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European lenders exit Amazon oil trade after scrutiny by campaigners

  • Banks phase out financing for Ecuador oil exports.
  • Indigenous leaders in Amazon rainforest welcome the move.
  • Advocay groups call for moratorium on new drilling.
Published January 25, 2021
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ZURICH/LONDON: 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 US 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 Ecuadorian 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 $10 billion of Ecuadorean oil to the United States 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.

'ENGAGEMENT ONGOING'

"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 Ecuadorian 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 US 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.

'GROWING SCRUTINY'

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% 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 programmes 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.

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