As Europe’s economy continues to buckle under a worsening energy crisis that now threatens to derail the implementation of the European Green Deal, proposals from the European Investment Bank (EIB) and other international finance institutions (IFIs) to expand investment in green energy projects should be welcome news.
However, local communities that stand to be impacted by these projects have ample cause for alarm, given these institutions’ worrying track records of causing direct harm through their investments.
Unless the EIB and other financial institutions consult local communities throughout the investment planning process, adhere to their own rules designed to prevent harm, and provide a remedy where harm occurs, Europe will merely be displacing the cost of its energy crisis onto the Global South.
In my work with Accountability Counsel, I’ve seen what happens when the EIB and other IFIs fund renewable energy infrastructure projects without adequate consultation with communities, leading to harm including economic loss and displacement, disregard for indigenous peoples’ rights over their land and territories, and retaliations against affected communities who raise these concerns. Since 2018, the EIB-funded 220 kV Marsyangdi Corridor, a hydroelectric project in Nepal’s Lamjung district, has displaced hundreds of residents, caused environmental destruction including deforestation, and negatively impacted indigenous communities’ livelihoods.
As a result of a complaint filed by FPIC and Rights Forum, a coalition of impacted communities, an investigation by EIB’s independent complaints mechanism revealed that the EIB not only failed to respect Indigenous peoples’ right to Free, Prior, and Informed Consent (FPIC), but that implementation of its hydropower project perpetrated severe environmental and social harm.
However, nearly a year and a half after the harms were independently verified, project-impacted communities still haven’t been consulted, and the Nepalese government has inflicted violent repression against community members in retaliation for standing up for their rights. Most recently, authorities brutally beat a single mother and detained her two sons and another community member for their protest against the construction of the project on their land.
Despite knowing of this violence and that their investment violates their own environmental and social policies, the EIB has been unwilling or unable to stop the harm and remedy the situation. The EIB paused disbursements of the project but has yet to conduct the required FPIC process or implement an FPIC protocol proposed by local communities. The EIB’s complaint mechanism has yet to release a monitoring report or make a site visit to evaluate whether its recommendations are being followed and thus appears to lack any real enforcement or remedial power.
The Nepal case exemplifies the significant costs imposed on local communities by the EIB’s renewable energy financing. The EIB is certainly not alone in causing unintended harm as a result of top-down project planning and lack of accountability frameworks for ESG investments, however.
In fact, the World Bank has and continues to finance energy projects in Nepal that harm local communities. In 2015, the World Bank’s accountability mechanism found that the Khimti-Dhalkebar 220 kV Transmission Line did not meet the Bank’s environmental and social obligations, and right now, local communities allege that the World Bank is financing yet another transmission line in Nepal that violates their rights. These egregious examples show that the issue of harmful internationally financed projects is much larger than the respective funding sources, and speaks to the lack of accountability in Global North financial institutions across the board.
At this moment, expanding alternative energy infrastructure is critical not only to addressing Europe’s acute energy crisis but also to halting further climate catastrophes.
In Panama, the International Finance Corporation (IFC) financed a transmission line without consulting indigenous communities. Following a historic investigation, the World Bank’s accountability mechanism found that the IFC failed to respect the community members’ right to free, prior, and informed consent and has ordered remedial actions to be undertaken before the project can continue.
This example demonstrates that financial institutions can still right their wrongs by investing with responsibility through respecting the human rights of local communities and making progress to address climate change.
The current way that the EIB designs and implements green energy investments, however, is unacceptable, and local communities pay the price. Until development banks remediate the harm their energy projects have already caused and prove that they can implement projects while respecting local communities’ rights, they cannot be trusted to lead green infrastructure development.
Whether through a lack of will or a lack of ability, the EIB is failing Nepalese communities, and there’s no reason to believe that its similar projects elsewhere would be any better.
Europe’s dire need for alternative energy sources cannot be allowed to supersede the rights of communities in the Global South to their lives and livelihoods.
Sutharee Wannasiri is a Communities Consultant at Accountability Counsel, a nonprofit organization that provides legal counsel to communities facing human rights violations as a result of internationally financed projects.