COMMENT: The Belt and Road initiative has been hit by allegations of social and environmental abuses, despite Chinese commitments to the contrary. Golda Benjamin of BHRRC calls for more transparency, particularly from the country's financial sector
“Going green” is a central pillar for China’s overseas investment programme – which in 2020 alone invested over $13bn around the world despite the pandemic, according to official data. While many civil society organisations have raised concerns about the social and environmental standards of the investments, China has undertaken public commitments on international initiatives such as the UN Guiding Principles for Business and Human Rights, the Sustainable Development Goals (SDGs) and the Paris Agreement in its effort to consolidate an image of a “responsible great power”. But in practice, the aspirations of these governmental pledges are undermined by the high rates of social, environmental, and human rights allegations of abuse linked to the overseas operations of Chinese businesses.
In the two decades since China announced its “Going Out” policy and eight years since the launch of the Belt and Road Initiative (BRI), the government has issued an increasing and welcome matrix of laws, regulations and guidelines outlining social and environmental safeguards for its international economic cooperation. They cover diverse aspects of China’s economic activities abroad, from regulating forestry to reinforcing social integrity, environmental protection, work and personnel safety, and compliance of major private and state-owned enterprises overseas.
We recorded a total of 679 allegations of abuse – 87 concerning renewable energy companies
Our latest analysis of the human rights impact of Chinese investment overseas highlights a significant gap between policy and practice and the harm this creates for communities and workers. Our briefing, ‘Going Out’ Responsibly: The human rights impact of China’s global investments, tracks social, environmental and human rights allegations of Chinese investments globally. We recorded a total of 679 allegations of abuse. The highest number of allegations of abuse was found in the metals and mining sector with 236 allegations, which suggests it is a high-risk sector for Chinese companies operating abroad. In total, 87 allegations concerned renewable energy companies, the majority relating to hydropower projects, highlighting the challenge of creating a just transition for clean energy futures. A total of 72 allegations related to the banking and finance sector, the majority of which concerned inadequate disclosure or environmental impact assessments.
While about a third of renewable energy companies responded to the allegations, this is well below our global average response rate of 60% for this sector. China’s finance and banking sector recorded a dismal 5% response rate to allegations of abuse, compared with a 63% global average for the sector. From 20 approaches to Chinese banks to seek their responses to social and environmental harms from overseas projects in which they have invested, only one response was received.
The high number of allegations and poor response rate of the finance and banking sector suggests existing frameworks, or their enforcement, are insufficient to effectively hold the Chinese finance and banking sector to account for human rights abuses. Unless greater efforts are made to enforce the regulations, stronger frameworks on transparency and accountability will be needed – not least because 90% of BRI investments come from this sector.
Some financial institutions, such as Exim Bank of China, Bank of China, and State Development & Investment Corporation (SDIC), have published welcome corporate policies on environmental protection and social responsibilities. In 2020, the Industrial and Commercial Bank of China (ICBC) withdrew from the Lamu coal plant project in Kenya, but only after persistent petitions launched by local communities and a lawsuit against the Kenyan environmental authority over the project’s defective environmental and social impact assessment (ESIA) and insufficient public participation. Action such as this remains the exception rather than the norm, and the threat of harm to communities and workers remains significant.
Among the most common allegations relating to Chinese financiers were inadequate disclosure or environmental impact assessments (EIAs), loss of livelihoods and abuse of indigenous peoples’ rights. These allegations span a wide range of high-risk sectors, including fossil fuels, mega hydropower dams and mining projects. If the aim is to be both resilient and truly sustainable, China’s financiers and banks must seek to identify the salient social and environmental risks upstream in their investment decisions, and take action to mitigate them. Put simply, they need to be undertaking effective due diligence.
With stronger regulation and enforcement, Chinese investment can help tackle both unsustainable inequality and climate breakdown
Chinese banks and financial institutions (including policy banks and commercial banks) can start by building greater transparency – searchable, comprehensive, and up-to-date databases of their proposed and current investments and projects. Similar to those of the Asian Infrastructure Investment Bank (AIIB) and the World Bank, they should include project-level information, the final reports from environmental, social and human rights impact assessments, and contact information for stakeholders to use when raising concerns about particular projects.
Hand-in-hand with this should be clear pathways for complaints to be heard and effective grievance mechanisms for those who have endured abuse. Those affected must be able to seek, obtain, and enforce a range of remedies – which may include redress financial or non-financial compensation, and sanctions when abuse happens.
With substantial shifts in business regulations and incentives underway in Europe and north America, and the global rise and rise of responsible (ESG) investing, China has the opportunity to keep pace, and transform the social and environmental impact of its overseas investment. With stronger regulation and enforcement, Chinese investment can help tackle both unsustainable inequality and climate breakdown – our world’s two most pressing challenges.
Golda Benjamin is Programme Director at the Business & Human Rights Resource Centre
Belt and Road Initiative energy transition SDGs UN Guiding Principles on Business and Human Rights