Export Credits Guarantee Department and Sustainable Development
Memorandum from The Corner House to the Environmental Audit Committee
by The Corner House
first published 30 June 2008
The Environmental Audit Committee is appointed by the UK's lower house of parliament, the House of Commons, to consider to what extent the policies and programmes of government departments and non-departmental public bodies contribute to environmental protection and sustainable development. It also audits their performance against any targets set by government Ministers and reports back to the House.
In 2008, the Committee carried out an inquiry into the Export Credits Guarantee Department and Sustainable Development, publishing its (Eleventh) 124-page report on 14 October 2008.
The inquiry examined how well the ECGD takes account of environmental impacts in its assessment and decision-making processes, and how its procedures could be improved with regard to information disclosure and transparency. It also looked at ECGD's progress in addressing shortcomings and concerns highlighted five years earlier by the Committee in the coverage of its impact analysis process, transparency and the composition of its portfolio.
This Corner House memorandum to the Committee's inquiry examines:
ECGD's decision-making procedures and sustainable development
The submission describes these procedures as "totally inadequate" to re-orientate the ECGD's activities towards compliance with the government's sustainable development objectives, let alone ensure such compliance.
Not a single application for ECGD support is formally assessed against the UK's stated sustainable development objectives. The decision-making procedures entirely omit formal scrutiny of project compliance with these objectives, despite this being a key requirement imposed on ECGD by government ministers.
Of ECGD guarantees issued in 2006-07, 71 per cent (by value) were unscreened for any environmental or social impacts. The Department's environmental screening process is intended merely to collect information on projects so as to categorise them by potential impact, not to screen out unsustainable ones.
ECGD has reserved wide powers to derogate from its stated sustainable development and procedural standards.
Inadequacy of Business Principles and need for proactive approach
ECGD's largely aspirational and discretionary Business Principles fail to provide the incentives, penalties and binding rules to ensure that ECGD's business practice accords with sustainable development objectives.
- ECGD's due diligence and monitoring
- Information disclosure
- The OECD and export credit agency reform
The Corner House drew on documents requested and released under Freedom of Information legislation to give examples involving the Sakhalin II oil and gas project in the Russian Far East; the Baku-Tblisi-Ceyhan (BTC) oil pipeline project; and Shell's Bonny Island, Nigeria, LNG Project, among others.
The Committee's final report concluded that:
"There is still room for improvement in the way sustainable development is incorporated into the agency's decision-making and the ECGD must ensure its activities are in line with wider Government aspirations on sustainable development."
"The challenge is for the ECGD to demonstrate that sustainable development is given appropriate weight within its current remit, and that it does nothing that would actively undermine this principle. In particular, the ECGD should identify areas where its environmental standards could be tightened. More rigorous standards can then be applied across its portfolio, including to aerospace exports. The ECGD must improve the transparency of its assessment processes and increase the level of disclosure of project information. It is important that the department does more to attract renewable energy and other projects that support sustainable development . . ."
"The ECGD's approach to sustainable development is all the more important because of its ability to influence and raise standards internationally. A bolder approach from the ECGD on sustainable development issues and transparency will be vital in improving the performance of Export Credit Agencies in general."
In one of its 16 conclusions and recommendations, the Committee stressed that it did:
"not believe that the ECGD has struck the appropriate balance between protecting commercial confidentiality and ensuring due transparency. The ECGD provides support from public funds and exporters must therefore recognise that this facility should necessarily entail certain conditions to ensure adequate disclosure and scrutiny of funding decisions."