September 7th 2010 – As the world debates each new and obsolete coal energy production loan going to countries like South Africa and India, or whether we should destroy mountain tops to produce dirty energy, 70 of the world’s most important financial institutions are telling the World Bank’s private sector lending arm, the IFC, to raise the bar on climate financing.
– IFC should lead as standard setter and be more assertive and innovative on climate change;
– IFC should send clear signals promoting best available climate-friendly technologies, not coal;
– IFC should provide the finance framework for climate negotiations, presently it does not;
– The World Bank should be discouraging fossil fuel energy projects, presently it promotes them;
– We need stronger climate risk and climate assessment triggers in policy from IFC;
– IFC should require green house gas emission reporting for large investments;
These are some of the clear and pro-climate recommendations private banks are calling on IFC to incorporate in their Performance Standards, currently under review. The message is loud and clear, IFC is failing on the climate and much more can and should be done.
The letter, dated July 28th and recently made public, comes from some of the world’s most prominent private banks, including the likes of ABN Amro, Barklays, Lloyds, Bradesco, HSBC, JP Morgan Chase, Santander, BNP Paribas, Crédit Agricole, Dexia, Credit Suisse, Citibank, and ING, among others. A total of 70 banks subscribe to the Equator Principles, a voluntary code of conduct for bankers which lay out the basic tenets of sustainable financing. (For the full list and more info see: www.equator-principles.com).
Public response to IFC’s policy review process has thus far been especially critical of the World Bank’s failure to adequately address climate finance, a critique already common in global governmental negotiations underway through the UNFCCC process, where many countries are criticizing the World Bank for trying to muscle in their own priorities for climate finance. The fact remains the bank is doing little to promote a structural shift away from fossil fuel dependency.
Instead, the World Bank, largely influenced by its highly politicized governmental ambassadors to its’ Board of Directors, is receiving strong criticism from the private sector for lagging on climate leadership. For example, the World Bank recently provided South Africa with US$2.6 billion for highly contaminating coal production. This is the wrong signal to be sending to some of the most dirty energy producers.
The debate around stemming financing for dirty fossil fuel energy production is spreading quickly. The US Ex-Im Bank, for example, has taken criticism for bowing to the coal lobby and offering US$900 million to Bucryus, for a coal-burning energy project in India. If we are to meet global targets on reversing climate change, dirty energy projects such as these should not be receiving public monies or soft loans. The World Bank should making renewable energy investments financially competitive, not financing coal.
Private banks are moving more quickly and calling for stronger and clearer signals from government and multilateral institutions like the World Bank. Five large banks including JP Morgan Chase, Wells Fargo, Credit Suisse, Morgan Stanley, and Bank of America, for example, are phasing down or withdrawing completely from mountain top removal for coal energy. The World Bank should take note. Instead, it is lagging on leadership to shift our global energy consumption from fossil fuels to climate friendly energy.
Through beefing up its extremely influential Performance Standards to favor the climate, IFC has a unique opportunity to leverage a structural shift in the world’s energy finance market, a shift towards more climate friendly energy.
The question many are asking is, will it make the right decision?
For More Information:
Jorge Daniel Taillant
www.cedha.org.ar