As banks fund oil pipeline, campaigners question their environmental pledges
  • Activists say some banks that have signed up to the Equator Principles are failing to live up to their pledge of properly assessing the environmental and social risks of the projects they finance.
  • South Africa’s Standard Bank and Japan’s Sumitomo Mitsui Banking Corporation are facilitating funding for the East African Crude Oil Pipeline project (EACOP).
  • When fully operational, crude oil flowing through 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 been inadequately compensated.

Activists have accused an association of banks claiming to adhere to principles safeguarding people and the environment of “greenwashing.” Two signatories of the Equator Principles are currently advising East African governments and their oil major partners on securing finance for the EACOP pipeline.

Banks signing up to the Equator Principles commit to respecting a set of voluntary guidelines through which the environment and social impacts of large industry projects are considered. South Africa’s Standard Bank and Japan’s Sumitomo Mitsui Banking Corporation (SMBC) are card-carrying members, along with more than 130 other financial institutions globally.

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

“Banks are making a lot of promises, but not committing to any action. They are preaching water but drinking wine,” says 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 path from Lake Albert in Uganda to the port of Tanga in Tanzania. France’s TotalEnergies and the China National Offshore Oil Corporation are major stakeholders.

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

“Standard Bank should not be proceeding with the EACOP project because financing it is in disregard of the Equator Principles,” says Elmawi, referring to a report produced by the Africa Institute for Energy Governance (AFIEGO), Inclusive Development International, and BankTrack in June.

Standard Bank has so far stopped short of directly funding EACOP, saying it will only do so if the project complies with the principles it has signed up to. AFIEGO’s 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 sources that it will pass through; and that the land acquisition process was improper.

“We have project-affected persons complaining that compensation is inadequate and delayed,” says Diana Nabiruma of AFIEGO. “Their income is reduced and they are not able to feed their children.”

“There’s ample evidence that this project is not going to meet the principles,” says Ryan Brightwell, research director at BankTrack. “It’s black and white in our view.”

But TotalEnergies says the consultants hired to carry out a risk analysis of the project for lenders reported there were no “red flag” items that would be considered no-go for financing. That consultant report, carried out for Standard Bank by Golder Associates, has not been made public even though the bank’s CEO committed to doing so in May.

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

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

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

“The main conclusions of that report which has taken more than one year, combining desktop reviews, interviews, workshops and on the ground 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 there are no red flags raised is extraordinary,” says Brightwell, who called for a grievance mechanism that allows affected communities to hold banks directly to account when they fail to meet their Equator Principle commitments.

Following the Equator Principles annual general meeting in October, the organization announced new “due diligence tools” to improve access to grievance mechanisms.
Brightwell welcomes this but notes that these tools don’t address the question of accountability at the bank level.

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

Elmawi, meanwhile, says the system needs to be overhauled to ensure that banks that contravene the principles pay substantial fines. “We have to be serious. These principles have to deter people from doing harms,” he tells Mongabay.

Pipeline subcontractors purchased a strip of land that cuts through Elizabeth Ayebare’s family’s farm in 2018, but the family has still not been compensated. Image courtesy of Thomas Lewton.

BankTrack has also called on members of the Equator Principles to go further and rule out all new investments in oil and gas. According to BankTrack, almost 200 new fossil fuel projects have been financed by signatories to the Equator Principles since 2016. “Banks are trying to look like they’re acting on the climate crisis, but they’re not committing to any action,” Elmawi says.

Both the International Energy Agency and the Intergovernmental Panel on Climate Change have said there can be no new fossil fuel developments if global warming is to be limited to 1.5° Celsius (2.7° Fahrenheit) above pre-industrial levels — the threshold beyond which scientists expect runaway changes to the climate will be set in motion — and the world is to reach net-zero emissions by 2050, targets set under the UN’s Framework Convention on Climate Change. EACOP will generate more than 34 million metric tons of carbon dioxide each year.

In September, the pipeline secured its first financial commitment to the tune 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 maximising opportunities for sustainable and inclusive growth across the continent, while also managing the risks posed by climate change.”

A spokesperson for TotalEnergies 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 contacted the Equator Principles Association for comment but didn’t receive a reply by the time of publication.

Total’s oil pipeline gets go-ahead from Ugandan MPs despite secret terms

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

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