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Some of the world’s largest economies have agreed that their government-backed export credit agencies should look at a wider range of social factors when considering whether to provide financial support for new business projects.
The 30 member countries of the OECD rubber-stamped an official ‘recommendation’ last month to expand the range of issues to be considered by their credit agencies before approval is given to backing for projects such as industrial plants, pipelines, dams and major tourist and retail developments. Member countries, which include most of the major economies but not China and Russia, are expected to adhere to the recommendations, although there are no official sanctions for failing to do so.
OECD policy on export credits, which was last updated in 2003, has hitherto almost exclusively urged export credit agencies to take account of environmental, rather than social, impacts. But the revised recommendation says projects should now be benchmarked against the full range of performance standards recently set by the International Finance Corporation (EP7, issue 11) for its annual $19.3billion (£9.65bn) loan portfolio in the developing world.
The eight standards cover areas not touched on in the OECD’s earlier recommendation, among them working conditions, labour standards, involuntary resettlement and the rights of indigenous peoples. The standards entail a review of any project’s effects on health and safety in nearby communities.
The OECD is also asking export credit agencies to disclose each year what social and environmental issues have been considered in relation to credit applications. In addition, agencies are urged to swap information more regularly ‘to improve common practices and promote a level playing field between export credit providers’.
Many governments use export credit agencies, which can be government bodies or private companies operating on behalf of government, to channel financial support to national companies competing for overseas sales. Usually this takes the form of insurance that underwrites loans provided by financial institutions. In 2005, $65billion of business was underwritten in this way.
Christopher Avery, director of the Business & Human Rights Resource Centre charity, told EP the new recommendation was ‘a welcome first step’, but warned that human rights advocates ‘will be waiting to see whether and how each export credit agency implements it’.
The UK’s Export Credits Guarantee Department (ECGD) already operates to the IFC performance standards and so will not have to tighten its procedures, an ECGD official told EP. ‘The common approach agreed by export credit agencies embeds the UK’s existing policies at an OECD level,’ the official said. But some countries will need to make changes.
Reference to the IFC performance standards brings OECD policy on export credits roughly into line with the Equator Principles, which are used by financial institutions to assess the social and environmental risks involved in large scale projects. The IFC standards also underpin the Equator Principles.
The 30 member countries of the OECD rubber-stamped an official ‘recommendation’ last month to expand the range of issues to be considered by their credit agencies before approval is given to backing for projects such as industrial plants, pipelines, dams and major tourist and retail developments. Member countries, which include most of the major economies but not China and Russia, are expected to adhere to the recommendations, although there are no official sanctions for failing to do so.
OECD policy on export credits, which was last updated in 2003, has hitherto almost exclusively urged export credit agencies to take account of environmental, rather than social, impacts. But the revised recommendation says projects should now be benchmarked against the full range of performance standards recently set by the International Finance Corporation (EP7, issue 11) for its annual $19.3billion (£9.65bn) loan portfolio in the developing world.
The eight standards cover areas not touched on in the OECD’s earlier recommendation, among them working conditions, labour standards, involuntary resettlement and the rights of indigenous peoples. The standards entail a review of any project’s effects on health and safety in nearby communities.
The OECD is also asking export credit agencies to disclose each year what social and environmental issues have been considered in relation to credit applications. In addition, agencies are urged to swap information more regularly ‘to improve common practices and promote a level playing field between export credit providers’.
Many governments use export credit agencies, which can be government bodies or private companies operating on behalf of government, to channel financial support to national companies competing for overseas sales. Usually this takes the form of insurance that underwrites loans provided by financial institutions. In 2005, $65billion of business was underwritten in this way.
Christopher Avery, director of the Business & Human Rights Resource Centre charity, told EP the new recommendation was ‘a welcome first step’, but warned that human rights advocates ‘will be waiting to see whether and how each export credit agency implements it’.
The UK’s Export Credits Guarantee Department (ECGD) already operates to the IFC performance standards and so will not have to tighten its procedures, an ECGD official told EP. ‘The common approach agreed by export credit agencies embeds the UK’s existing policies at an OECD level,’ the official said. But some countries will need to make changes.
Reference to the IFC performance standards brings OECD policy on export credits roughly into line with the Equator Principles, which are used by financial institutions to assess the social and environmental risks involved in large scale projects. The IFC standards also underpin the Equator Principles.
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