There has been no joint commitment to stop funding fossil fuels or ensure proper human rights diligence.
Last week saw the first ever international meeting of public finance institutions, dubbed the Finance in Common Summit, as development banks from around the world sought to agree on joint responses to the climate emergency and Covid-19 pandemic.
However, an international group of civil society organisations and parliamentarians have issued two joint statements that are highly critical of these financial institutions, arguing that they exacerbate climate change and inequality, whilst also undermining human rights.
Both statements draw attention to the case of Feronia Inc, a Canadian company that operates several palm oil plantations across DR Congo (as The Ecologist has reported on previously).
Feronia, which has received approximately $80 million from the UK development bank CDC Group, stands accused of failing to pay decent wages, endangering their workers with poor safety equipment, and of consistently failing to provide promised social infrastructure (such as adequate housing and healthcare facilities).
More shockingly, in September it was alleged that plantation workers and received racist abuse from Feronia staff and that public whipping had been illegally reintroduced on one plantation (CDC argues that these claims are unsubstantiated).
One of the letters also draws attention to the high levels of fossil fuel financing provided by development finance institutions (DFIs) and calls on them to repurpose these investments to work in the interests of people and planet.
Daniel Willis, finance campaigner at Global Justice Now, said: "This Summit should have been an opportunity to reimagine how development banks could act for the public good in the not quite post-Covid-19 world. However, there has been no joint commitment to stop funding fossil fuels or ensure proper human rights diligence. Instead, we can expect continuing adherence to the status quo - privatisation and financialisation."
"Feronia is a case in point - not only has UK aid supported the awful labour practices of this extractivist enterprise, but the company is backed by numerous European DFIs as well. Now Feronia is set to be sold off to a private equity firm based in a tax haven - further denying justice to the communities in DR Congo."
The civil society statement, signed by over 80 organisations from across the world, argues that DFIs should invest taxpayers’ money in the public interest, not in the interests of corporations: “In contrast to development cooperation bodies, which provide grants and loans to governments of the global south”, the statement argues, “development banks invest in the private sector for a financial return.
"Some of the most damaging impacts of these investments can be seen in agriculture. The organisations collectively condemn the use of public funds to invest “primarily in agribusiness companies and an industrial model of agriculture that is a main driver of both pandemics and the climate crisis. Development banks have little track record for supporting locally-controlled food systems or peasant-led agroecological farming”.
The interparliamentary statement on DFI investments, signed by parliamentarians from Germany, the Netherlands and Belgium, echoes these calls and argues that DFIs "need to change" to "contribute to genuinely sustainable development".
In particular, this statement calls for urgent action to end any DFI investments that support fossil fuels or contribute to deforestation. “DFIs need to exclude fossil fuels & coal from their investment portfolios. Additionally … DFIs must have a clear policy to exclude any investments that contribute, directly or indirectly, to deforestation or other types of crucial biodiversity loss”.
Analysis from May this year shows that CDC Group has given a billion pounds to fossil fuel projects in the last decade alone.
However, despite this pressure, the joint declaration by organisations participating in the Finance in Common Summit left much to be desired.
Participants agreed that they should “consider ways and means of reducing” fossil fuel investments and “work towards applying more stringent investment criteria, such as explicit policies to exit from coal financing” – but no explicit ban on fossil fuels was forthcoming.
Similarly, warm words were given on the need to “share and apply best practices” on human, environmental and social rights – but little was said about the need to take action against those investments already harming communities.
The case study used in the statement is of Feronia Inc, a company which has received $80 million from the UK DFI CDC Group since 2013. Despite this, Feronia is now bankrupt and CDC is now going to write off $50 million of taxpayers' money as the company is sold.
A wide range of concerns have been raised about DFIs investments in Feronia on a number of issues, including reports by Human Right Watch of unsafe and unjust working conditions, violent confrontations between Feronia security guards and local communities, and more recently the allegations of racist treatment of workers and the (illegal) reintroduction of public whipping.
These concerns were summed up in the joint statements as follows: “Feronia has a very difficult colonial legacy that includes unresolved land conflicts and a very authoritarian behaviour of the management towards the local population. DFIs promised that their engagement would lead to more jobs, better wages and a flourishing company.
"None of these goals have been achieved. To the contrary: Although DFIs have invested more than 200 million Euros, Feronia declared bankruptcy a few months ago. Working conditions remain very poor. Many people still work on a daily basis and do not even receive the minimum wage. Conflicts between the company and the local population have escalated several times within the last years, up to the point of violent encounters leaving three people dead and many more arrested.”
“[DFIs] have taken no action to address the historic conflicts over the nearly 100,000 hectares of land concessions or the allegations of corruption plaguing the project. Their environmental, social and governance (ESG) plans did nothing to alleviate poverty in the communities.
"And the involvement of the various banks did not reduce rampant human rights violations against villagers or workers. What’s worse, the banks have acted to undermine the community efforts to use the grievance mechanisms that they themselves established.”
For communities in DR Congo and the civil society organisations working in solidarity with them, the struggle continues.
Daniel Willis is a policy & campaigns manager focussing on international development and climate justice at Global Justice Now.
Read the response from the CDC Group at The Ecologist.