No transparency in sight at DEG

Photo: sciondriver, published under CC Lizenz BY-NC 2.0 on flickr.com

In addition to climate finance via federal budgets, the German government has been counting loans from the German development bank DEG – i.e. funds leveraged from the private sector either via DEG’s budget or own funds – as mobilized public climate finance since 2015. In 2015, almost €195 million were thus invested in energy projects in Africa, Asia and Latin America. In 2016, nearly €136 million went toward energy projects in Africa. These projects can also be found on the climate finance project lists published by the Federal Ministry for Economic Cooperation and Development (BMZ). Unlike the loans granted by Kreditanstalt für Wiederaufbau (KfW), however, it is not possible to determine which DEG projects are being counted as German climate finance as a contribution toward achieving the $100 billion pledge. For this reason, www.deutscheklimafinanzierung.de is publishing the following analysis by the human rights organization FIAN Deutschland criticizing DEG’s lack of transparency:

FIAN cricizes DEG for lack of transparency

In 2013, FIAN Deutschland submitted a petition to the German Bundestag together with 25 other NGOs calling for “transparency for human rights” at DEG, a German development bank. FIAN criticizes the fact that, contrary to the BMZ’s promises, the justification in the petition text remains highly topical: It is “practically impossible to get an impression of DEG’s human rights practice in its projects, as the public is not systematically informed”.

The petition was rejected for reasons including the assertion by then BMZ undersecretary and chairman of the DEG supervisory board, Hans-Joachim Fuchtel, that DEG “had since realized transparency measures in a very good manner”. This remark referred to the publication of basic data on financing provided by DEG since 2015. In its current annual financial statement, the state-owned development bank also notes: “Since January 1, 2015, DEG has been publishing information about the projects and companies it finances on its website.” However, it neglects to mention that this is only done if the loan recipient agrees to a publication.

BMZ promises turn out to be a pacifier

FIAN research has now shown that less and less of this minimum information has been published since 2015: out of 111 financing commitments in 2017, information was published on only 61. This means that out of €1.551 billion granted in 2017, around €680 million will flow into companies and projects that are unknown to the public and parliament, even though the bank has a development policy mandate and is tax-exempt as a nonprofit organization.

Roman Herre, agrarian expert at FIAN Deutschland states: “With the current information practice, we must assume that companies reject publication particularly when the financed projects are problematic from a human rights perspective. A simple clause in all contracts would ensure the publication of all DEG financing.” The lack of transparency is exacerbated by the fact that 54% of DEG funds are invested in banks or funds – often via highly opaque company networks in financial havens. Even when basic data is published, there is no information about possible recipients of forwarded loans or real effects on the ground.

“To this day, DEG remains a black hole of German development aid,” Herre continued. Despite its public mandate, it does not give an adequate account of its financing to parliament and the public. The human rights and ecological impacts of its projects are thus largely unknown despite ratings and key figures. For FIAN, the demands of the 2013 petition calling for the publication of documents that allow for an assessment of human rights issues in projects, including full environmental and social plans, remain unaddressed. FIAN hopes that the new DEG supervisory board will also rectify this issue.

Reaction and criticism from DEG – further clarifications by FIAN

On July 20th FIAN published a clarification of its analysis which was criticized by DEG which we are also publishing here:

DEG contacted FIAN on July 5, 2018 and stated that the published figures were not correct. DEG requested that we publicly clarify the information we provided on the number of projects published by DEG. FIAN then reviewed the figures again and submitted its findings to DEG for comment before publication. We are now presenting the results to the public:

1. The study examined DEG’s “newly approved investment projects” for the years 2015 to 2017. FIAN conducted its research for the years 2015 and 2016 in the summer of 2017. The year 2017 was examined in the first weeks of April 2018.

2. We maintain that the figures published by FIAN on June 15, 2018 reflect the number of DEG publications at the time the research was conducted (see item 1).

3. The currently published DEG projects of these three years amount to 241 out of 280 (as of July 10, 2018) according to our research. This means that 39 financing projects remain unpublished, which is significantly less than the 98 unpublished projects reported by FIAN on June 15, 2018. According to DEG, this figure is even lower, as two different financing instruments are being used for a number of financing commitments. Technically, these would be considered to be two commitments, but would be represented by single publication by DEG. We were not told the number of such commitments.

4. According to our follow-up research, the discrepancy mentioned in item 3 results primarily from the fact that financing projects are regularly not published until many months after the commitment. The following must be noted: The date of publication of a commitment is directly traceable via the creation date of the respective pdf. DEG has confirmed this to FIAN, and it serves as the basis of the following data collection:

4.1. Taking all 78 pdf documents of the DEG publications listed on July 10 that were published in 2018 according to the pdf creation date, the average publication date is more than seven months after the respective agreement was concluded.
We had not been expecting such a long – and from our point of view problematic – delay. In our research several months after the end of each calendar year, we had assumed that all financing projects of the previous year for which publication was agreed had already been published. After reviewing the pdf creation dates, we believe that 29 commitments for 2017 (23 percent of the commitments) had not yet been published at the time of our research in early to mid-April.
For the year 2016, seven commitments were published after July 2017, and a further four not until 2018 (corresponding to 12% of the commitments).

4.2. On April 23, FIAN (privately) contacted DEG for the first time regarding the large discrepancy detected in our research. According to their pdf creation dates, 26 financing projects were published immediately afterwards – between April 25 and April 27. Most of the financing commitments published during this period date back to the period from October through December 2017. They were thus published around four to five months after approval. Four of these commitments were approved in December 2016 and were published around 16 months later. We believe DEG made additional efforts to place publications on the website as a result of our exchange. DEG denies this.

Based on the above, we conclude that FIAN’s critical and constructive work is prompting DEG to step up its efforts to publish data on financing commitments. The up to 39 financing projects that have not yet been published are still a relevant figure, however. FIAN believes that in particular companies that are problematic in terms of human rights and the environment would be opposed to publication.

In addition, the fact that more than half of DEG funds are allocated to financial institutions/funds/financial intermediaries and that potentially affected local stakeholders, the German public and the Bundestag have no information on the actual recipients of financing, remains a substantial problem.

FIAN has been working for years to get DEG to publish relevant financing information before the contract is concluded. DEG has never communicated such delayed publication of information in the past. The delay contradicts the idea of transparency and further reduces the possibility of local stakeholders, civil society and parliament addressing (human rights) issues at DEG – if not in advance, then at least in the decisive early phase of financing projects. We therefore call on DEG to publish a minimum of information on the projects on the day they are approved and not many weeks or months later.

Further information on the original analysis:
• Table of publications since 2015 (in German)
• The 2013 petition text (in German)
• Speech by Undersecretary Fuchtel on March 16, 2016 (in German)

Guest post: Roman Herre / FIAN Germany

The German version of this article first appeared on the FIAN Deutschland website.