Capital

Export credit agencies (ECAs) are a key actor in facilitating global capital flows. On behalf of national governments, ECAs offer insurance, guarantees or credit to domestic companies to cover the risks of doing business abroad. By doing so, ECAs help companies mobilise finance for their business. ECAs are the largest source of public financial support for projects in developing countries.

The Dutch ECA, Atradius Dutch State Business (Atradius DSB), underwrote more than E15 billion in 2014 alone – public support for a huge sum of private money that should be advancing the Dutch government’s goals of inclusive, sustainable development. Instead, many projects guaranteed by Atradius DSB are associated with severe environmental destruction and human rights violations. In collaboration with local partners, Both ENDS monitors the impacts of Atradius DSB-supported projects, and presses the Dutch government and Atradius DSB to improve its practices and policies.

Suape, Brazil     

One such case involves communities around the Port of Suape in north-eastern Brazil. The livelihoods of people in the area have been devastated by pollution and destruction of the marine ecosystem thanks to a port expansion project designed to accommodate large oil tankers. Since 2012, Both ENDS has supported local fishing and farming communities to organise and claim their rights, including regaining access to the harbour’s natural resources.

In 2015, Both ENDS and FGG Alliance partner SOMO supported local partner Fórum Suape in formulating a formal complaint to the Brazilian and Dutch National Contact Points (NCPs), which are tasked by their respective governments to handle complaints against companies accused of failing to adhere to the OECD Guidelines for Multinational Enterprises. The complaint has been submitted by the Fórum Suape, the human rights organisation Conectas, and the Z8 Fishing Colony in Brazil, and by Both ENDS in the Netherlands. It targets the Dutch dredging company Van Oord as well as Atradius DSB, which provided insurance to two dredging projects of this company for the Suape port. The complaint documents the lack of consultation with local communities, the loss of their traditional way of life and livelihoods, and severe damage to biodiversity and ecosystems as a result of dredging in and around the harbour.

Depending on the Suape port authorities, the complaint has the potential to lead to concrete improvements for the Suape communities. Fórum Suape and Both ENDS are arguing that the companies should provide compensation, mitigation, and remediation for damage caused to both the communities and the environment.

The outcome could contribute to broader guidance for the Export Credit Agency sector on human rights due diligence and other responsibilities as laid out in the OECD Guidelines.

Publicly-funded development banks like the World Bank, the European Investment Bank and the Dutch FMO play a key role in financing projects in developing countries, with the goal of fostering economic growth. Most development banks have social and environmental policies in place.

But rarely do these policies translate to positive outcomes for local people, many of whom are engaged in desperate efforts to resist large-scale projects funded by development banks.

FMO and the Barro Blanco dam

Both ENDS continued to support the NgäbeBugle people, an indigenous tribe in Panama which is opposing construction of the Barro Blanco dam. The dam, which was financed in part by FMO and the German development bank (DEG), would submerge the Ngäbe-Bugle’s homes and sacred sites.

In 2014, Both ENDS and FGG member SOMO supported partner Movimiento 10 de Abril (M10) in filing a complaint with FMO and DEG – the first ever under their new joint grievance mechanism – for funding the project.

In April 2015, the mechanism’s independent panel issued its long-awaited report, confirming that the banks had violated their own policies by approving the loan before sufficiently appraising the risks to indigenous rights and the environment. Despite the report’s supportive findings, FMO failed to 

Banks and biodiversity offsetting

Suppose a proposed development project – perhaps a mine or a dam, or the road needed to get there – would erase what is now a fragile habitat, which would mean the demise of unique species of plants and animals. Fortunately, a thorough Environmental Impact Assessment (a key tool for banks to assess the impacts of a project before making a decision about investing) would flag the problem. The information should trigger serious consideration of whether the project should go forward, or how it could be adapted to avoid or mitigate the damage.

Under a new scheme called biodiversity offsetting, there is an easy way out. The problem doesn’t have to be solved: a life here can simply be traded for a life there, as if taking away your dog could be ‘offset’ by giving your neighbour a fish. The idea may sound farcical, but many development banks, including the European Investment Bank, are considering it as a way of dealing with the negative impacts of the projects they fund.

In May, Both ENDS participated in a fact-finding mission to Mongolia, the first country with legislation that requires biodiversity offsetting. Together with staff from Mongolian partner Oyu Tolgoi Watch and three other NGOs, Both ENDS set out to learn about implementation of the Mongolian law and implications for environmental conservation in the country. They met with the Environmental Ministry and nature conservation organisations in the capital, then headed to the South Gobi, the site of the massive Oyu Tolgoi mining project, which has received financing from the World Bank and the European Bank for Reconstruction and Development.

International trade and investment agreements do a lot to determine the conditions under which global capital flows. Such agreements should contribute to economic growth and employment. Instead, their focus is often on lowering the bar on social and environmental regulation and protecting investors.

Investor-to-state dispute settlement mechanism

In 2015, Both ENDS contributed to a vitally important debate around international frameworks and rules for trade and investment. Much attention was given to the Investor-to-State Dispute Settlement Mechanism (ISDS), which is part of many bilateral investment treaties (BITs) and free trade agreements. ISDS allows foreign companies to demand financial compensation for ‘unfavourable’ government regulations. What’s worse, companies can bypass domestic law and take their claim to an international court of private arbitrators who are neither democratically elected nor appointed.

In cooperation with Fair, Green and Global Alliance partners, Both ENDS participated in several public events and awareness-raising efforts around ISDS, particularly in relation to its proposed inclusion in the Transatlantic Trade and Investment Partnership (TTIP) which is currently being negotiated between the European Union (EU) and the United States (US).

When the European Commission proposed an Investment Court to replace ISDS, Both ENDS teamed up with allies in the Seattle to Brussels network to publish a critical analysis of the proposal, which doesn’t address the fundamental problem: giving foreign investors the right to sue states for democratically decided laws.

Similarly, in the aptly named report To change a BIT is not enough, Both ENDS argued that mild reform of BITs, which include ISDS, is not enough to ensure that they contribute to poverty reduction, inclusive growth and sustainable development – elements of the newly agreed Sustainable Development Goals (SDGs).