(VICE, Brooklyn, 6 April 2022) The South Korean government has shelved plans to pour $700 million into a massive $4.7 billion gas project in Australia’s Timor Sea far north offshore after Tiwi Island Indigenous leaders from the region took them to court, according to government meeting notes seen by VICE. The Export-Import Bank of Korea pulled the handbrake on part of a mammoth $US700 million investment into the controversial Barossa gas project in Australia’s Northern Territory last month. “Not only is the Barossa gas project more polluting than other existing gas fields, but it also faces business uncertainty with its incomplete carbon capture and storage scheme, and plummeting long-term liquified natural gas demand,” said Hye-Young, South Korean National Assembly representative. ABC Australia reports that South Korea’s K-SURE and Japan’s JBIC have approved their financing, so the project’s financing hinges on KEXIM. Larrakia and Tiwi Islander traditional owners, along with an international coalition of anti-gas groups, are targeting plans for a $4.7 billion Barossa gas development, to be built and operated by Santos, in waters about 300 kilometres north of Darwin. Conversation Canada has noted that this Tiwi Islands offshore gas fight shows public banks are under real pressure over fossil fuel funding. They note that Public financial institutions are under renewed pressure to change lending practices after the world’s leading climate scientists strongly warned against any new fossil fuel infrastructure. In our region, public banks in China, Japan, and South Korea now face unprecedented scrutiny for their role in financing the climate crisis. While export credit agencies are not the only funders of oil, gas and coal infrastructure, and not the largest either, they have been instrumental in developing many of the world’s most carbon intensive sectors. How? By locking in fossil fuel energy systems, leveraging private finance by reducing risk premiums, and shaping international standards which influence private bank policies. In short, they have played a key role in enabling fossil fuel expansion. For decades, these state supported agencies have gone under the radar. No longer. Scrutiny is increasing of their work borrowing from national treasuries or public capital markets to finance export-oriented fossil fuel projects.
Newsletter
Greenwashing won’t cut it: Canada risks disaster by barely mentioning financial sector in climate plan
(National Observer, Vancouver, 6 April 2022) Canada’s recently published emissions reduction plan provides a roadmap for how Ottawa plans to hit its 2030 climate targets, but critics say until the financial sector is aligned with climate goals, the government’s plans are “derelict.” Environmental Defence’s climate finance manager Julie Segal says Canada appears excited about the benefits of sustainable finance but doesn’t appreciate the risks from continued fossil fuel investments. First, there’s the systemic risk from climate change and how the financial sector and financial regulators approach that, and then there’s the piece about how the financial sector is contributing to climate change through investments,” she said. “And Canada is being derelict on those accounts.” The 271-page emissions reduction plan contains [only] 4 pages dedicated to “sustainable finance” that outline at a high level a few of the federal government’s initiatives. However, Segal says the brief attention to financial issues in the plan, when compared to the detail offered for other sectors, shows Ottawa isn’t grasping the importance of the file. “Part of the reason they’re not getting it is because the Sustainable Finance Action Council — all of the work on sustainable finance — is very much led by industry,” she said. “The federal government hasn’t thought about finance and climate properly. They just haven’t really understood what’s going on here,” said Adam Scott, director of Shift Action for Pension Wealth and Planet Health. Greenwashing won’t cut it because real emissions reductions are needed to protect the economy at large from ever-worsening natural disasters and the economic impacts of climate change. Page 5 of a recent Oil Change International report shows that Canada leads the world in its public finance support for fossil fuel investments.
The 900-Mile EACOP East Africa Crude Oil Pipeline Is a Bad Deal for My Country — and the World
(New York Times, Kampala, 8 April 2022) Vanessa Nakate, Ugandan climate justice activist, notes that this week, the panel of climate experts convened by the UN delivered a clear message: To stand a chance of curbing dangerous climate change, we can’t afford to build more fossil fuel infrastructure. We must also rapidly phase out the fossil fuels we’re using. In moments like this, the media rarely focuses on African countries like mine, Uganda. When it does, it covers the impacts — the devastation we are already experiencing and the catastrophes that loom. They are right to: Mozambique has been battered in recent years by cyclones intensified by climate change. Drought in Kenya linked to climate change has left millions hungry. In Uganda, we are now more frequently hit by extreme flash floods that destroy lives and livelihoods. Africa isn’t only a victim of the climate crisis, but also a place where infrastructure decisions made in the coming years will shape how it unfolds. TotalEnergies, a French energy company, this year announced a $10 billion investment decision, which involves a nearly 900-mile oil pipeline from Kabaale, Uganda, to a peninsula near Tanga, Tanzania. From there, the oil would be exported to the international market. Despite local opposition, TotalEnergies and a partner, the China National Offshore Oil Corporation, have pushed ahead. The project might have a difficult time securing additional financing, as many banks have already ruled out the project. The multinational insurance company Munich Re has also vowed not to insure it, at least in part because of the harm it would do to the climate. An estimated 14,000 households will lose land, according to Oxfam International, with thousands of people set to be economically or physically displaced. There are reports that compensation payments offered to some communities are completely insufficient. In other news, Ugandan NGOs have written to German and Italian ECAs asking them to not finance EACOP, noting that if constructed the pipeline will be the longest electrically heated crude oil pipeline in the world, will transport 216,000 barrels of crude oil per day at peak production, will displace over 86,000 people from 5,172 hectares of land in Uganda and Tanzania, affect nearly 2,000 sq.km of protected areas, a quarter of which are habitats for endangered species, threaten the livelihoods of hundreds of thousands of Lakes Albert and Victoria fishers in Uganda and the DRC and result in the production of over 34.3 million metric tonnes of carbon per year, roughly 7 times Ugana’s annual emissions when the oil is burnt.
Global Trade Review Editorial: Encouraging yet disheartening
(Global Trade Review, London, 11 April 2022) Momentum continues to build around environmental, social and governance efforts in trade and trade finance. Every week, we report on encouraging new developments, including a recent decision by the European Council that gives export credit agencies (ECAs) in the EU until the end of 2023 to set deadlines for ending support for fossil fuels; the formation of the Climate Working Group, a new initiative convened by the Berne Union bringing together ECAs and other insurers and financiers to accelerate climate action; as well as the much-anticipated launch of a pilot of a new ESG scoring tool for measuring country, supply chain and company activity against EU and UN sustainability goals. Other developments have been less heartening. The annual Banking on Climate Chaos report, a comprehensive global analysis on fossil fuel financing released as this publication goes to press, documents that in the six years since the adoption of the Paris Agreement, the world’s 60 largest private banks poured US$4.6 trillion [yes trillion] into fossil fuels. As much as US$742bn of support was provided in 2021 alone. The report, co-authored by NGOs including BankTrack, Sierra Club and Oil Change International, includes a timeline that lays out how banks that joined the Net-Zero Banking Alliance last year simultaneously financed “some of the most egregious oil and gas expansion companies”. In this publication, we take a closer look at these and other issues impacting on ESG and trade.
UN Secretary General: Some governments & business leaders say one thing but do another. Simply put they’re lying.
(Brisbane Times, Brisbane, 11 April 2022) The Intergovernmental Panel on Climate Change’s Sixth Assessment Report, with its direct language and whole chapter on finance, should be a wake-up call to those in the business community who are avoiding taking genuine action on climate change. United Nations Secretary General Antonio Guterres didn’t mince his words when he introduced the report to the world, bluntly stating that investing in “new fossil fuel infrastructure is moral and economic madness.” The report calls out commercial banks and export credit agencies for the role they are still playing in financing fossil fuel investments. He notes that “Some government and business leaders are saying one thing – but doing another. Simply put, they are lying.”
Oil Change International launches database to expose the institutions using our money to fund fossils
(Oil Change, Washington, 28 April 2022) Public finance institutions shape our future energy systems. They are uniquely positioned to catalyze a just, transformative, and rapid transition to clean energy and a livable future — if we can hold them accountable to their public-interest mandates. But the decade-plus of data Oil Change International has collected for the newly launched Public Finance for Energy Database (energyfinance.org) shows most influential international public finance institutions are failing to take the very first step: stop funding fossil fuels. The headline finding of our database is that G20 countries’ trade, export credit and development finance institutions and the major multilateral development banks (MDBs) provided at least $63 billion each year to coal, oil, and gas projects between 2018 and 2020. That is 2.5 more than the support for clean energy by the same institutions over the same period. In addition to this critique, the report notes that there is momentum growing to end public finance for fossil fuels and shift this to support a just energy transition, with 39 countries and institutions committing to do this by the end of 2022 under the Glasgow Statement at COP26.
Korean ECAs sued to stop deep-sea oil pipeline
(BBC, London, 23 March 2022) Tiwi Islands and Larrakia Traditional Owners in Australia’s Northern Territory and youth activists in South Korea have taken the South Korean government to court to stop it from financing Santos and SK E&S’ offshore deep sea Barossa gas project. The legal challenge could prevent the South Korean Government from lending some $AU964 million (US$722m) to the $4.7 billion Barossa gas project via its export credit agencies, the Export-Import Bank of Korea (KEXIM) and the Korea Trade Insurance Corporation (K-SURE), putting the financial viability of the entire project at risk. The Traditional Owners argue they have not been consulted about the project – which threatens their sea country and way of life – and therefore have not been given the opportunity to give their free, prior and informed consent for it to proceed. Plans for the gas project include a 300km-long pipeline to be built through their sea country, an area under their legal jurisdiction. Traditional Owners fear impacts to cultural sites, turtles and other marine life that are central to their culture and the local ecotourism industry. Energy giant Santos is pushing ahead with development for the major new gas field off the coast of Darwin, in what it says is the biggest investment in Australia’s oil and gas industry in almost a decade.
EDC targets growing demand for ESG financing
(Globe & Mail, Toronto, 28 March 2022) Canada’s export credit agency is looking to capitalize on the growing trend for sustainable investing, launching a set of new financial tools aimed at supporting socially oriented businesses and helping large greenhouse gas emitters reduce their carbon footprint. Export Development Canada has issued green bonds since 2014, using the proceeds to invest in public transportation and renewable energy projects. [We have pointed out in other articles in this month’s What’s New that EDC provided more public finance for fossil fuels than any G20 country other than China, on average $13.8 billion in support to oil and gas companies each year between 2016 and 2018. So they have a long way to go to offset their fossil fuel vs sustainability imbalance.]
Pressure on Japan’s energy ties in Russia ratchets up with Shell’s Sakhalin exit
(S&P Global, Tokyo, 1 March 2022) Pressure is mounting for Japanese companies to review their energy business connections with Russia in the wake of Shell’s withdrawal from the Sakhalin 2 project, which accounts for close to 9% of Japan’s LNG imports, industry sources said. Shell’s Feb. 28 announcement that it was withdrawing from its partnerships with Russian energy giant Gazprom, including the Sakhalin 2 crude oil and LNG project in the Russian Far East, in response to Russia’s invasion of Ukraine. Jogmec provides an equity financing and loan guarantee to Japan Arctic LNG, a subsidiary of Mitsui, which has a 10% stake in the Arctic LNG 2 project. NEXI provides export credit insurance and export credit guarantees for Japanese companies’ energy businesses including LNG in Russia.
SACE freezes loan for Russian Arctic LNG 2 plant
(Reuters, Rome, 1 March 2022) Russia’s invasion of Ukraine has prompted Italy to put on hold its share of financing for the $21 billion Arctic LNG 2 project led by privately-owned Russian gas producer Novatek (NVTK.MM), two sources close to the matter told Reuters on Tuesday. Italian state lender Cassa Depositi e Prestiti (CDP) and the Russian arm of Italy’s biggest bank Intesa Sanpaolo (ISP.MI) had agreed in recent weeks to help finance Novatek’s project. The loan was set to be guaranteed by SACE, Italy’s export credit agency, which has already insured nearly 5 billion euros worth of projects and investments relating to Russia. SACE also notes that it is temporarily suspending the evaluation and acceptance of new risks for export credit activities in Russia and in Belarus.
