Leveraging Green Power: Environmental Rules for Project Finance

Abstract

Environmental policies of providers of international finance – namely the World Bank, export credit agencies, and Equator Principles banks – provide interesting cases within which to study the power of business not as only an input to the political process or as a constraint on politics, but also as a conduit for both state and non-state actors.This paper shows how targeting financial actors has allowed NGOs to transform their rather weak discursive power base into instrumental power over business actors in other sectors. NGOs have channeled their power through states, consumers, and financial institutions; this has allowed them to augment discursive power over their targets with additional indirect, yet more immediate, forms of structural and instrumental power. As a consequence of both direct and indirect NGO pressure, financial institutions have adopted environmental policies. This article posits a theoretical explanation of the underspecified power relationships in NGO strategies that allow NGOs to exploit weak links in commodity chains for their campaigns.This paper argues that financial institutions wield considerable structural power through their ability to control access to finance. It is particularly this power base which has made them prime targets for NGOs campaigning for the greening of infrastructure development projects. As a consequence of NGO pressure, financial institutions have adopted environmental policies which in turn have provided the World Bank and Equator banks with additional sources of discursive power.

How Rising Powers Create Governance Gaps: The Case of Export Credit and the Environment

“…In the mid-1990s, Arrangement participants began a process of expanding its rules to address the potential environmental and social aspects of export credit (OECD 2011: 152-184). This came in response to mounting pressure on OECD ECAs to address the environmental and social impacts of the projects they finance (Schaper 2007). Beginning in the 1980s, prompted by the role of ECAs in a number of controversial projects, such as the Three Gorges Dam in China and the Bataan nuclear power plant in the Philippines, ECAs came under increasing scrutiny.…”

“…Public stakeholders and NGOs became increasingly vocal in calling for ECAs not to support projects that harm the 1 Interviews with ECA officials, July 2015 and June 2016. environment or adversely affect local communities. Civil society actors waged a large-scale transnational advocacy campaign that pressed OECD countries to accept that ECAs should promote compliance with international environmental and social standards (Schaper 2007;Wright 2011). There was recognition that unilateral action on the part of individual states would not be sufficient; global action was needed, involving all the major providers of export credit.…”

Export Credit Agencies and Global Energy: Promoting National Exports in a Changing World

“…In the late 1990s, OECD countries were increasingly pressured to accept that ECAs – despite operating under narrow mandates to promote national exports – nevertheless should promote compliance with environmental and social standards (Maurer and Nakhooda, 2003; Schaper, 2007). A transnational advocacy campaign had directed public attention towards a number of ECA‐supported projects in developing countries that had caused environmental damage, displaced local communities, and enabled government corruption.…”

“…The civil society campaigns built public pressure on selected governments in North America and Europe to require their respective ECAs to adopt environmental and social standards (Schaper, 2007). Additionally, the US government, which had unilaterally committed to comply with environmental standards, was eager to create international rules that compelled others to follow.…”

“…Third, ECAs may influence the extent to which energy development in developing countries follows a carbon‐intensive or low‐carbon path. Given that the energy choices developing countries make are partially driven by the cost of capital, the financing terms and conditions that ECAs attach to their financing instruments can help decide which types of energy project are able to attract affordable financing (Schaper, 2007). And fourth, ECAs have a bearing on international energy cooperation and domestic energy governance by providing an instrument for governments to intervene in the energy sectors of other countries.…”