Climate Change & Human Rights Risks to the Energy Industry: National Contact Points & Project Financing

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An increasing number of lawsuits relating to climate change are being filed with courts all around the world. But there is another avenue for pursuing grievances related to climate change that has been relatively unexplored to date: filing complaints before the National Contact Points (“NCPs”) of any of the Organization for Economic Co-operation and Development (“OECD”) Member States, which were set up in accordance with the OECD Guidelines for Multinational Enterprises (initially issued by the OECD in 2000).[1] We expect this route to be pursued more aggressively in the coming years.

National Contact Points

All governments adhering to the OECD Declaration on International Investment and Multinational Enterprises are required to establish a National Contact Point.[2] These NCPs are intended to further the effectiveness of the OECD Guidelines for Multinational Enterprises (the “Guidelines”) “by undertaking promotional activities, handling enquiries and contributing to the resolution of issues that arise relating to the implementation of the Guidelines in specific instances.”[3]

Each State retains discretion over the structure and mandate of the NCP, including deciding upon the organization of the decision-making body, the existence of any advisory bodies, and the scope of the NCP’s reporting duties and their frequency.[4]

In terms of decision-making competence, States have organized NCP structures based on individualized (Chile, Colombia, United Kingdom, United States, among others), inter-ministerial (Canada, Germany, Japan, Switzerland, among others), expert (Denmark, Lithuania, Netherlands and Norway) and multipartite decision-making (Belgium, France, Sweden, among others).[5]

NCPs have the duty to address and to contribute to the resolution of potential non-compliance of the OECD Guidelines.[6] OECD data indicates that, between 2000 and 2018, 400 specific instances have been submitted to NCPs all over the world.[7]

In term of procedure, the NCP can conclude that (i) the specific instance does not merit further examination; or (ii) it merits further examination, and the NCP offers to help the parties resolve the issue. In the latter case, the parties either: (i) reach an agreement, in which case the NCP typically will issue a report describing the issues and the agreement reached; or (ii) do not reach an agreement, in which case the NCP typically issues a statement describing the issues raised and the procedures undertaken to assist the parties.[8]

The NCP publishes these statements and reports, which may include recommendations[9] issued by the NCP about the dispute. Some NCPs would like to go even further and make determinations,[10] such as deciding whether the company has observed the Guidelines.

The 2019 OECD report indicated that 91 of the 211 closed cases (concluded or not accepted) included recommendations (43%) and 37 out of 211 closed cases (18%) contain a determination as to whether a company observed the Guidelines. Of all these cases, NCPs concluded in 12 instances that the Guidelines were not observed; in 19 instances that there was no breach of the Guidelines; and six contain both sets of determinations on various issues submitted to the NCP.[11]

The fact that a filed complaint concerns events that may have taken place in a country that does not adhere to the OECD Guidelines for Multinational Enterprise[12] does not deter the NCP from making recommendations or determinations. NCPs issued recommendations in 50 cases (53%) and determinations in 24 cases (25%) out of a set of 95 cases that concerned events that took place in one or several non-adherent countries.[13]

OECD Guidelines on Environmental Damage

The OECD Guidelines state: “The basic premise of the Guidelines is that enterprises should act as soon as possible, and in a proactive way, to avoid, for instance, serious or irreversible environmental damages resulting from their activities.”[14] Article 4 further states:

“Consistent with the scientific and technical understanding of the risks, where there are threats of serious damage to the environment, taking also into account human health and safety, not use the lack of full scientific certainty as a reason for postponing cost-effective measures to prevent or minimize such damage.”[15]

With respect to sound environmental management, the OECD Guidelines support companies “embodying activities aimed at controlling both direct and indirect environmental impacts of enterprise activities.”[16]

NGOs v. ING Bank

In May 2017, an NCP accepted a complaint based on the alleged breach of the Guidelines in connection with climate and environmental damage.[17] Four NGOs based in the Netherlands filed a complaint before the Dutch NCP alleging that ING’s financing of companies in the fossil fuel industry violated the OECD Guidelines because ING failed to disclose potential environmental harm, did not report on indirect product emissions, and had no plan to reduce the amount of greenhouse gas emissions from its financing.[18]

The complainants explained how the bank invested eight times more in fossil industries compared to the investments made in sustainable energy companies. Also, the complainants presented evidence of ING planning to finance four new coal power plants. They called on ING to publish details of the greenhouse emissions attributable to its investments, as well as to set concrete and measurable goals to reduce those emissions, such that the bank’s policies would be aligned with the Paris Climate Agreement of 2015, which aims to limit global warning to an increase of no more than 1.5°C.[19]

After several meetings between the parties, in September 2018, ING publicly announced that it will begin steering its lending portfolio towards meeting the Paris Agreement’s well-below 2 degrees goal.[20] ING also agreed to adopt an innovative approach towards measuring, target setting and steering the bank’s climate impact, including by reassessing its investments in the most carbon-intensive sectors that it finances.[21]

On April 19, 2019, the Dutch NCP issued its public final statement on the case. The NCP established that “[u]nder the terms of the OECD Guidelines[,] companies are expected to conduct a due diligence process in respect of their environmental impact, including climate impact. This relates not only to their own negative environmental impact, but also to the impact in their value chain.”[22]

The NCP found that a determination with respect to whether ING complied with the Guidelines was “not helpful to the future process between the parties, nor does it reflect to the efforts ING is making in order to steer its portfolio towards the goals of the Paris Agreement.”[23] The NCP made this pronouncement in part because of ING’s cooperation in the process before the NCP, and also because ING had listed the proactive measures it would take to calculate the effect of indirect emissions of the various projects it had financed and assess climate impact. This is a good example of how due diligence efforts and risk mitigation measures taken by companies can prevent a negative non-compliance determination by the NCPs.

Conclusion

As was explained by the NGOs in the case against ING, this is not an isolated effort. There are many cases being brought in several countries to “ensure greater transparency of climate risks and a rapid transition away from fossil fuels to renewable energy,”[24] which means that we should expect more cases of this nature to be brought before the NCPs in OECD jurisdictions.

[1] OECD, OECD Guidelines for Multinational Enterprises, OECD Publishing (2011), available at: http://dx.doi.org/10.1787/9789264115415-en (Last visited Sept. 27, 2019).

[2] Id. at Ch. I, § 11: (“Governments adhering to the Guidelines will implement them and encourage their use. They will establish National Contact Points that promote the Guidelines and act as a forum for discussion of all matters relating to the Guidelines. The adhering Governments will also participate in appropriate review and consultation procedures to address issues concerning interpretation of the Guidelines in a changing world.”).

[3] OECD, Guide for National Contact Points on Structures and Activities, OECD Guidelines for Multinational Enterprises, 1, 4 (2019), available at http://mneguidelines.oecd.org/Guide-for-National-Contact-Points-on-Structures-and-Activities.pdf (Last visited Sept. 27, 2019).

[4] Id. at 4.

[5] Id. at p. 15.

[6] OECD, Guide for OECD National Contact Points on issuing Recommendations and Determinations, OECD Guidelines for Multinational Enterprises, 1, 4 (2019), available at http://mneguidelines.oecd.org/Guide-to-NCP-practices-on-issuing-recommendations-and-determinations.pdf (Last visited Sept. 27, 2019).

[7] Id.

[8] Id. at 5; See also, Procedural Guidance of the Guidelines, Commentary, at ¶ 35.

[9] Id. at 5: (“Recommendations are suggested actions the parties are encouraged to take in order to resolve the issues; and in particular, suggested actions that the enterprise in question is encouraged to take in order to observe the Guidelines.”).

[10] Id. at 6: (“Determinations are statements by NCPs setting out their views on whether the company observed the Guidelines”).

[11] Id. at 7-12.

[12] To see all 34 OECD countries, and 12 non-OECD countries that have adhered to the OECD Guidelines for Multinational Enterprises, refer to https://mneguidelines.oecd.org/about/ (Last visited Oct. 1, 2019).

[13] Id. at 19.

[14] Supra, Fn. 8 at Ch. VI, Commentary 69.

[15] Id. at Ch. VI, § 4.

[16] Id. at Ch. VI, Commentary 63.

[17] The case specifically concerns the alleged non-observance of the chapters of the Guidelines on Disclosure (Chapter III), Environment (Chapter VI) and Consumer Interests (Chapter VIII). See Dutch Ministry of Foreign Affairs, NGOs v. ING, Final Assessment, 19 April 2019, at 3, available at: Final Statement NGOs vs ING 2019-04-19.pdf (Last visited Sept. 27, 2019).

[18] Id.

[19] Dutch Ministry of Foreign Affairs, NGOs v. ING, Initial Assessment, 14 November 2017, at 3, available at: 71114-IA-ING-_ENG_WEB.pdf (Last visited Sept. 27, 2019).

[20] Supra Fn. 23, at 4.

[21] Id. at 4.

[22] Id. at 3.

[23] Id. at 7.

[24] NGOs v. ING, A press release regarding the announcement that the Dutch NCP has accepted the compliant, available at: ING OECD IPR final.pdf (Last visited Sept. 27, 2019).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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