National Post (National Edition)

European lenders exit oil trade in Amazon basin after scrutiny

Pressure from campaigns to protect rainforest

- BRENNA HUGHES NEGHAIWI, MATTHEW GREEN AND SIMON JESSOP

• Credit Suisse, Dutch lender ING and France's BNP Paribas have decided to stop financing trade in crude oil from Ecuador, the banks said on Monday, after pressure from campaigner­s aiming to protect the Amazon rainforest.

The role of European lenders in backing the trade came under scrutiny in August, when a report by advocacy groups Stand.earth and Amazon Watch named six European banks as major financiers of Ecuadorean oil exports to U.S. refineries.

Indigenous leaders battling to prevent further oil exploratio­n in their territory said the banks' role had made them complicit in oil spills, violations of land rights and the destructio­n of rainforest by Ecuador's oil industry.

“The banks' commitment is a milestone,” Marlon Vargas, president of the Confederat­ion of Indigenous Nationalit­ies of the Ecuadorean Amazon, told Reuters. “The banks should finance other forms of economic developmen­t, but not oil extraction.”

The August report had named the three banks alongside France's Natixis, Switzerlan­d's UBS and Dutch bank Rabobank as the main backers of the shipment of about US$10 billion of Ecuadorean oil to the U.S. over the past decade.

Campaigner­s had accused the banks of using double standards for making climate change pledges while backing trade in oil from Ecuador, where the industry plans to drill hundreds of wells in the Yasuni National Park, a UNESCO World Heritage site.

The Amazon plays a vital role in regulating the Earth's climate by absorbing carbon dioxide, one of the main greenhouse gases responsibl­e for global warming.

ING said it shared many of the concerns in the report over protecting the Amazon and had decided to review its exposure to oil and gas exports from Ecuador.

“Our research and resulting engagement­s are ongoing,” the bank said. “In the meantime, we have decided not to engage in any new contracts for the financing of oil and gas trade flows from the Ecuadorean Amazon.”

Credit Suisse said it had decided to phase out financing for oil exports from the Ecuadorean and Peruvian Amazon after completing existing commitment­s.

“Credit Suisse reviews and updates its sector-specific policies on a regular basis,” the bank said.

BNP Paribas said it had decided in December to exclude oil exports from Ecuador's Esmeraldas region — home to Ecuador's export terminal for oil from its Amazon region.

“BNP Paribas is committed to the continuous improvemen­t of its sustainabi­lity strategy,” the bank said.

Rabobank said in August that it had stopped financing Ecuadorean crude cargoes earlier in 2020.

UBS, for now, has stopped short of committing to end its financing of Ecuadorean crude oil cargoes. The bank said it maintained dialogue with advocacy groups and was committed to the highest environmen­tal and social standards.

“As such we have declined transactio­ns where the origin of oil is verifiably associated with breaches of our standards, such as Indigenous peoples' land rights or UNESCO World Heritage Sites,” the bank said.

Natixis, meanwhile, financed cargoes of 5.5 million barrels of oil from the Ecuadorean Amazon from July to December — more than double the volume it backed in the first half of the year, according to an analysis of U.S. customs data by Stand.earth and Amazon Watch.

Natixis said that it continued to “proactivel­y” screen transactio­ns for potential environmen­tal or social risks and understood that financing Ecuador's oil exports could encourage plans by the industry to expand into the Yasuni National Park.

“Given this situation, Natixis has declined to finance any new clients involved in oil exports from

Ecuador since mid-2020 and has reduced the number of existing clients it works with in this area,” a Natixis spokespers­on said.

Ecuador's oil industry says that taking care of the environmen­t and maintainin­g a harmonious relationsh­ip with people living in its operationa­l areas is a priority. State-owned oil company Petroecuad­or did not respond to a request for comment.

With oil output of about 0.5 million barrels per day, or 0.5 per cent of global volumes, according to BP's statistica­l review, Ecuador ranks as a mid-sized producer. Much of its oil is used to pay the country's debts to China.

The move by the banks could complicate the export of oil from Ecuador because trading companies that were using their services will have to find other banks to back their transactio­ns. Swiss trading house Gunvor, identified in the report as one of the firms trading Ecuadorean crude, declined to comment.

“Any banks involved in this trade will face growing scrutiny, unless Ecuador's government puts a moratorium on new drilling and addresses the environmen­tal damage and rights violations caused by existing production,” said Tzeporah Berman, internatio­nal programs director at Stand.earth.

“Ecuador is going to need support to get out from under crushing debt, but new drilling in primary forests without consent from Indigenous peoples is not the solution.”

With asset managers under pressure to rebalance their portfolios to help to slow climate change, tropical deforestat­ion and the loss of biodiversi­ty, the stance of emerging market government­s on such issues is facing growing scrutiny.

“We have to position as investors with countries that are taking an active approach to governing and environmen­tal concerns, and obviously some countries are better placed to do that than others,” said Carlos de Sousa, an emerging market debt portfolio manager at Vontobel Asset Management, which has exposure to Ecuador's sovereign bonds.

 ?? IVAN CASTANEIRA / AMAZON WATCH / HANDOUT VIA REUTERS FILES ?? Oil pipelines in El Reventador, Ecuador, a country where the oil industry insists that taking care of the environmen­t
and maintainin­g a good relationsh­ip with people living in its operationa­l areas is a priority.
IVAN CASTANEIRA / AMAZON WATCH / HANDOUT VIA REUTERS FILES Oil pipelines in El Reventador, Ecuador, a country where the oil industry insists that taking care of the environmen­t and maintainin­g a good relationsh­ip with people living in its operationa­l areas is a priority.

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