The Use of Environmental and Social Criteria in Export Credit Agencies' Practices
Ecologic published a study on the incorporation of environmental and social standards into export credit agencies' lending practices. The study, which was commissioned by the Deutsche Gesellschaft für technische Zusammenarbeit (GTZ), surveys the environmental guidelines of eight OECD member states' export credit agencies. Special emphasis was given to the support of large dams; in this context, the study evaluates to what extent the recommendations made by the World Commission on Dams are reflected in the environmental and social guidelines.
Export credits are a central Instrument for trade between industrialised and developing nations. They serve to ensure exports in politically or economically unstable countries with the goal of strengthening the domestic export economy. Above all, export credits are an instrument of national foreign direct investment. Nearly all major governments economically assist their respective domestic interests through export credit agencies. These government agencies, in short, promote national exports by financing transactions in cases in which financing from private financial market is not available because of unacceptably high risks.
In the past, export credit agencies found themselves caught in the crossfire of criticism. Export credits were in many cases used to finance large projects that were not at all complementary to the goals of sustainable development. In particular large dam projects, such as the Chinese Three Gorges Dam or the San Roque Hydro and Irrigation Project in the Philippines, were often financed by export credits without the guarantee that the corresponding environmental and social standards would be observed. It was therefore a longstanding demand that export credits be allocated with social and ecological considerations in mind.
In recent years the export credit agencies of all of the major industrialised countries established guidelines with regard to environmental and social standards. The German EulerHermes, for example, adopted a set of "Environmental Guidelines in April 2001. In December 2001 the OECD established the "Common Approaches on Environment and Officially Supported Export Credits" which outlines a common set of minimum standards for the consideration of environmental and social standards.
Contents of the study
Ecologic was commissioned by the Deutsche Gesellschaft für technische Zusammenarbeit (GTZ) investigate environmental and social standards in export credit agencies' lending practices. The study surveys the environmental guidelines of eight OECD member states' export credit agencies. Special emphasis was given to the support of large dams; in this context, the study evaluates to what extent the recommendations made by the World Commission on Dams are reflected in the environmental and social guidelines.
The study seeks to determine inter alia:
- the way in which (i.e. according to which criteria) project applications are assessed;
- the role of stakeholder interest and involvement;
- which information about projects should be accessible, and at which point in time this information should be made available.
The study comes to the conclusion that in recent years the ECAs from all countries examined have made significant progress with the integration of environmental and social interests in their lending practices. For instance, large projects are all subject to regular environmental assessments, which are either conducted by the ECAs or by an external environmental consultant. However, disclosure policy represents an issue where room for improvement remains. While a several ECAs have introduced ex-ante disclosure policies, others only publish information about decisions that have been taken. However, effective stakeholder participation can only be achieved if the public has access to detailed information well ahead of the final decision.
The study concludes with an overview of the impact of the World Commission on Dams on Export Credit Agencies and a series of suggestions as to how the WCD recommendations can be better integrated into the lending practices of ECAs.
The findings of the study have been summarised in a 54-page project report [pdf, 398 KB, English].
1. Export Finance and Insurance Corporation (EFIC, Australia)
2. Export Development Canada (EDC, Canada)
3. Compagnie Française d' Assurance pour le Commerce Exterieur (COFACE, France)
4. Japan Bank for International Cooperation (JBIC, Japan)
5. Garanti-Instituttet for Eksportkreditt (GIEK, Norway)
6. Export Risk Guarantee Agency (ERG, Switzerland)
7. Euler-Hermes Kreditversicherungs-AG (EULER HERMES, Germany)
8. Export Credits Guarantee Department (ECGD, United Kingdom)
9. Export-Import Bank of the United States (EX-IM BANK, United States)
10. The World Commission on Dams
11. UNEP - Dams and Development Project
12. OECD Export Credit Division
13. UNEP Division of Technology, Industry, and Economics (UNEP-DTIE)
14. Deutsche Gesellschaft für Technische Zusammenarbeit
15. ECA-Watch - International NGO Campaign on Export Credit Agencies
Keywords: Trade, Export Credit Agencies, Investment
Sponsor: Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ)
Team: Ana-Mari Hamada, Benjamin Görlach, Markus Knigge, Caroline Nuffort
Duration: 01.04.03 until 01.06.03
Project number: 1809
Last changes: 03.11.03