UK Government-Owned Investor Using Hundreds of Millions of Aid Money to Finance Fossil Fuels Abroad

authordefault
on

Have you heard of the bank that taxpayers bankroll? Its purpose is โ€œto do good, without losing moneyโ€, and it could be permitted to receive up to ยฃ12 billion a year in publicย funding.

But it is allegedly invested in polluting activities across the world on behalf of the UK.

CDC Group is a government-owned company that was founded as the โ€˜Colonial Development Corporationโ€™ in 1948.ย Last year, former International Development Minister Harriet Baldwin assured Parliament: โ€œCDCโ€ฆ has not made any new investments in anything coal-related sinceย 2012โ€.

But campaign group Global Justice Now reports that CDC did, in fact, invest directly more than ยฃ120 million in โ€˜coal-relatedโ€™ projects sinceย 2012.

CDCโ€™s investment portfolio is often administered by private equity funds, making it harder to trace its environmental impact. The Independent Commission For Aid Impact (ICAI) last year gave CDC an amber/red rating on fragile state investments, flagging up an โ€œabsence of comprehensive, independent evaluationโ€ of these publicly-fundedย investments.

Alongside this, CDCโ€™s part in the UKโ€™s aid portfolio has grown substantially. ICAI says that between 2015 and 2018, โ€œCDC received investments of new capital from DFID totaling ยฃ1.8 billion.โ€ It expects this to grow, estimating CDCโ€™s โ€œnet assets may increase from ยฃ2.8 billion in 2012 to over ยฃ8 billion byย 2021.โ€

Undeclaredย coal

There are at least two coal-related projects CDC has invested in since 2014, according to Global Justiceย Now.

One is a $16.6 million [ยฃ12.7 million] investment in South African port operator Grindrod in 2014, which facilitates the export of South African coal to China via Mozambique. CDC says it invested in the company because it alleviates poverty, facilitates regional trade and creates jobs in sub-Saharanย Africa.

The other is a $144 million [ยฃ110.3 million] investment in the coal-burning cement producer ARM Cement in 2016. CDC reportedly lost approximately ยฃ88 million from the latter venture, being the โ€˜biggest loserโ€™ from ARMโ€™sย collapse.


Like what you’re reading? Support DeSmog by becoming a patronย today!


Last year, CDCโ€™s Chairman Graham Wrigley was asked in parliament whether CDC has stopped making new investments in coal. He replied: โ€œWe have done that. We have executedย thatโ€.

But a spokesperson for Coal Action UK told DeSmog the UK needs to go much further than just ending new investments, and should end its involvement in any coal extractionย projects.

โ€œThe current 2025 coal phase-out plan is only a market mechanism which limits the use of coal in UK power stations,โ€ they said. โ€œTo make a real difference, the phase out has to extend to coal extraction and coal financing, and it must be legislatedย on.โ€

โ€œCoal contributes to the climate emergency no matter where it is dug up andย burned.โ€

Heavy fuel oilย investments

It is not just coal in which CDC isย invested.

Labour MP Dan Carden recently asked the Government to reveal CDCโ€™s investments in heavy fuel oil projects sinceย 2011.

WWF reports that heavy fuel oil is โ€œthe world’s dirtiest, most polluting ship fuel, and it can cause the most damage in the event of aย spill.โ€

James Dudderidge MP answered Carden for the Foreign Office, saying that CDC is invested inย โ€œfour energy projects designed to run on heavy fuel oil in four countries in Africa: Kenya, Cameroon, Mali andย Guinea-Conakry.โ€

DeSmog understands the projects Dudderidge referred to are Kenyaโ€™s first privately-owned power generating plant, a power plant in Cameroon that uses heavy fuel oil, the first independent power project (IPP) to feed into the national grid in Mali, and Guineaโ€™s first independent power project.ย 

Dudderidge added that, โ€œwhenever CDC invests in fossil fuels, it does so with the aim to increase efficiency, reduce emissions and as part of a low carbon transitionย plan.โ€

CDC told DeSmog that its fossil fuel investments only made up four percent (about ยฃ97 million) of new commitments between 2017 and 2018. In the same period, it committed around ยฃ550 million to renewable energy investments, it said, which represents 85 percent of its energy sector commitments during thatย time.


Read more:ย UK Government Agency’s Annual Support for Overseas Fossil Fuel Projects Rises toย ยฃ2bn


However, as with coal, Global Justice Nowโ€™s researchers say they have found heavy fuel oil projects that have not been accountedย for.

That includes an undeclared amount in Karadeniz Powerships via Investec Africa. CDCโ€™s website stated: โ€œThe powership is expected to generate approximate 225MW of electricity to augment Ghanaโ€™s energyย needs.โ€

The investment is part of a โ€˜Credit Africaโ€™ programme. Sources with knowledge of the Ghanaian Powership project told DeSmog that Karadeniz Powerships ran exclusively on heavy fuel oil for several months, and that heavy fuel oil is still being used as a โ€œback-up fuelโ€ for the project. CDC says it invested in the company because it plays a vital role in bringing electricity to millions of people inย Africa.

Dutch development bank FMO also reported that CDC owned 60 percent of CEC Africa Sierra Leone Limited. The company was, according to FMO, set up โ€œto develop, construct, operate and maintainโ€ a heavy fuel oil fired power plant in the West of Sierra Leoneโ€™s capital Freetown. However, the investment never came toย fruition.

CDC reports that it invested an undisclosed amount in Jamaica Public Services Limited. This was under a pre-2012 strategy of investments via a private equity fund. Jamaica Public Servicesโ€™ website states that it runs heavy fuel oil power plants, as well as hydro and diesel, as well as being โ€œin the process of constructingโ€ its first wind farm. CDC has a small remaining stake in theย company.

And in June 2014, CDC made a $10.1 million investment in Actis Energy Cameroon Holdings (Eneo). Eneo Cameroonโ€™s website reported in 2017 that it was โ€œoperating at 80MW as recommended for continuous running with heavy fuelโ€. CDC says its investment was used to connect those without power to the electricity grid, and was not an investment in the heavy fuel oilย plant.


Read DeSmog’s special seriesย โ€“ย Empire Oil: London’s Dirtyย Secret


A spokesperson for CDC defended its investments on the basis that many people in Sub-Saharan Africa still do not have access to electricity, and that the regionโ€™s carbon footprint is only a fraction of developed countries. They toldย DeSmog:

โ€œThe climate emergency is the biggest global development challenge facing the world today and we know that it will affect those living in the most poverty-stricken countries theย most.โ€

โ€œFor us the question as an impact investor is how we can support the economic transformation in our markets to achieve net zero emissions by 2050 in a socially just manner that delivers on peopleโ€™s needs for prosperity and improved livingย standards.โ€

โ€œIn African countries this does involve increasing some use of fossil fuels as a transition source of power in their pathways to net zero economies. We believe we can play a part in supporting countries to tackle energy poverty and meet their Paris commitments, including by investing in more efficient sources, such asย gas.โ€

CDC last month appointed a new Climate Change Director, Amal-Lee Amin, who reportedly ledย  a Governorsโ€™ resolution for doubling climate finance at the Inter-American Development Bank. CDC is expected to publish its new climate change strategy by theย summer.

Reform

Global Justice Now is calling for urgent reform of the 70-year-old CDC. The last time CDC faced vociferous calls to reform was a decade ago, in 2010, when at least ยฃ900,000 in pay and bonuses to its then-CEO Richard Laing drew outrage inย Parliament.

Global Justice Now want any report on CDC‘s environmental impact to include โ€œexploration, extraction, power generation, distribution, storage, and manufacturing โ€“ through both direct and intermediatedย investments.โ€

Daniel Willis, Policy and Campaigns Manager for Global Justice Now told Desmog: โ€œTime and time again we have heard this government greenwashing its role in the climate emergency by failing to give the full picture on its fossil fuel investments in the globalย south.โ€

โ€œGiven the UKโ€™s historical responsibility for climate change, the government needs to ensure that no further aid money or UK Export Finance goes to fossil fuel projects in the global south โ€ฆ whilst facilitating and financing a just transition to renewable energy systems in theirย place.โ€

Global Justice Now suggests CDC needs more radical reform, including the implementation of an independent evaluation body which reports to parliament, a legally binding right-to-redress for communities who claim they have been negatively impacted, and to stop bonuses for directors or other staff being based on the rate of return onย investment.

CDCโ€™s directors will be in Parliament on Wednesday, answering Lordsโ€™ questions about their investments in sub-Saharanย Africa.

Related Posts

on

A Conservative peer and former UK trade advisor were among those who spoke at the summit.

A Conservative peer and former UK trade advisor were among those who spoke at the summit.
on

All Conservative appointees to the Board of Trade have been binned by the new Labour government.

All Conservative appointees to the Board of Trade have been binned by the new Labour government.
on

Multnomah County, Oregon, says NW Natural โ€œengaged in an enterprise of misrepresentationโ€ about its productsโ€™ harm to the climate.

Multnomah County, Oregon, says NW Natural โ€œengaged in an enterprise of misrepresentationโ€ about its productsโ€™ harm to the climate.
Analysis
on

The final two Conservative candidates have worrying records on green issues.

The final two Conservative candidates have worrying records on green issues.