Press release

EU bank’s new environmental and social policy not fit for lofty development ambitions

On 2 February 2022, the EIB’s Board of Directors approved a new Environmental and Social Sustainability Framework, which lays out the bank’s social, environmental and climate standards and requirements for its clients.

The revision comes as the bank just launched “EIB Global”, a branch of the EIB which will cover all its operations outside of Europe in a tentative bid to raise its profile in the world of development finance.

Despite some improvements, the new standards fail to address many of the concerns raised by civil society organisations during the revision process. In a letter to the EIB Board [1] sent last week, 22 civil society groups urged the Directors representing EU Member States and the European Commission to include explicit procedures in the policy to prevent human rights violations in its projects, to end the Bank’s hands-off approach to projects financed via secretive financial intermediaries and to avoid double standards for biodiversity rules depending on whether a project is in the EU or not.

Human rights violations still possible with EU money

The new policy includes no significant improvement in human rights promotion and protection. Without a clear system of human rights due diligence and explicit requirements for the bank’s clients to conduct human rights impact assessments, the EIB is in danger of continuing to inadvertently fund human rights abuse.

In Kenya, a road connecting Mombasa and Mariakani, which is co-financed by the EIB, resulted in more than 500 complaints related to rights violations against the individuals and communities living along the road [2]. Many people have been left without proper and timely compensation or the possibility to work, families were forcibly evicted overnight, and others faced intimidation.

In Nepal, the construction of an electricity transmission grid funded by the EIB threatens to intrude on ancestral lands of indigenous communities, damaging their forests, community resources, livelihoods, health, and spiritual practices [3]. In April 2021, the EIB Complaint Mechanism concluded that the bank overlooked the project’s impact on Indigenous Peoples, despite the concerns raised by impacted communities.

One third of the EIB’s lending disappears into a black hole

A third of the EIB’s investments in 2020 – a total of EUR 22.6 billion – was carried out through financial intermediaries. Due to the secrecy of commercial banks, the public has little idea of what happens to this money, whether it is effectively used and whether it causes environmental and social damage.

The EIB has introduced a long-awaited new standard on financial intermediaries. Yet the standard still perpetuates the bank’s hands-off approach to risky projects funded via unaccountable banks or funds. Even environmentally and socially risky projects will not be subject to public disclosure. The rules require financial intermediaries to comply with social and environmental standards, but the EIB fails to commit to systematically checking and ensuring compliance, leaving intermediaries to police themselves [4].

Biodiversity outside Europe threatened by double standards

The new policy offers better protection for biodiversity in many ways, but applies double standards regarding protected areas and internationally recognised areas of biodiversity such as Emerald, Ramsar and UNESCO sites. In the EU and accession countries, an appropriate assessment in line with the EU Habitat Directive is required in order to decide whether a project can be implemented without damaging the area, while in the rest of the world no equivalent is prescribed.

Anna Roggenbuck, policy officer with CEE Bankwatch Network, said, “The EIB’s self-proclaimed leadership in EU development finance has disappeared in a haze of understatements with the new policy. With no clear EIB role in safeguarding human rights and requirements for promoters to conduct human rights impact assessments, a complete lack of responsibility for its financial intermediary investments and double standards in assessing projects impacting biodiversity inside and outside of the EU, the EIB is not ready to become ‘EIB Global’.”

Xavier Sol, Counter Balance Director, said: “The bank’s commitments on protecting and promoting human rights will be toothless if it refuses to back them up with concrete actions. By refusing to develop specific tools to check that the projects it finances do not harm local communities, the EIB has given the green light for human rights violations to be funded with EU public money for years to come.”

For additional information please contact:

Anna Roggenbuck
Policy Officer, CEE Bankwatch Network
+48 509970424
annar@bankwatch.org

Xavier Sol
Director at Counter Balance
+32 473 223 893
xavier.sol@counter-balance.org

Notes for editors:

[1] https://bankwatch.org/wp-content/uploads/2022/01/Joint-CSOs-letter-to-the-EIB-Board-on-ESSF.pdf

[2] Briefing on the Regional Mombasa Port Access Road project “Highway of Destruction” https://bankwatch.org/publication/highway-of-destruction-raises-questions-about-effective-and-safe-access-to-remedy-and-poor-human-rights-safeguards-at-the-eib

[3] Accountability Counsel’s article “Nepal Indigenous communities vindicated in rare European human rights victory” https://accountabilitycounsel.org/2021/04/nepal-indigenous-communities-vindicated-in-rare-european-human-rights-victory/

[4] In southeast Europe alone, the EIB has provided at least 27 intermediated loans for destructive small hydropower plants since 2010, though the names of many of the projects remain unknown. Just last week, a complaint was submitted to the EIB’s complaint mechanism on two hydropower plants on the Crni Rzav river in Serbia, which have damaged over 9 km of river in a protected area. Ten months after being informed of the issues, the EIB has still not responded to the evidence submitted by civil society organisations. For more examples see Bankwatch’s recent report on EIB hydropower financing in central and eastern Europe: https://bankwatch.org/publication/public-money-vs-pristine-rivers

Major blow to Bosnia hydropower project as Germany’s KfW drops financing plans

A EUR 30 million loan agreement between KfW and public utility Elektroprivreda Bosne i Hercegovine (EPBIH) was signed in 2014 (1) for the 15.75 MW Janjići plant. The plant would entail a 16 m high dam and would flood a picturesque section of the river with a series of rapids upstream from Zenica.

The stretch is highly valued by local people and fishermen and is home to protected species such as otters and numerous fish species, including the endangered Danube Salmon or Huchen. The hydropower plant would represent the first major barrier that would stop fish migration all the way from the Danube, through the Sava and Bosna rivers up to Sarajevo.

Samir Lemeš from Eko Forum Zenica, said, ‘A year after filing a complaint to the bank, we welcome this decision. We would like to express our gratitude to our friends from other NGOs who helped us in this campaign. The next step is to erase the power plant from the spatial plan, and Eko Forum has already submitted an initiative to the Cantonal Ministry for Spatial Planning.’

Emina Veljović, from the Aarhus Center in BiH, said, ‘The river Bosna is the river after which our country is named. It has indescribable value for all of us. It was completely insane for an attempt to be made to destroy it by building the Janjići hydropower plant despite public opposition and contrary to domestic and international environmental laws. I feel deeply about every illegal attack on the environment in BiH, especially this one, because the river Bosna is part of my identity. I am very grateful that KfW decided to act responsibly.’

Ulrich Eichelmann, CEO of Riverwatch, said, ‘This is a very promising step by Germany´s KfW and wonderful news for the Bosna river and the people who live along it. However, we will remain vigilant to ensure that no other financier backs the project.’

Andrey Ralev, Biodiversity Campaigner at CEE Bankwatch Network, said, ‘The Janjići hydropower plant is clearly not in line with KfW’s standards, as the beautiful rapids and islands of the river Bosna were going to be flooded beneath a 3-km long reservoir. After this decision by KfW, the government must take steps towards the long-term protection of this and many other unique Bosnian rivers.’

Contacts

Andrey Ralev, Biodiversity Campaigner at CEE Bankwatch Network, andrey.ralev@bankwatch.org, +359884268552

Emina Veljović, Executive Director and Environmental Legal Expert at the Aarhus Center in BiH, koordinator@aarhus.ba, +38762103544

Samir Lemeš, activist at Eko Forum Zenica, samir@ekoforumzenica.ba, +38761805565

Ulrich Eichelmann, CEO Riverwatch, ulrich.eichelmann@riverwatch.eu, + 436766621512

Notes for editors

Source: https://www.epbih.ba/upload/documents/GI_engleski_2014%201.pdf.

The project information on KfW’s website is available at: https://www.kfw-entwicklungsbank.de/ipfz/Projektdatenbank/Programm-zur-Entwicklung-der-Wasserkraft-I-27390.htm

This publication was produced in collaboration with EuroNatur and RiverWatch in the frame of the Save the Blue Heart of Europe campaign, with financial support from MAVA Foundation.

NGOs hail Chinese banks’ exit from Bosnia’s controversial Ugljevik III coal plant project

The future of the planned 700 MW Ugljevik III coal power plant in Bosnia and Herzegovina is in doubt after one of the project companies, Sunningwell International Limited, confirmed (1) that Chinese bank loans will not be available for the project.

The news comes after China pledged to not build new coal-fired power plants abroad at both the UN General Assembly in September and the EU-China Climate Dialogue in October 2021 (2)(3). Sunningwell’s statement was issued in response to an article in The Diplomat by Just Finance International (4), questioning how China’s commitment would be put into practice in reality.

A concession to build and operate the plant was issued by the Republika Srpska authorities in 2013 to Comsar Energy, owned by Russian billionaire Rashid Sardarov. But the project has progressed slowly, with its environmental permits being cancelled twice, in 2017 and 2019, following legal complaints by the Center for Environment from Banja Luka being upheld.

Despite Comsar’s failure to build the plant, in 2020 the Republika Srpska authorities allowed the project to move ahead with a capacity increase of 100 MW, and in January 2021 they increased the concession period to 44 years (5). This was followed by an announcement (6) in June 2021 that an engineering, procurement and construction contract (EPC) for the project had been signed by Sunningwell and the project’s EPC contractor, China National Electric Engineering Company (CNEEC).

Majda Ibraković of Center for Environment in Republika Srpska, said, “Obtaining permits for Ugljevik 3 is still ongoing, and there have been numerous negative comments on the environmental impact assessment for this project. We appeal to the Government of Republika Srpska to realistically consider all the negative consequences of the project and refuse to issue any permits, because this investment is absolutely unclear, uncertain and finally very harmful for Republika Srpska entity and the country itself.“

Wawa Wang, director of Just Finance International, said, “The decision by Chinese banks to no longer provide financing for the Ugljevik III project demonstrates China’s rethinking of alternatives to coal for the region: since 2014 China has singlehandedly provided debt financing for new coal projects in the Balkans that OECD financiers consistently walked away from. It remains to be seen whether China’s 2021 pledge to end its overseas coal project is serious – especially as Chinese state-owned enterprise (SOE) CNEEC, an EPC contractor for the project, and other SOEs continue to pursue problematic coal projects in Southeast Europe and globally. Chinese SOEs must exit these planned coal projects for its 2021 pledge to have true climate saving impacts.”

Pippa Gallop of CEE Bankwatch Network, said, “This project has been plagued with legal violations right from the outset and the Republika Srpska Concession Commission has confirmed that the concession-holder hasn’t fulfilled its obligations. It’s time to end this charade once and for all, admit the plant won’t be built, and turn towards sustainable forms of renewable energy.”

Contacts

Majda Ibraković, Center for Environment

majda.ibrakovic AT czzs.org 

+387 51 433 140

Wawa Wang, Just Finance International

wawa AT justfinanceinternational.org 

+45 81949469

Pippa Gallop, CEE Bankwatch Network

pippa.gallop AT bankwatch.org

+385 99 755 9787

Notes for editors

(1) Sunningwell’s statement

(2) China’s statement at the United Nations General Assembly in New York

(3) EU-China Joint Communiqué following the Second EU-China High Level Environment and Climate Dialogue

(4) Just Finance International’s article in The Diplomat  

(5) Capital.ba: Government extended Serdarov’s concession for Ugljevik III to 44 years

(6) CNEEC announcement of 24 June 2021

Western Balkan countries need a dedicated fund to ensure a just energy transition – new report

Most Western Balkan countries have long relied on coal for their electricity. But as the international community mobilises to tackle the climate crisis, coal is becoming uneconomic and the region’s antiquated power plants will have to close in the coming years. Also, new EU climate policies designed to make coal power more expensive and ultimately obsolete – from the EU’s 2030 climate targets to the planned Carbon Border Adjustment Mechanism – will affect coal-based electricity imported from the Western Balkans, and lead to a gradual reduction in coal production in the region.

Yet, a transition away from coal in the region – in itself a major development opportunity – needs to be done in a managed, inclusive and fair way, particularly involving those set to be most affected by it, namely coal workers and communities neighbouring mines. Such a process also requires a significant mobilisation of public resources.

The Green Tank and Bankwatch’s new report, titled A Just Transition Fund for the Western Balkan Countries, underlines the need for a Just Transition Fund for the Western Balkans and uses a specially developed model to explore how such a Fund could be allocated in the fairest possible manner.

The proposed allocation model employs five criteria which quantify each country’s dependence on coal and oil, the climate ambition of each country as reflected in known phase-out commitments, the pollution levels resulting from coal use, and the financial capacity of each country to cope with the challenges of the transition away from fossil fuels. Six coal phase out scenarios were analysed using the model, as well as a variety of different weightings for the allocation criteria.

The main outcome of the analysis is that committing to an early coal exit will significantly increase the share of the fund a country will receive. In particular:

Serbia benefits the most from an early coal phase-out date in five out of the six scenarios analysed, receiving as high as 45.4 per cent of the Fund.  
Bosnia and Herzegovina (BiH) may receive up to 34.6 per cent and surpass even Serbia’s share in the scenario in which BiH phases out coal by 2030, and Serbia and Kosovo continue with the coal-based electricity model until 2050 and 2040, respectively. 
Kosovo may receive up to 23.8 per cent provided it commits to a coal phase out by 2030. 
The fact that North Macedonia has committed to a 2027 coal phase-out date raises its share up to 13 per cent of the fund, almost double the share of 7.36 per cent it would have received had it decided to prolong its dependence on coal until 2050.  
Montenegro could potentially almost triple its share to almost 4 per cent of the fund if it decides to retire its only coal plant, currently operating way beyond its 20,000 legal operating hours, by 2022 instead of its pledged phase-out date of 2035.

Furthermore, the differences between each country’s smallest and largest potential shares for the six coal phase-out scenarios increase when the transition speed criterion has a larger weight, whereas accounting for the financial capacity of the Western Balkan countries in the design of the Just Transition Fund favours the weaker countries (Kosovo, BiH and Albania).

‘To avoid the huge challenges of an abrupt transition such as the one currently taking place in Greece’s lignite regions, Western Balkan countries should start to plan the transition of their coal regions immediately. The EU should provide both technical and financial support in developing a truly Just Transition Fund for the Western Balkans, whereas the transition speed should definitely be included among the allocation criteria to correctly assess the urgency of the transition in each country’, stated Nikos Mantzaris, Senior Policy Analyst of the Green Tank, an Athens-based environmental think tank.

‘The transition away from fossil fuels in the Western Balkans is coming much faster than governments expect, and a Just Transition Fund is much needed to support this process. This winter, much of the region has been struggling with power plant failures and coal supply difficulties. Antiquated coal power plants in North Macedonia, Serbia and Kosovo went offline, underlining the need to speed up investments in energy efficiency measures and sustainable forms of decentralised renewable energy generation,’ stated Ioana Ciuta of the CEE Bankwatch Network.

Notes to editors:

The full text of the report “A Just Transition Fund for the Western Balkan countries” is available here.

Contact info:

The Green Tank: Ioli Christopoulou, info@thegreentank.gr, +30-210-7233384, +30-6937-935031

CEE Bankwatch Network: Ioana Ciuta, ioana.ciuta@bankwatch.org; +40724020281

EU bank freezes funding for major Budapest Airport expansion over sweeping violations of environmental norms

Even before the airport development has commenced, nearly a million people living around the airport have long been suffering air pollution and unbearable noise, including some houses damaged by vibration and air turbulence. The Complaint Mechanism’s investigation revealed that no environmental impact assessment has been done for the project, and found that the local residents have been deprived of their right to be consulted on the plans to expand the airport and on measures to mitigate the impacts.

In December 2018, the EIB granted the airport operator a EUR 200 million loan intended for “the construction of the new Pier B, a possible new Terminal 3, the renewal of the airfield ground lighting, the construction of a new cargo city and a range of other landside and airside enhancements,” as well as an “upgrade of the baggage handling system,” according to the Bank’s project documentation [1]. These works are ultimately meant to allow for a 50% increase in passenger traffic within the next eight years. The loan was also backed by a guarantee from the EU budget under the European Fund for Strategic Investments.

Released in late 2021, the Complaint Mechanism’s investigation report [2] was the result of a complaint submitted by two Hungarian civil society groups, the National Society of Conservationists – Friends of the Earth Hungary (MTVSZ) and the Association for Civilized Air Transport, with support from CEE Bankwatch Network. Following the Complaint Mechanism’s recommendation, the disbursement of the loan has been discontinued at least until the EIB receives the decision of the Hungarian authorities on whether a full environmental impact assessment is required for the expansion of the airport. A proper assessment should account for the cumulative impacts of the different project components. The investigation report also recommended measures to ensure fair stakeholder involvement and proper information disclosure, including mapping again all those who stand to be affected by the airport expansion and establishing a grievance mechanism for the project.

In addition, the investigation report confirmed allegations raised by the civil society groups regarding failures within the EIB in screening the project’s compliance with the Bank’s own policies, and in informing the public about the project and its implications. According to the report, the EIB’s due diligence for the project lacked basic necessary documentation and therefore had no grounds to conclude it complies with the Bank’s standards. Following the findings of the EIB’s Complaint Mechanism investigation, civil society groups now urge the Hungarian authorities to ensure noise levels from the airport are in line with EU and WHO standards, and to support the residents most affected, including through offering to buy out homes in the loudest areas and subsidising full insulation in houses further afield.

Teodóra Dönsz-Kovács, campaigner with the National Society of Conservationists – Friends of the Earth Hungary (MTVSZ), said: “The Hungarian government and the airport operator should take joint responsibility for addressing the impacts of the current operation of the airport, regardless of whether the government buys the airport, as it intends, or not. The local residents are already suffering. Beyond the case of the Budapest Airport, if we take the climate goals and ecological limits seriously, such developments should be properly vetted by investors, authorities and the EIB.”

Zoltán Frik, President of the Association For Civilized Air Transport, commented: “The Complaint Mechanism’s investigation report gives new hope and impetus to the local residents to continue their struggle. Therefore, it is of utmost importance that the issues identified in this report are urgently addressed – the environmental impacts and the climate footprint of a larger airport must be properly assessed, and neighbouring communities need to have a say on both the investment and remedy measures.”

Anna Roggenbuck, Policy Officer with CEE Bankwatch Network, said: “The EIB is currently revising its environmental and social policies, and a new policy could be adopted within weeks. The case of the Budapest Airport shows that the EIB cannot take for granted that projects in the EU always meet the Bank’s environmental and social standards. The Complaints Mechanism rightly suggested that for such complex projects the Bank should seek assistance of environmental and social experts including those who know the local language in order to appropriately assess the project and conducts monitoring.”

For additional information please contact:

Teodóra Dönsz-Kovács
National Society of Conservationists – Friends of the Earth Hungary (MTVSZ)
donsz.kovacs.teodora@mtvsz.hu +36304580730

Anna Roggenbuck Policy Officer,
CEE Bankwatch Network
+48 509970424 annar@bankwatch.org

Zoltán Frik (Hungarian speaking) Acting President,
Association for Civilized Air Transport
+36202681386 egyesulet@kulturaltlegikozlekedesert.hu

Notes

[1] https://www.eib.org/en/projects/pipelines/all/20160605

[2] https://www.eib.org/attachments/complaints/sg-e-2020-03-budapest-airport-conclusions-report-ws-26-11-2021.pdf

[3] Bankwatch and MTVSZ published an analysis in October 2021 https://bankwatch.org/publication/trouble-in-the-air-eib-ignores-environmental-and-social-burdens-caused-by-budapest-airport-expansion