Despite being the biggest class of public finance institutions operating internationally, export credit agencies (ECAs) are rarely subject to any public scrutiny. European ECAs declare the compliance with the non-binding OECD Common Approaches standards, but it’s an insufficient benchmark for evaluating compliance with the EU’s External Action obligations as stated by the relevant EU Regulation.
Aleksandra Antonowicz-Cyglicka, Researcher | 4 September 2020
Every year ECAs channel around USD 200 billion in public money to projects. Some of these projects, are in stark contrast with the global effort to tackle the climate crisis, such as a coal power plant in Bangladesh, oil power plants in Cuba or an LNG project in Mozambique. Other projects contribute to human rights violations. For example, the investor behind the Olkaria I and IV geothermal power plant in Kenya supported by French and German ECAs and other multilateral financiers, ignored the Indigenous People status of impacted Masaai communities. In other cases, ECAs back projects in Indonesia’s coal sector, where companies have allegedly been moving millions of dollars offshore. As part of Bankwatch’s effort to enhance the reporting requirements of European ECAs under EU law, we have been in dialogue with the European Commission about making these public institutions as accountable as they should be. But the EU’s executive body appears to be satisfied with the status quo. “Member States should comply with the Union’s general provisions on external action, such as consolidating democracy, respect for human rights and policy coherence for development, and the fight against climate change, when establishing, developing and implementing their national export credit systems and when carrying out their supervision of officially supported export credit activities,” says an EU regulation, in force since 2011. To put this into practice, the European Commission produces an annual evaluation of the compliance of EU ECAs with the Union’s objectives and obligations. Specifically, the Commission’s monitoring is intended to check whether projects supported by ECAs are consistent with the “external action” objectives set out in Articles 3 and 21 of the Treaty of the European Union. These objectives promote, inter alia, the consolidation of democracy, respect for human rights, policy coherence for development and action against climate change. To check that, the European Commission has been accepting the Common Approaches as a benchmark for years. What’s even more striking, the checklist filled in by EU Member States is an outdated box-ticking exercise. For example, it doesn’t contain any questions related to climate action or the implementation of the Paris Agreement. ECAs, as public finance institutions, should be aligned with their governments’ climate change mitigation commitments, including the Paris Agreement. Meanwhile, European ECAs differ significantly when it comes to climate action commitments. The unique example of any action undertaken is the Swedish export credit agency EKN, which starting 2021 will no longer issue new guarantees for the financing of exports to coal mining. Dutch Atradius, in its 2017 Annual Report, stated its general intention to mobilize capital and finance for climate projects, thereby contributing to the Netherlands’ efforts to combat climate change under the Paris Agreement. But there are also many other export credit agencies, which don’t exclude projects related to the extraction and combustion of gas, crude oil, hard coal or lignite. Thus, a clear benchmark showing this and other EU objectives to be shaped by the European Commission is even more needed. In 2018, the European Ombudsman had called for improving the methodology and procedures used by the Commission to evaluate the annual reports it receives from Member States. In response, the Commission has started a revision of the checklist template used by Member States for their annual reports, which is ongoing. The problem is, this revision exercise is not even informed by any gap analysis of the Common Approaches vis-a-vis the European Aquis. The Commission should provide such gap analysis and employ EU standards as the benchmark for evaluating the compliance of member state ECAs with the EU’s external action obligations. Not to do so would, in our view, constitute maladministration.
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