When banks fund oil pipelines, campaigners question their environmental pledges | Techy Kings


  • Activists say some banks that have signed up to the Equator Principles have failed to fulfill their pledge to properly assess the environmental and social risks of the projects they finance.
  • South Africa’s Standard Bank and Japan’s Sumitomo Mitsui Banking Corporation are facilitating financing for the East African Crude Oil Pipeline (EACOP) project.
  • When fully operational, the crude oil flowing through the pipeline will generate 34 million metric tons of greenhouse gas emissions each year.
  • Activists say EACOP, which will run 1,400 kilometers (870 miles) across many ecologically sensitive areas, has also affected 12,000 households who have received insufficient compensation.

Activists have accused bank associations that claim to adhere to principles of protecting the public and the environment of “greenwashing.” The two signatories of the Equator Principles are advising East African governments and their major oil partners to secure finance for the EACOP pipeline.

Banks that subscribe to the Equator Principles are committed to respecting a set of voluntary guidelines through which the environmental and social impacts of large industrial projects are considered. South Africa’s Standard Bank and Japan’s Sumitomo Mitsui Banking Corporation (SMBC) are card carrier members, along with more than 130 other financial institutions worldwide.

Yet Standard Bank and SMBC continue to facilitate the financing of the East African Crude Oil Pipeline (EACOP) project.

“The bank made many promises, but did not take any action. They preach water but drink wine,” said Omar Elmawi, coordinator of the StopEACOP campaign.

Construction of the EACOP pipeline began last year. When completed, it will be the longest heated pipeline in the world, cutting a route from Lake Albert in Uganda to the port of Tanga in Tanzania. France’s TotalEnergies and China National Offshore Oil Corporation are the main stakeholders.

Road construction near Murchison National Park: machinery and heavy trucks for a pipeline within the park boundary have disturbed wildlife. Image by Thomas Lewton.
The EACOP line stretches 1,445 kilometers from Hoima to Tanga port in Tanzania.  Image by Sputink via Wikimedia Commons (CC BY-SA 4.0).
The EACOP line stretches 1,445 kilometers from Hoima to Tanga port in Tanzania. Image by Sputink via Wikimedia Commons (CC BY-SA 4.0).

“Standard Bank should not proceed with the EACOP project because financing it is ignoring the Equator Principle,” said Elmawi, referring to a report produced by the African Institute for Energy Governance (AFIEGO), Inclusive Development International and BankTrack in June.

Standard Bank has so far refrained from funding EACOP directly, saying it will only do so if the project adheres to the principles it has signed up to. The AFIEGO report found that affected communities were not adequately informed and consulted; that the project fails to mitigate environmental risks to the protected ecosystems and water resources it will pass through; and that the land acquisition process is improper.

“We have project-affected people complaining that compensation is insufficient and delayed,” said Diana Nabiruma of AFIEGO. “Their income is reduced and they cannot feed their children.”

“There is overwhelming evidence that this project will not meet the principle,” said Ryan Brightwell, director of research at BankTrack. “It’s black and white in our view.”

But TotalEnergies said a consultant hired to conduct a project risk analysis for the lender reported no “red flag” items that would be deemed ineligible for financing. The consultant’s report, carried out for Standard Bank by Golder Associates, has not been made public despite the bank’s Chief Executive Officer committing to do so in May.

“We want to know the list of communities and civil society groups that Golder Associates has consulted,” said Nabiruma.

A spokesperson for Standard Bank said that “the report’s findings are currently being reviewed by internal experts. Standard Bank’s final assessment and subsequent decisions will follow the project’s timeframe.”

Stephanie Platat, media relations officer for TotalEnergies, said: “All partners are committed to implementing these projects in an exemplary manner, taking into account the interests of the environment and biodiversity, as well as the rights of the communities concerned, in line with strict performance standards. International Finance Corporation (IFC).

“The main conclusions of the report which has taken more than a year, combining desktop reviews, interviews, workshops and field visits, found that EACOP either meets or is on track to meet all 8 IFC Performance Standards.”

In September, the European Parliament passed an emergency resolution condemning the EACOP project for human rights violations and environmental risks. “To say that no red flags were raised is extraordinary,” said Brightwell, who called for a grievance mechanism that would allow affected communities to directly hold bank accounts when they fail to meet their Equator Principle commitments.

Following the annual general meeting of the Equator Principles in October, the organization announced a new “due diligence tool” to improve access to the complaints mechanism.
Brightwell welcomes this but note that this tool does not address the question of accountability at the bank level.

“It is not fit for purpose. We cannot rely on banks to do as they promise. But we don’t want to throw the baby out with the bathwater here. We see the potential of the Equator Principle to ensure that risk is better managed in project finance.”

Meanwhile, Elmawi said the system needs to be overhauled to ensure that banks that violate the principle pay large fines. “We have to be serious. These principles should prevent people from doing harm,” he told Mongabay.

A pipeline subcontractor bought a piece of land that cut off Elizabeth Ayebare’s family farm in 2018, but the family has yet to receive compensation. Image courtesy of Thomas Lewton.

BankTrack has also called on members of the Equator Principle to go further and reject all new investment in oil and gas. According to BankTrack, nearly 200 new fossil fuel projects have been financed by signatories of the Equator Principles since 2016. “Banks are trying to look like they’re acting on the climate crisis, but they’re not doing anything,” Elmawi said.

Both the International Energy Agency and the Intergovernmental Panel on Climate Change have said there is unlikely to be new fossil fuel development if global warming is limited to 1.5° Celsius (2.7° Fahrenheit) above pre-industrial levels — a threshold that exceeds scientists’ expectations. climate change will be set in motion — and the world will achieve net zero emissions by 2050, the target set under the UN Framework Convention on Climate Change. EACOP will generate more than 34 million metric tons of carbon dioxide annually.

In September, the pipeline secured its first financial commitment of $100 million from the Saudi Arabia-based Islamic Development Bank, which is not a signatory to the Equator Principles.

A spokesperson for Standard Bank said: “Standard Bank is committed to maximizing opportunities for sustainable and inclusive growth across the continent, while managing the risks posed by climate change.”

A TotalEnergies spokesperson said: “We are doing everything we can to make it an exemplary project in terms of transparency, shared prosperity, economic and social progress, sustainable development, environmental accountability and respect for human rights.”

Mongabay reached out to the Equatorial Principle Society for comment but did not receive a reply at the time of publication.

Total oil pipeline gets permission from Ugandan MPs despite secret terms

Banner image: Phonothèque AT via Flickr (CC BY-NC 2.0)

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