appetite double to £5bn and the maximum cover limit for individual markets increase by up to 100%, potentially resulting in as much as £2.5bn of additional capacity to support exports to some destinations.
(Latin Finance, 28 November 2016, Mexico City) The Mexican export credit agency could raise up to $1bn in the cross-border bond markets next year, Bancomext CEO Alejandro Diaz tells LatinFinance. The Mexican ECA will likely target a cross-border issue between $500m and $800m, although going up to $1bn is not out of the question, he said. The ECA in August priced a $700m Basel III-compliant bond, which proved a "useful instrument" for Bancomext to mitigate its exposure to foreign currencies. The peso has slumped since Donald Trump won the US presidential election earlier this month, but Díaz de León said Bancomext had hedged its assets with its liability positions to correspond with any volatility, adding that the ECA's balance sheet was "fully hedged."
(Spend Matters Network, 2 November 2016, Chicago) As global trade expands, so does the importance of trade finance. Kapronasia’s new report takes an in-depth look into these issues and analyzes how trade finance is changing in the world’s largest exporting economy. Total trade volume in China was 24.59 trillion RMB ($3.95 trillion) last year, even despite a fall in import and export volumes. This is especially crucial in the world’s largest exporting nation. Trade financing is typically viewed as letters of credit, lending, export credit and insurance, usually offered by traditional banks and export credit and insurance agencies. However, fintech and the internet have been changing the face of trade finance. For instance, Barclay has announced the first trade finance deal using Blockchain-based technology in September this year, which increased efficiency in the process. In addition, more and more international trade in retail is conducted through online marketplaces such as Alibaba and eBay. These new technologies are reducing paperwork and increasing the speed of communication between companies, banks, and other counter parties.
(Indian Express, 8 November 2016, New Delhi) President Mukherjee said that in the present day context the role of an Export Credit Agency (ECA) is of central importance in international trade and investment flows.. “These institutions are, in a manner of speaking, akin to policy instruments at the disposal of the sovereign to ensure adequate and timely support to national exports by way of extending credit, insurance and guarantees. They develop the platform upon which exporters and bankers sustain existing markets in addition to exploring new markets. Absence of an ECA adds to the underlying political, economic and financial uncertainty. ECAs offer more than just trade credit insurance. Their role in an economy is multifaceted with protection against risks, enabling access to bank finance, information and expertise in trade finance,” he added
(Reuters, 24 November 2016, Dubai)Gulf governments are increasingly turning to export credit agencies to finance billions of dollars of infrastructure projects as low oil prices squeeze liquidity in the region. Bankers say that since oil prices fell more than two years ago, eroding state revenues and drying up funding from local and international banks, borrowers are considering ECA finance for everything from airports to oil refinery expansion.
(Thomson/Reuters/Zaya, 16 November 2016, Beirut) The Aman Union is a professional forum assembling Commercial & Non-commercial Risks Insurers & Reinsurers in Member Countries of the Organization of the Islamic Conference (OIC) and of the Arab Investment & Export Credit Guarantee Corporation. Day two hosted a presentation titled ‘The Areas of Cooperation Between Banks and Export Credit Agencies (ECAs) and the Role of the Banking Sector in Supporting Trade.’, presented by Mr. Hai Liang, SEO – Group GM, Saudi Hollandi Bank, Saudi Arabia.
(Lesprom, Moscow, 24 November 2016) Segezha Group signs a five-year Euro 383.6 million syndicated facility agreement potentially extendable up to 7-10 years through export credit financing to be provided with insurance coverage from European export credit agencies. ING BANK (EURASIA) JSC, ING Bank N.V. Dublin Branch, AO Raiffeisenbank, Raiffeisen Bank International AG and Sberbank acted as mandated lead arrangers and lenders. The funds will be used to finance Segezha Group investment programme, which includes long-term projects such as an overhaul of Segezha pulp & paper mills and construction of a new plywood factory in Kirov, Russia, as well as general corporate needs. Segezha Group is one of Russia's largest vertically integrated forest holding companies that performs a full cycle of logging and advanced wood processing operations.