{"id":50005955,"date":"2016-04-22T17:35:32","date_gmt":"2016-04-22T16:35:32","guid":{"rendered":"https:\/\/stage.dialogochino.net\/?p=5955"},"modified":"2023-06-05T15:50:51","modified_gmt":"2023-06-05T14:50:51","slug":"5955-first-brics-bank-loans-spark-debate-over-environmental-protection","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/5955-first-brics-bank-loans-spark-debate-over-environmental-protection\/","title":{"rendered":"First BRICS bank loans spark debate over environmental protection"},"content":{"rendered":"<p>Instead of funding coal plants, oil refineries or roads that cut through pristine forests as some observers had feared, new southern-led infrastructure lender the <a href=\"http:\/\/www.ndb.int\/index.php\">New Development Bank<\/a> (NDB or BRICS bank), has earmarked its first <a href=\"http:\/\/www.ndb.int\/brics-bank-gives-811-million-in-first-round-green-energy-loans.php\">US$ 811 million batch of loans<\/a> for renewable energy projects.<\/p>\n<p>The NDB this week signed-off two main disbursements of US$300 million to Brazilian national development bank <a href=\"http:\/\/www.bndes.gov.br\/SiteBNDES\/bndes\/bndes_en\/\">BNDES<\/a> and US$250 million to India\u2019s <a href=\"http:\/\/www.canarabank.com\/English\/Home.aspx\">Canara bank<\/a> to enhance renewable energy capacity. Shaktikanta Das, India\u2019s economic affairs minister, described the loans as a \u201cgood start\u201d on the way to proving the bank\u2019s green credentials.<\/p>\n<p>South African public utility <a href=\"http:\/\/www.eskom.co.za\/Pages\/Landing.aspx\">Eskom Holdings SOC Ltd<\/a> and China\u2019s Shanghai Lingang Hongbo New Energy Development Co. will&nbsp;receive US$180 million and US$81 million respectively. The former will construct a new transmission line and the latter is set to add 100 megawatts of rooftop solar capacity. In the case of South Africa and China, funds will be administered by public finance ministries. The locations of the projects have not been disclosed.<\/p>\n<p>NDB project funding has been the subject of <a href=\"http:\/\/stage.dialogochino.net\/does-anyone-know-anything-about-the-new-brics-bank\/\">intrigue<\/a> and concern among civil society organizations (CSOs) since the bank\u2019s formal <a href=\"http:\/\/brics.itamaraty.gov.br\/\">launch<\/a> in Fortaleza, Brazil, in 2014. Yet news of these first \u2018green\u2019 loans has done little to ease their fears.<\/p>\n<p>The problem, CSOs say, is that since the NDB still lacks a proper social and environmental policy framework, it cannot safeguard against the adverse impacts of its projects \u2013 no matter how green they claim to be.<\/p>\n<p>\u201cHow the bank defines \u2018green\u2019 is something the bank should clarify up front before issuing any finance,\u201d says Katherine Lu, sustainable finance coordinator at <a href=\"http:\/\/www.foe.org\/\">Friends of the Earth<\/a> US, adding that safeguards enable banks to assess the sustainability of projects and their potential impacts on society in a consistent manner.<\/p>\n<p>\u201cWithout them, banks have no moral compass,\u201d Lu told <em>Di\u00e1logo Chino<\/em>, noting that the bank lacks staff and processes to address public feedback.<\/p>\n<p>\u201cIt is a red flag that the bank remains immature as a financial institution and may not yet be ready for the international stage,\u201d Lu says.<\/p>\n<p><strong>Starting small<\/strong><\/p>\n<p>While the first projects would seem to have a low environmental impact it is not clear whether NDB will continue to fund similar small-scale developments. There is nothing stipulated in the bank\u2019s <a href=\"http:\/\/www.ndb.int\/download\/Agreement%20on%20the%20New%20Development%20Bank.pdf\">articles of agreement<\/a> that rules out investment in bigger, potentially more damaging projects.<\/p>\n<figure id=\"attachment_5136\" aria-describedby=\"caption-attachment-5136\" style=\"width: 215px\" class=\"wp-caption alignleft\"><a href=\"https:\/\/dialogue.earth\/content\/uploads\/2016\/02\/1200px-BRICS_summit_709x470-Copy-Copy.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-5136\" src=\"https:\/\/dialogue.earth\/content\/uploads\/2016\/02\/1200px-BRICS_summit_709x470-Copy-Copy.jpg\" alt=\"See also: Does anyone know anything about the new BRICS bank?\" width=\"215\" height=\"142\"><\/a><figcaption id=\"caption-attachment-5136\" class=\"wp-caption-text\">See also: <a href=\"http:\/\/stage.dialogochino.net\/?p=4957=\">Does anyone know anything about the new BRICS bank?<\/a><\/figcaption><\/figure>\n<p>Lu doubts that these first loans are indicative of the NDB\u2019s future funding plans since the bank\u2019s remit is to support large infrastructure.<\/p>\n<p>Caio Borges, a lawyer with Brazilian civil society group <a href=\"http:\/\/www.conectas.org\/en\">Conectas<\/a>, says irrespective of a project\u2019s size safeguards reveal a bank\u2019s commitment to listening and incorporating communities\u2019 perspectives into the design and implementation of a project.<\/p>\n<p>\u201cThe safeguard model is the by-product of decades of civil society struggle to ensure that development finance institutions respect, protect and fulfil human rights,\u201d Borges <em>told Di\u00e1logo Chino<\/em>.<\/p>\n<p>Kevin Gallagher of Boston University\u2019s <a href=\"http:\/\/www.bu.edu\/pardeeschool\/research\/gegi\/\">Global Economic Governance Initiative<\/a> says that by coming out of the gate with four green projects partly <a href=\"http:\/\/www.reuters.com\/article\/brics-bank-bonds-yuan-idUSL5N17I0WY\">financed by green bonds<\/a>, the NDB has demonstrated real innovativeness.<\/p>\n<p>\u201cIf the NDB can also devise state-of-the art safeguards that enhance environmental sustainability and social inclusion without dragging down the project cycle it could become a truly new model for multilateral development banking,\u201d Gallagher says.<\/p>\n<p><strong>&#8216;On-lending&#8217;<\/strong><\/p>\n<p>By lending through member countries\u2019 national development banks (a process known as <a href=\"http:\/\/markets.ft.com\/research\/Lexicon\/Term?term=on_lending\">on-lending<\/a>), NDB projects become subject to the rules of these banks on managing social and environmental risks.<\/p>\n<p>For Borges, this does not circumvent the need for oversight from the NDB since rules in some member countries do not align with the highest international standards on human rights, transparency and accountability.<\/p>\n<p>Even with safeguards, many of the major infrastructure works financed by national development banks have failed to adequately mitigate their impacts, adds Lu, pointing to Brazil\u2019s controversial <a href=\"http:\/\/stage.dialogochino.net\/china-takes-leading-role-in-brazils-power-sector\/\">Belo Monte dam<\/a>, funded by BNDES.<\/p>\n<p><strong>Washington rules?<\/strong><\/p>\n<p>While the NDB seems to be doing things differently to existing multilateral development banks, the other new China-led bank in town, the <a href=\"http:\/\/www.aiib.org\/\">Asian Infrastructure Investment Bank<\/a> (AIIB), is treading a more familiar path.<\/p>\n<figure id=\"attachment_5139\" aria-describedby=\"caption-attachment-5139\" style=\"width: 216px\" class=\"wp-caption alignright\"><a href=\"https:\/\/dialogue.earth\/content\/uploads\/2016\/02\/16895431122_c396b41616_z-Copy-2.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5139\" src=\"https:\/\/dialogue.earth\/content\/uploads\/2016\/02\/16895431122_c396b41616_z-Copy-2.jpg\" alt=\"16895431122_c396b41616_z - Copy (2)\" width=\"216\" height=\"144\"><\/a><figcaption id=\"caption-attachment-5139\" class=\"wp-caption-text\">See also: <a href=\"http:\/\/stage.dialogochino.net\/?p=4338target=\">Can China make the AIIB and BRICS the greenest banks in town?<\/a><\/figcaption><\/figure>\n<p>The AIIB, which will invest in infrastructure to support its <a href=\"http:\/\/stage.dialogochino.net\/china-needs-to-pave-one-belt-one-road-with-green-finance-say-experts\/\">One Belt, One Road initiative<\/a>, also <a href=\"http:\/\/www.ft.com\/cms\/s\/2\/a36af0d0-05fc-11e6-9b51-0fb5e65703ce.html\">approved<\/a> its first loans this week. The bank will fund a highway in Pakistan, an expressway connecting Dushanbe, the Tajik capital, to the Uzbek border, and a ring road in Almaty, Kazakhstan. But in contrast to the NDB, the AIIB has incorporated safeguards into its policy framework.<\/p>\n<p>The AIIB held a process of <a href=\"https:\/\/www.chinadialogue.net\/article\/show\/single\/en\/8554-Pressure-mounts-on-AIIB-for-greater-clarity-on-green-lending\">public consultation<\/a> on its safeguards, which ended up more or less replicating those developed by the Washington-based finance institutions such as the <a href=\"http:\/\/www.worldbank.org\/\">World Bank<\/a>. China holds a 30% vote and veto power within the AIIB. Therefore, Gallagher says, it is the NDB, in which BRICS member countries hold equal voting share, which currently offers the more interesting approach to multilateral development finance.&nbsp; China is also a member of the BRICS bank.<\/p>\n<p>Borges points out that, for better or worse, the World Bank is seen as the reference point for safeguards. However, he says Washington-based financial institutions\u2019 <a href=\"http:\/\/stage.dialogochino.net\/latin-america-won-the-china-lottery-but-is-paying-for-its-commodity-gamble\/\">imposition<\/a> of harsh \u2018structural adjustment\u2019 policies on developing countries in the 80s and 90s as a condition of lending has translated into a perception the safeguard model also undermines democratic autonomy.<\/p>\n<p>All the same, Borges says, both developed and developing countries should uphold the principles to which they have committed in the international sphere.<\/p>\n<p>\u201cSafeguards play a key role in making sure that development is made to the benefit of the people and in accordance with international human rights,\u201d he says.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Civil society groups concerned despite New Development Bank\u2019s approval of \u2018green\u2019 first loans<\/p>\n","protected":false},"author":40000225,"featured_media":50005966,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758],"tags":[512,544,20000237],"hashtags":[],"country":[50000021,20000110,20000111,50040754],"class_list":["post-50005955","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-brics","tag-finance","tag-sustainable-development","country-brazil","country-china","country-india","country-south-africa"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>First BRICS bank loans spark debate over environmental protection | Dialogue Earth<\/title>\n<meta name=\"description\" content=\"Civil society groups concerned despite New Development Bank\u2019s approval of \u2018green\u2019 first loans\" 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