Don’t scrap environmentally responsible overseas investment with reckless Senate BUILD Act

Earlier this year, the Overseas Private Investment Corporation, the development finance institution of the United States, put its consideration of a palm oil processing plant in Indonesia on hold. The Indonesian plant threatens a nearby national park and encourages further clearing of highly biodiverse primary forests in a country with one of the fastest deforestation rates in the world.

Twenty-five years ago, OPIC may have quickly approved this project without much debate.

{mosads}Today, thanks to Congress and more than a little prodding by civil society (and an occasional lawsuit), OPIC has developed environmental and social policies that prevent or limit its support of harmful projects like the one in Indonesia. Such policies are important not only to protect local communities and the environment but also to prevent the U.S. government from assuming unnecessary risks of ill-conceived projects.

However, this progress has been thrown into jeopardy as newly introduced legislation in the Senate threatens to throw out OPIC’s environmental and social safeguards. The Better Utilization of Investments Leading to Development Act of 2018, would combine OPIC with a few smaller departments at USAID to create a larger development finance institution with new powers.

The draft Senate bill contains a fatal flaw that, if not fixed, could set progress back a quarter century. It fails to transfer to the new institution OPIC’s existing environmental, social, climate, transparency, worker rights, human rights, indigenous peoples, gender, anti-corruption and accountability policies — putting communities, the environment and the U.S. government at risk.

While it can be easy to forget in the current political climate, the United States has long been a world leader in securing such protections at development finance institutions. For example, back in 1989, the Pelosi Amendment set international best practice on environmental assessments and public disclosure for multilateral development banks.

Yet, the Senate bill sets us up to move backwards. Today, standard practice includes social assessments, remediation to mitigate harms and compensation for local communities for unavoidable harms. They are not, however, required under the current version of the BUILD Act before the Senate. Nor does the Senate bill include other key OPIC policies that protect against human rights abuses, corruption and other malfeasance.

For example, in 2003 Congress directed OPIC to put in place an independent accountability mechanism, OPIC’s Office of Accountability, which allows project-impacted communities to bring forward grievances. Yet, the Senate’s BUILD Act fails to include this critical body.

While the bill outlines the duties of an inspector general, that office is no substitute for an Office of Accountability. An inspector general evaluates the agency’s performance and provides recommendations for the future, whereas the Office of Accountability allows for dispute resolution and problem-solving for current problems communities are experiencing, with the aim to address the harm or provide compensation for damage to project-affected peoples’ homes, communities and lands.

The two are in no way interchangeable; both serve necessary but entirely different functions.

The Senate bill also threatens to abandon the progress that OPIC has made with regard to its energy portfolio. OPIC has become a leader in support of renewable energy, providing $500 million for renewable energy projects in 2017.

That support has included vital financing for distributed renewables aimed at helping poor, rural communities get access to electricity, especially in sub-Saharan Africa.  

A cap on OPIC’s greenhouse gas emissions has been key to this forward-looking shift in energy financing, but it too is not included in the version of the BUILD Act before the Senate.

Legislation establishing a new development institution that absorbs OPIC but does not carry over its vital policies — on environment, climate, gender, accountability, worker rights, human rights, anti-corruption and transparency — is counter-productive, undermines sustainable development and is simply unsupportable.

Transferring these policies represents a bare minimum for any new institution in 2018. Even better would be for Congress to take advantage of this once-in-a-generation opportunity to strengthen the policies that protect local communities and the environment, encourage distributed renewables and ensure development finance is held accountable.

Kate DeAngelis is an international policy analyst at Friends of the Earth, an international environmental advocacy organization. Follow her on Twitter@katedeangelis.