The new legislation has created new hopes among the NGOs that things will start to improve at Opic.
US export credit agencies have been falling short on social and environmental standards
The Overseas Private Investment Corporation (Opic) and US Export-Import Bank, the two official export credit agencies in the US, are beginning to feel the pressure to adopt more responsible business practices.
Both agencies, funded by the government, help provide financing and political risk insurance to US businesses investing in emerging markets.
Environmental campaigners Greenpeace and Friends of the Earth filed a lawsuit against Opic and Ex-Im Bank in 2002 alleging that they contributed to climate change by funding oil fields, pipelines and coal-fired power plants.
The lawsuit resulted in a settlement in early 2009 that required Opic to reduce greenhouse gas emission by 20% over 10 years from financed projects and the Ex-Im Bank agreed to introduce a carbon policy and take emissions into account in evaluating fossil fuel projects.
New legislation has also tightened the way Opic loans or guarantees projects. The law, passed in December, requires Opic to reduce emissions from financed projects by 30% in 10 years and 50% in 15 years. Opic will also be required to increase financing for renewable energy projects in developing countries.
Opic already had a set of environmental standards contained in an environmental handbook last updated in 2004. But critics say the agency ignored these principles in practice.
For example, an investigation by Opic’s own office of accountability, set up to independently handle complaints, concluded in 2009 that Opic did not comply with its stated standards on the resettlement of indigenous people in a silver and tin mining project in Bolivia operated by US mining company Coeur d’Alene Mines Corporation.
Opic had provided $54m in political risk insurance to the company in 2004.
To the dismay of the NGOs fighting for the rights of the affected community, Opic’s management publicly disagreed with the findings. However, a couple of months later, the agency introduced greater transparency by posting information on environmentally sensitive projects on its website, seeking public comments.
Mixed hopes
The new legislation has created new hopes among the NGOs that things will start to improve at Opic.
Doug Norlen, policy director at San Francisco-based non-profit group Pacific Environment, which campaigns for responsible finance, says: “More importantly, the new legislation requires Opic to revise its policies on the environment, transparency, worker rights and human rights.”
New requirements also cover, for the first time, financial intermediaries – entities that Opic funds jointly with the private sector – which were previously not subject to the oversight of the agency.
While Opic faces new legal requirements, however, Ex-Im Bank still enjoys a free run. Ex-Im caused controversy in December when it announced a $3bn financing deal, the largest in its history, for an ExxonMobil-led Papua New Guinea liquid natural gas project. This coincided with the Copenhagen climate change summit. By Ex-Im Bank’s own estimates, the project will emit 3m tonnes of carbon dioxide annually.
Norlen says: “They have a carbon policy that does not reduce carbon. Their portfolio of renewable energy is less than 4% of their financing of fossil fuel.” He says that, in practice, Ex-Im Bank is going on a fossil fuel binge.
Export credit agencies in developed countries are the most opaque public financing institutions. Norlen says: “They need to do a much better job of making sure that international agreements and treaties on human rights and environment are complied with.”