Page 7 - DMEA Week 34 2021
P. 7
DMEA COMMENTARY DMEA
credit agency UK Export Finance (UKEF) has primary addressees of the letter – ICBC (China),
also turned down a request for funding, while the Ugandan branch of South Africa’s Standard
the French insurance company AXA announced Bank Group and Sumitomo Mitsui (Japan), all of
in July that it would not provide coverage for the which have agreed to act as transactional advis-
project. ers for TotalEnergies, CNOOC and the gov-
ernments of Uganda and Tanzania on EACOP.
Climate considerations Standard Bank in particular has been criticised
All of these financial institutions have cited cli- by environmental groups for signing on to the
mate considerations as the reason for their deci- project, largely because of its extensive track
sion. Specifically, they have described EACOP record of financing coal projects but also because
as incompatible with their commitment to its lending policy does not put fossil fuels beyond
fund only projects that are in line with the Paris the pale.
Agreement, which aims to keep the rise in aver-
age global temperatures to 2 degrees centigrade More obstacles looming?
or less by the end of the 21st century. At this point, Standard Bank does not appear to
Some of the financial institutions in question be contemplating an exit from EACOP.
have faced outside pressure. In early March, It did promise in May 2021 that it would roll
more than 260 non-governmental organisations out roll out a new climate policy in the first half of
(NGOs) published an open letter that urged 2022, during its next reporting cycle. Presuma-
financial institutions not to provide any funding bly, the new version will be more restrictive than
for the construction of the pipeline. The signa- the bank’s existing policy, which imposes cer-
tories included well-known international NGOs tain restrictions on lending for oil, gas and coal
such as Greenpeace and Friends of the Earth, as projects and requiring borrowers to minimise
well as more narrowly focused organisations or reduce greenhouse gas (GHG) emissions.
such as the Africa Institute for Energy Govern- However, it will probably not have any retroac-
ance and the Alliance for Food Sovereignty in tive components; that is, it will not require the
Africa. bank to abandon any commitments that it has
The intended recipients, meanwhile, included already made.
22 commercial and state-run banks that were Even so, recent developments such as
expected to provide part of the financing for TotalEnergies’ higher estimate for pipeline
EACOP. At least five of these banks – ANZ, BNP construction costs and AXA’s decision to stay
Paribas, Crédit Agricole, Société Générale and out of the project should serve as notice that
UniCredit – subsequently abandoned plans to Uganda will face further obstacles as it attempts
support the pipeline project. At the same time, to develop and monetise its oil resources. It defi-
many of the others are facing pressure from nitely moved a step closer to this goal with the
shareholders and environmental activist groups signing of the EACOP agreements earlier this
to curtail lending to projects involving fossil year, but it has yet to reach its target. Moreover,
fuels. the target could recede further if climate con-
Similar pressure is being applied to the cerns continue to complicate financing.
Week 34 26•August•2021 www. NEWSBASE .com P7
