Energy Industry, Human Rights and Animal Husbandry
Background information on the ESHR due diligence
The Federal Government is championing climate protection in a large number of initiatives worldwide. This also includes the foreign trade promotion instruments (see, for example, the Sector Understanding on Renewable Energy and Water Projects). In November 2015, the OECD member states agreed that new coal-fired power stations should only be supported with export credit guarantees (PDF, 165 KB) if strict criteria and requirements are met. As a result, only projects using the most efficient, state-of-the-art technology that causes as little damage as possible to the climate may be supported as of 01.01.2017
Moreover, the four ministries represented on the IMC agreed to restrict cover facilities under single transaction cover for certain climate-damaging projects.
In practical terms, this means that, with immediate effect, export credit cover from the Federal Government is now longer available for direct supplies and services for the construction of new or the expansion of existing coal-fired power stations. Nonetheless, exports for the purpose of modernising existing power stations (e.g. flue gas desulphurisation plants, filters) may still be supported with Hermes Cover provided that the modernisation does not involve a capacity expansion and that the transaction is otherwise eligible for support and the risk involved is justified.
Information and guidelines for the energy industry
On 4 June 2014, the Federal Government decided in the Interministerial Committee (IMC) that, as a matter of principle, it will no longer assume any export credit guarantees for supplies and services destined for nuclear facilities abroad. This exclusion from cover applies to both new and existing plants.
The general exclusion from cover does not apply to supplies and services which help to improve the safety of existing plants or to dismantle them. Moreover, supplies and services for nuclear facilities that serve other purposes than commercial energy generation (e.g. nuclear medicine equipment) continue to be possible.
For more detailed information see AGA-report spezial 241 (German version only)
Apart from the existing international rules of the OECD for the granting of export credit guarantees in the coal sector, the IMC decided in July 2020 to restrict cover facilities under single transaction cover for certain transactions even further as part of the climate strategy for the Export Credit Guarantees.
In practice this means that, with immediate effect, direct supplies and services for the construction of new or the expansion of existing coal-fired power stations will no longer be covered with an Export Credit Guarantee of the Federal Government.
Together with the restrictions on cover for coal-fired power stations, the IMC also decided in July 2020 to exclude supplies/services for oil extraction projects that involve routine venting and flaring from cover.
For more detailed information see:
Export Finance for Future Initiative (E3F)
The ministers of the E3F initiative countries Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden and the United Kingdom agreed at a meeting in November 2022, to no longer support any fossil energy projects that are not in line with the 1.5°-target of the Paris Climate Agreement as from 2023. The participants reaffirmed their commitment to existing agreements despite the tense situation on the global energy and commodities markets. This includes also a declaration signed by all members during the climate change conference COP26 in Glasgow in 2021.
For more details see AGA Report 335
Respect for human rights plays an important role in foreign trade promotion. In particular, projects that are supported with instruments of the Federal Government’s export promotion schemes are required to meet environmental, social and human rights standards. The Federal Government expects companies to respect the established human rights in their business dealings. The companies are asked to act in accordance with the OECD Guidelines for Multinational Enterprises (OECD Guidelines) and to comply with their due diligence duty in relation to human rights as stated in the German National Action Plan for the Implementation of the UN Guiding Principles on Business and Human Rights (UN Guiding Principles).
Therefore the Federal Government has set high standards for the project appraisal prior to the granting of Export Credit Guarantees.
In the course of the environmental, social and human rights impact assessment issues, such as, for example, occupational safety, health and safety of the general public, lawfulness of land acquisition and resettlement, protection of indigenous peoples, protection of cultural heritage, consultation possibilities for affected persons, labour rights (including freedom of assembly, right to trade union membership, freedom of movement, etc.), protection of minorities and other especially vulnerable groups as well as the existence of a complaints mechanism, are investigated.
In this context the reports published by the National Contact Point for the OECD Guidelines (NCP) must be taken into account in the assessment pursuant to the OECD Common Approaches. The Federal Government goes beyond these requirements by taking into account complaints already received by the NCP as well as certain incidents and problems related to these (e.g. a company’s non-participation) when appraising a project. Organisations as well as individuals can turn to the NCP if they believe that there has been a breach of the OECD Guidelines.
In connection with animal husbandry and animal transport projects animal welfare issues play an important role. Therefore, the Federal Government has championed stricter animal welfare standards for foreign trade promotion within the OECD and the World Bank Group.
Where animal husbandry projects within the scope of application of the OECD-Common Approaches are concerned, the World Bank Operational Safeguard Policies and/or the IFC Performance Standards as well as the relevant Environmental, Health and Safety (EHS) Guidelines (Poultry Production, Poultry Processing, Mammalian Livestock Production, etc.) of the World Bank Group apply. Besides, the IFC Good Practice Note on Animal Welfare in Livestock Operation (including the so-called Five Freedoms of Animal Welfare) is used as guidance for the assessment of animal welfare issues.
These days, the majority of German deliveries for livestock operations already meet EU standards. However, in connection with foreign trade promotion the Federal Government does not consider it appropriate to exclusively apply German/EU standards to livestock operations. If only Germany applied EU standards, suppliers from other countries would normally win the contracts Thus, on the one hand there probably would not be any positive effect on animal welfare, on the other hand this could be a disadvantage for the German export industry.
For transactions relating to animal husbandry to which the Common Approaches do not apply, a risk assessment of animal welfare issues is usually carried out.