Select Committee on Environmental Audit Eleventh Report

Conclusions and recommendations

1.  The ECGD has made progress on supporting sustainable development that deserves to be recognised. The objectives introduced by the 1999 Mission and Status Review placed considerable demands on a small, specialised department, with a difficult role to play in balancing business and financial needs with wider government concerns. The mechanisms put in place following the review are a sound basis for further action on sustainable development. (Paragraph 5)

2.  While the ECGD must balance the duty to raise its standards of sustainable development against its duty to support the competitiveness of UK industry, it has a unique capacity to influence and raise standards internationally. (Paragraph 7)

3.  We conclude that a change to the ECGD's primary remit is not currently necessary, but continued scrutiny of further progress is important. The current remit provides an adequate basis for sustainable development to underpin its activities. The challenge for the ECGD is to demonstrate that sustainable development is given appropriate weight within its current remit, and that it does nothing that would actively undermine this principle. (Paragraph 10)

4.  The ECGD has a responsibility to support UK exporters. Any move by the Government to adopt policies that limited support to sectors such as defence, aerospace and fossil fuels, or to assess these sectors by different standards, would need to be carefully assessed. While these sectors remain within the ECGD's portfolio, the agency must take steps to improve the scrutiny of sustainable development in these areas. (Paragraph 14)

5.  A large programme of support for sustainable and environmental industries would help the ECGD to revitalise its role while remaining within its current remit. Although it cannot compete directly with the private sector, the ECGD should establish a programme actively to promote its services to environmental industries and to other projects that could support sustainable development. (Paragraph 17)

6.  No offer of support should be made, whether actual or provisional, until the ECGD's Business Principles Unit has completed its assessment, and its recommendations have been duly considered. The Government must be prepared to provide the ECGD with whatever further resources are necessary for the Business Principles Unit to carry out its sustainable development assessment work swiftly, effectively, and consistently. (Paragraph 20)

7.  The ECGD should disclose the precise standard used as the basis for environmental and sustainable development review in every high-impact case. This information should be published prominently alongside the project assessment information (Paragraph 21)

8.  We recommend that the ECGD commissions an independent study into how its environmental and sustainable development standards could be tightened, including an assessment of how UK Sustainable Development objectives could be effectively reflected in the ECGD's assessment standards. Such a study should be used to help the ECGD raise international standards. The ECGD should devise and publish a strategy, so that it can be properly scrutinised, and so that UK exporters and other Export Credit Agencies are aware of the ECGD's intentions. Where a standard can be raised without undue impact on the competitiveness of UK industry, the higher standard should be adopted and concomitant action from other Export Credit Agencies should be encouraged. (Paragraph 23)

9.  Constructive engagement and the ability to exercise discretion are important and, when used appropriately, can help to improve project standards in general. But the failure effectively to communicate these decisions and the reasoning behind them leaves the ECGD open to criticism and suspicion. The disclosure of the reasoning behind these decisions, and the effects of the constructive engagement process, must be improved if the system is to inspire confidence. (Paragraph 26)

10.  We welcome the recent decision of the ECGD to report the carbon dioxide impacts of high and medium impact projects. The information gathered under this exercise must be put to practical use by helping further to improve the standards of individual projects. This is an area where the ECGD should be leading from the front and setting an example for other Export Credit Agencies. The ECGD should also use the data to review the carbon footprint of its portfolio as a whole and to identify areas where further emissions reductions could be achieved without limiting the scope of its business. (Paragraph 28)

11.  It is difficult to assess exactly how aircraft will be used. However, by excluding aerospace from the Case Impact Assessment Process too many important sustainable development impacts are left unconsidered. We reiterate the conclusion of our predecessor Committee that the ECGD should bring all aerospace-related applications within the Case Impact Assessment Process, in addition to ICAO assessment. Full assessment may be difficult, and may even be impossible on occasion, but it is crucial to assess civil aerospace under these criteria to demonstrate that these issues have at least been considered. In such cases the assessment process should be accompanied by a narrative explaining any difficulties in applying the process, and setting out how conclusions have been reached. (Paragraph 31)

12.  We do not believe that the ECGD has struck the appropriate balance between protecting commercial confidentiality and ensuring due transparency. The ECGD provides support from public funds and exporters must therefore recognise that this facility should necessarily entail certain conditions to ensure adequate disclosure and scrutiny of funding decisions. In 2003, our predecessor Committee recommended that 'requests for confidentiality should be tested against rigorous criteria to ensure that only such information as might genuinely compromise clients' commercial activities is withheld. A high degree of disclosure should become a condition of ECGD support.' We reiterate this recommendation. (Paragraph 35)

13.  The ECGD needs to ensure that project information is disclosed at a stage in the assessment process where any challenge to the case could still be taken into account. The ECGD should make the disclosure of basic project information (name, involved parties, and a brief description) a pre-condition of its appraisal process, for all categories of project. As further assessments of the project's economic, social and environmental impacts are made, these too should be made publicly available. (Paragraph 36)

14.  By failing to disclose a wider range of information as a matter of course, the ECGD has directly contributed to the negative perception of its sustainable development policies. (Paragraph 38)

15.  Where decisions are taken that appear contrary to the information available in the public domain (for example in the classification of projects into impact categories) the ECGD should publish an explanation of their decision and provide further supporting material as necessary. This will increase confidence in the ECGD's procedures and make it easier for Parliament and interested parties properly to assess the ECGD's decisions. (Paragraph 39)

16.  Where the ECGD conditionally agrees to support a project that does not meet all of its standards, it should publish a document clearly setting out where the project falls short; why the ECGD remains prepared to support the project, and what actions the ECGD will take to ensure that the project is brought up to standard. The ECGD must then demonstrate that these standards have been achieved. (Paragraph 40)

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