Need for improved OECD environmental assessment standards and transparency

In its attempts to move away from coal and align with the Paris agreement, in its 2021 CSO consultation, the OECD is requesting input towards how to incentivise climate-friendly and sustainable projects and/or discourage projects with negative impacts in the provision of official export credits. 

We would like to seize this opportunity and suggest ways in which to improve how and when OECD members carry out environmental and social impact assessments (ESIAs). The latter determine the impact OECD projects would have on the climate and environment and form the basis of decision for whether a project may go ahead or not.

Specifically, we suggest the following changes to OECD ESIA benchmarks for export credit agencies,
defined in The Common Approaches, based on existing EU standards:

  1. Applying The Common Approaches to all officially supported export credits, thereby removing any financial or other thresholds,
    a. including export credits with a repayment term of less than two years,
    b. as well as all other ECA products, such as bonds and working capital,
    c. and including all sectors, i.e. military equipment and agricultural commodities;
  2. Requiring all projects to undergo an environmental assessment, thereby removing the current financial threshold that limits environmental assessment to projects of SDR 10 million or more, publishing information on individual project EIAs online, prior to project approval allowing sufficient time for comments and challenges (best international practice requires a 120-day disclosure period).
  3. Publishing all screening decisions and categorising all projects prior to project approval. A public list of businesses should include all accepted projects and detailed project descriptions; naming the industry sector; giving reasons for any missing information; indicating the self-imposed and/or international guidelines upon which each project categorisation is based; including information on each project’s climate impact; and
    publishing all EIA assessments;
  4. Making all projects’ Environmental and Social Impact Assessments (ESIAs), Environmental Impacts Assessments (EIAs) and Social Impact Assessments (SIAs) available, where these have been undertaken, as well as any Environmental and Social Due Diligence reports (ESDDs), Environmental and Social Action Plans (ESAPs), Cumulative Impact Assessments
    (CIAs), Resettlement Action Plans (RAPs), Biodiversity Action Plans (BAPs) and monitoring reports. These, along with project contacts, should be kept online for the entire running period of each project. EIAs should automatically be requested for projects that do not conform to Paris Agreement goals;
  5. Publishing all Category A and B projects and publishing information about which international and self-imposed guidelines have been applied to individual project decisions
    in the screening, categorisation, and due diligence processes. Information on monitoring should also be published;
  6. Publishing information on individual project emissions online, prior to project approval, and allowing sufficient time for comments and challenges (best international practice requires a
    120-day disclosure period). This information should also be published in the CSR and/or annual report.
  7. Considering auxiliary projects as part of the main project – any screening and assessment of a project should consider its contribution to the overall environmental and climate impact of
    the project it is related to.

Failing to improve these standards may lead to investments dangerous to climate and environment. This is exemplified in our recent report, using the example of the Danish export credit agency EKF. For example, EKF supported Danish trade with the backlisted, Brazilian mining company Vale SA. The project did not undergo an environmental and social assessment, as it is only a small (SME)
guarantee. The project is moreover not categorized as Category A, as the product supported is telecommunication equipment for a mining project (auxiliary industry), which EKF did not categorise as part of the mining project. The decision-making basis for this classification was not published (p.46-49).

Please find relevant information, as well as an exemplification of the issues around the existing OECD ESIA standards (p.20-22) using EKF as a case study (p.28-32), in Just Finance International’s report “Decarbonising Danish Export Credits” (June, 2021).