APPENDIX 19
Memorandum by WWF
INTRODUCTION
WWF has been engaged in dialogue with the ECGD
both in terms of the department's policies and approach and discussing
some of the projects they have provided finance for. WWF made
a written submission to the ECGDs 2002[109]
review and provided oral evidence to the Environmental Audit Committee
during its review of the ECGD. Our 2002 report contained an extensive
review of best practice not only in ECAs but International Finance
Institutions such as the World Bank and also commercial banks.
We feel the DTI committee would benefit from the review of these
pieces of work along with those of other NGOs such as Cornerhouse
and FoE.
We would also encourage the committee to ensure
that the ECGD takes these submissions seriously and responds to
NGO input in a detailed manner. NGOs put a great deal of their
resources into such work on behalf of their supporters and should
be viewed as an important and constructive stakeholder in efforts
to move the UK towards sustainability.
WWF requests that the Trade and Industry Committee
reviews the report we submitted in 2002 to the ECGD and its recommendations,
and the extent to which the ECGD has responded to them. This submission
to the DTI committee and its 10 main points should be taken as
an update and supplement to that 2002 work. Annex I shows in more
detail a summary of the main recommendations of the 2002 report,
the headlines of which are listed below:
ECGD must actively promote sustainable development:
— Align with Government commitments
on sustainable development;
— Monitor and report on performance
of the ECGD;
— Demonstrate and exert leadership;
and
— Foster and enhance the competitiveness
of UK environmental exports.
ECGD must amend its impact screening and
analysis procedures:
— Clarify and strengthen the screening
and review process;
— Develop clear and consistent environmental
sectoral standards;
— Improve the monitoring of projects;
— Support a presumption of transparency;
— Develop an appeal process; and
— Expand environmental capacity.
1. Coherence between UK SD commitments and
the Department's role in the promotion of sustainable development
2. ECGD mission
3. Transparency
4. Strategic Environmental assessment
5. Review of ECGD supported projects
6. No-go areas
7. Climate change
8. OECD
9. BTC concerns
10. World Bank Extractive Industry Review
1. COHERENCE
BETWEEN UK SD COMMITMENTS
AND THE
DEPARTMENT'S
ROLE IN
THE PROMOTION
OF SUSTAINABLE
DEVELOPMENT
WWF notes that the ECGD has as part of its mission
a commitment to support projects that align with UK government
positions. Whilst there has been improved liaison across Whitehall
on some projects, WWF does not feel that ECGD's portfolio reflects
the its commitment to place sustainable development at the heart
of its activities (ECGD press release 28 April 2003). There is
also limited evidence of incorporation of the UK's position on
climate change or biodiversity, as expressed through being party
to the UN Conventions on these issues. Increasingly guidance is
also coming from the European Union. Many responsible private
sector companies are applying global standards to their operations,
with the driver often coming from national or supra-national requirements.
WWF is concerned that the ECGD has a target
of zero projects being rejected on social or environmental grounds.
This implies that there is no practice that convenes sustainable
development principles that could warrant rejection by ECGD. In
WWF's view this sends the wrong signal to business. WWF does not
understand how sustainable development can be at the heart of
ECGD's activities if the department would never take a stand on
social or environmental issues. WWF trusts that ECGD does not
rely purely on IFC compliance as an indicator of agreement with
UK government positions.
When compared with the international best practice
identified in our 2002 report, ECGD still lags far behind. In
particular, its lack of clear environmental standards and of measures
to enhance the environmental sustainability of its project portfolio,
as well as very limited transparency and monitoring mean that
it currently falls behind many of the examples cited. In addition,
weak environmental standards put ECGD at increased financial risk—and
threaten the reputation of both ECGD and the UK Government more
generally.
WWF suggests that a review of the existing
portfolio is undertaken to assess congruency between existing
finance arrangements and UK government/EU positions. This will
inform a more coherent UK foreign investment strategy.
2. ECGD MISSION
WWF believes that the Export and Investment
Guarantees Act 1991 limits the ability of ECGD to deliver on UK
SD commitments and more specifically to adopt an exclusion list
of unsustainable projects. This we believe to be of serious concern
and we call for a review of the Act in the light of this. Such
a review must include the potential for enabling legislation to
alter the mission of ECGD.
WWF believes that the ECGD and their capable
staff are hindered in their moves to sustainability by the restricted
mandate provided by the Act. We believe that ECGD staff would
confirm this to be the case if questioned on this matter. We feel
that it is the responsibility of Parliament to pressure the Government
to live up to both the spirit and letter of their commitments
in these areas by reviewing and adjusting the mandate given to
ECGD in this regard.
There have been some limited procedural changes
in the ECGD since our 2002 submission to the ECDG Public Consultation
on Case Impact Analysis and written and oral evidence to the Environmental
Audit Committee. However we believe these have made little substantive
change to the type of projects supported by the ECGD nor in the
due diligence undertaken over such projects. Two particular cases
- the BTC and Sakhalin projects—back up our views in this
regard.
3. TRANSPARENCY
The ECGD mission statement includes a commitment
to "be as open as possible, while respecting legitimate confidentiality,
about what we do". Although commercially sensitive information
should remain confidential, the presumption should always be for
disclosure, except where the project sponsor can demonstrate a
commercial need for confidentiality, as is the policy of the World
Bank/IFC and EBRD. ECGD should clearly define what constitutes
"commercially sensitive" information in advance, as
the EDC (Canadian ECA) does. Disclosure should be a requirement
of the guarantee agreement, and not be conditional on the permission
of the sponsor.
The ECGD has improved the levels of transparency
regarding its own interests and potential activities. WWF would
like to see further information provision regarding the assessment
processes undertaken when considering an application for finance.
Much of this information can now be requested. It would make sense
to make information public as a matter of course, in order to
demonstrate transparency. Information on potential impacts is
not provided for public review until after a decision has been
made on ECGD support and environmental questionnaires that are
used are not made public. As is detailed in our 2002 report
In terms of the transparency of investments,
WWF would also like to see greater transparency of revenue payments.
The ECGD is committed to tackling corruption, and this is an extension
of that work. WWF's experience indicates that corruption contributes
to the degradation of the environment, through the avoidance of
regulation, and the diversion of funds from environmental budgets.
Initiatives such as the Extractive Industries
Transparency Initiative (EITI)—whose secretariat is based
in DFID—are seeking to promote disclosure by all parties
of revenues paid. ECGD should also take note of the increasing
spotlight being placed on the host government agreements and production
sharing agreements framing extractives projects. These frameworks
often bypass human rights and environmental standards that would
normally be upheld by national laws and international conventions.
If the ECGD is to ensure that its investments comply with these
regulations, then it must seek to eliminate loopholes provided
by such agreements.
WWF believes the ECGD should publicly support
the EITI, and promote its uptake amongst clients. WWF also urges
ECGD to seek transparency of the legal agreements governing the
projects applying for finance.
4. STRATEGIC
ENVIRONMENTAL ASSESSMENT
Another issue that emerged from the BTC pipeline
was the detrimental effect on the project design of not carrying
out a strategic environmental assessment of the project. DFID
concluded from its analysis of the project that it would "strongly
support the use of Strategic Environmental Assessment (SEA) for
future infrastructure projects on this scale". The IFC agreed
to include in its review an assessment of the potential for SEA
in future large scale and cross border projects. WWF suggests
that ECGD should also consider the value of applying such a tool
to these projects. Given the UK government position outlined by
DFID, this issue is of particular importance for the Sakhalin
II project currently being considered by ECGD. On Sakhalin the
transboundary issues, cumulative impacts and risks posed to other
sectors such as fishing have not been brought together in an SEA.
WWF believes ECGD should require Strategic
Environmental Assessments of large infrastructure projects.
5. REVIEW OF
ECGD SUPPORTED PROJECT
WWF believes more effort should be put into
monitoring by ECGD. This activity is essential to ensure that
standards committed to in the finance application are adhered
to for the life of the project. It provides an incentive for the
client to continue to meet the standards promised. WWF is also
concerned that the benefits of many projects are exaggerated at
the application stage in order to counter negative social and
environmental aspects, which may also be understated.
WWF believes a review of recent projects
would be a valuable exercise to demonstrate the true extent of
positive outcomes and adverse impacts compared to those indicated
by clients.
6. NO-GO
AREAS
WWF wishes to see a clear NO GO policy from
the ECGD for extractive industries. This would reflect the Amman
Declaration adopted by IUCN (The World Conservation Union), which
the UK government is a member of. The Amman Declaration states
that extractive activities should be excluded from IUCN Category
I-IV Protected Areas. The ECGD should also respect national designations
which have not yet been aligned with the IUCN system. The ECGD
has a clear opportunity to safeguard the future of designated
protected areas. Commercial banks such as Citibank have now expressed
their desire to respect these significant areas of biodiversity.
WWF recommends that the ECGD adopts a NO
GO policy of not funding any extractives project located in a
internationally or nationally designated protected area.
7. CLIMATE CHANGE
WWF welcomes the initiative that emerged from
Johannesberg, earmarking GBP 50 million per annum for financing
renewables. Funding of oil and gas projects in 2002-03 was GBP
455 million. If the GBP 50 million was spent, then this would
represent less than 10% of the total spend on energy sources.
WWF supports the CURES Initiative, which calls for a reversal
of this bias towards fossil fuels by the international finance
community. WWF considers that Vivian Brown's comments in the 2002-03
annual report stating that there were increasing oil and gas opportunities
does not sit easily with the UK's desire to be a leader on climate
change.
ECGD support for the recent significant investment
by UK oil majors in Russian oil companies will merely fuel exports
to the west. By effectively subsidising this carbon intensive
activity, the ECGD will distort the market against renewable alternatives.
More specifically CURES calls for ECAs to phase out support for
fossil, nuclear and hydro that does not comply with recommendations
of the WCD and replace it by new renewables and energy efficiency
by 2008. Further information is available on:
http://www.cures-network.org/texte/cures—declaration
engl.pdf )
WWF recommends that the ECGD attends the
Bonn renewables conference in June 2004 to enhance its understanding
of how it may make this transition.
8. OECD
WWF appreciates that common action from all
countries will be needed to collectively move the ECA sector towards
sustainability. WWF commends the ECGD on the work it has done
to develop the OECD common approach for Export Credit Agencies.
This framework is important to prevent lower environmental and
social standards being a competitive advantage for ECAs. The ECGD
must continue to push the agenda forward in the context of developments
in the rest of the international finance community.
WWF would like a firmer stand by the ECGD on
the application of the OECD guidelines for Multi-National Enterprises.
ECGD's provision of finance to the Baku-Tblisi-Ceyhan pipeline
came whilst a complaint to the UK contact point for the OECD guidelines
is still active. WWF understands the problems posed by the slow
processing of these complaints, and believes this must be addressed
if the guidelines are to be effective. However WWF also notes
the conflict of interest posed by the UK ECGD funding a project,
which the UK government contact point is still investigating.
WWF calls on the ECGD to push for an improved
process from OECD. WWF believes that the ECGD should not agree
funding on any project where a complaint has been accepted by
the UK contact point.
9. BTC CONCERNS
The ECGD announced in February 2004 it would
be providing finance to the BTC pipeline, led by BP Plc. WWF continues
to have a number of issues on this project regarding the route
selection, consultation process and the legal regime. WWF will
be pursuing these matters with BP management and the IFC Ombudsman.
A recent article in the Sunday Times exposed the cover up regime
that prevails on this project. An independent contractor blew
the whistle on BP, for failing to select the correct coating for
the pipe. It has been alleged that this decision was based on
the interests of the procurement manager, rather than the product
specification. BP investigated the potential corruption issue,
but did not inform any of its potential lenders. The results of
this decision being covered up and not rectified are that pipe
has been coated in an anti-corrosion paint that has already split,
thereby exposing the pipe, which will result in corrosion and
leaks. WWF is concerned that ECGD should learn lessons from the
mistake made in supporting the BTC project and ensure that further
projects in the financing pipeline do not repeat such mistakes.
The Sakhalin project is a case in point on which numerous international
NGOs are campaigning.
WWF insists that the ECGD thoroughly investigates
the matter raised on BTC and publishes a report on the findings,
in order to demonstrate how it deals with reports of questionable
management practices by its clients.
10. WORLD BANK
EXTRACTIVE INDUSTRY
REVIEW
WWF notes that the ECGD will support a project
where it is compliant with the World Bank guidelines or similar,
and it has a target of 100% of projects meeting this requirement.
The World Bank has recently conducted its Extractive Industries
Review (EIR) — a two year global stakeholder consultation,
designed to assess whether the World Bank should have a role in
extractive industries, and if so what role that should be. A number
of the recommendations that have emerged from the EIR are detailed
in this submission, however the wider issues are of relevance
to the ECGD. The Final Report of the WB EIR is available on www.eireview.org
Given the close relationship between ECGD
decisions and World Bank decisions, WWF believes the ECGD should
review the recommendations of the EIR, with a view to applying
them to its future work in extractives.
109 2002 submission to the ECDG Public Consultation
on Case Impact Analysis.Over and above these recommendations which
still stand, WWF would like the committee to take account of 10
further subsequent points (many of which relate to the above list). Back
| 
