From disappearing fish species to an exceptionally extreme dry season, there’s now clear indication that extreme damming is taking a toll on the Mekong. These impacts on the transboundary river in Southeast Asia are prone to intensify within the years to come back because the tempo of hydropower growth alongside its mainstream picks up.
More and more, hydropower dams have gotten infamous for his or her hostile results on a river’s biodiverse ecosystems and their potential to decimate the livelihoods of native riverine communities – girls are disproportionately impacted by disruptions to water and meals sources in rural settings the place conventional roles persist.
But builders pursuing new initiatives alongside the Mekong are supported by easy-to-access loans. It’s notably so when the shortage of disclosure necessities and long-term funding preparations shield them from intensive scrutiny.
Large enterprise consortiums have additionally been citing Southeast Asia’s rising demand for different power – with most nonetheless concerning hydropower as a clear and renewable supply – as the principle purpose to harness the facility of the river basin.
Hydropower initiatives working within the Mekong nations, consisting of Cambodia, Laos, Thailand and Vietnam, are seeing speedy enlargement. In Could 2023, there have been 97 initiatives with a complete capability of 28,479 megawatts (MW), based on statistics from United States-based International Power Monitor. At least 29 new initiatives have already been introduced or are of their development part, doubtlessly driving complete capability to extend. 
Now, sustainable finance watchdogs and environmental advocates are elevating the alarm that the impacts on the Mekong, as soon as free-flowing, may grow to be irreversible if financing continues to be justified underneath the ambit of pushing for a clear power transition within the area.
Laos and Cambodia account for greater than three quarters of the deliberate hydropower capability enlargement within the area. Picture: Truthful Finance Asia
Some are calling on monetary establishments (FIs) within the area to undertake extra sustainable banking insurance policies and practices and to totally leverage their affect to cease the tide of over-investment in dams, whereas others say an vital first step can be larger disclosures from these banks. Civil society organisations (CSOs) like Worldwide Rivers which works with dam-affected communities name hydropower initiatives “harmful” and consider these unsustainable ventures shouldn’t be thought of for funding.
For instance, roughly 4 kilometres upstream of the confluence of the Nam Ou and Mekong rivers, and about 25 kilometres upstream of Luang Prabang city, a well-liked vacationer vacation spot and UNESCO World Heritage Website in Laos, development of the 1,460-megawatt Luang Prabang dam on the Decrease Mekong mainstream has gone forward.
CSOs carefully monitoring the place the Thai-driven challenge is getting its monetary help from say that most banks haven’t been keen to substantiate if they’re concerned, except Siam Business Financial institution (SCB) which made a disclosure in August this yr, because it was obliged to report on challenge finance transactions underneath the Equator Ideas it signed on to.
In response to the Ideas, lending to the Luang Prabang hydropower challenge, labeled underneath a class of initiatives with doubtlessly vital hostile environmental and social dangers, or impacts that could possibly be numerous, irreversible or unprecedented, must be disclosed. No different FI in Thailand is a signatory to the worldwide business benchmark for assessing environmental and social dangers in project-related finance.
Development of a dam in Luang Prabang, Laos. Development work on the Luang Prabang dam has been ongoing for a yr. Picture: Worldwide Rivers
Murky world of hydropower financing
Sarinee Achavanuntakul, head of analysis for Truthful Finance Thailand (FFT), a coalition of civic society organisations (CSOs) monitoring the impacts of Thai banks’ lending actions, tells Eco-Enterprise that it’s not unusual that CSOs are stored in the dead of night in the case of the financing of hydropower initiatives. FFT has reached out to main Thai banks, solely to be given the silent therapy. An open letter to SCB, for instance, during which the coalition requested for the financial institution to handle questions on gaps in its challenge financing choice, together with a neglect of salient human rights dangers, has seen no official response to this point.
Sarinee Achavanuntakul, head of analysis for Truthful Finance Thailand, says civil society organisations are being stored in the dead of night on how the Luang Prabang dam is funded. Picture: Sarinee Achavanuntakul
“Proper now, we’re in a dilemma. We wish to see what additional advocacy we will do however the development [of the Luang Prabang dam] has began and is continuing at a really speedy tempo,” she mentioned. Aside from SCB, no banks have come ahead to substantiate that they’re financing the challenge, neither is there a lot public data on it, she added.
“What’s fascinating is that it’s an indicator that whoever is financing the dam is conscious of how controversial the initiatives are and wish to keep away from scrutiny.”
First proposed in 2019, the Luang Prabang hydropower challenge and its influence on the Mekong have been underneath the media highlight, particularly as there are fears that the dam’s shut proximity to the city of Luang Prabang may value it its UNESCO World Heritage Website standing.
The joint Lao-Thai enterprise is the second dam to be constructed within the space after the finished Xayaburi dam, and it may remodel the historic riverside city right into a lakeside one, based on preliminary scientific assessments, inflicting it to lose its “excellent common worth”, a former government from the UNESCO workforce informed media retailers early this yr. Final month, UNESCO beneficial that Laos invite a monitoring mission to Luang Prabang for evaluation to be performed first-hand.
An evaluation that FFT revealed in December 2022 highlighted key environmental, social and governance (ESG) dangers related to the Luang Prabang dam together with considerations that the developer has not adequately addressed the challenge’s transboundary environmental impacts, similar to on fisheries and aquatic ecology, in addition to resettlement plans that will put affected communities liable to human rights abuses. In its newest letter to SCB after the financial institution disclosed that it was concerned in financing the challenge, FFT questioned if the Thailand-headquartered financial institution’s resettlement motion plan and environmental and social monitoring plans made accessible on its web site in English, have been communicated to locals adequately and in a culturally applicable method, so that every one stakeholders understood any dangers concerned.
The Equator Ideas’ secretariat, in response to a earlier FFT’s grievance when SCB had not met its disclosure obligations, mentioned that the workplace “doesn’t evaluation or opine on” the implementation of the ideas by particular person banks.
Equator Ideas’s place is that every monetary establishment is individually liable for its personal inner procedures to attain and exhibit compliance with the ideas, to stick to the reporting necessities set out underneath its signatory guidelines, and for associated communications with stakeholders.
In response to FFT’s 2022 report, a review of accountable lending insurance policies of main challenge finance lenders in Thailand indicated that the majority banks don’t explicitly point out these ESG dangers from large-scale hydropower initiatives nor define clear screening standards for its lending choices. That is regardless of a lot of the main FIs in Thailand signing on to a set of accountable lending tips initiated by the Thai Bankers’ Affiliation in 2019.
Sarinee, who led the report’s analysis work, mentioned: “As we speak, many issues talked about within the report are nonetheless there. They haven’t gone away. The one distinction is that the challenge has gone forward, as the facility buy settlement (PPA) has been signed in 2022.”
PPAs are long-term contracts which might be usually used as a place to begin within the procurement of a hydropower plant, as they point out that there are consumers that can offtake the power produced.
Sarinee believes that accountable lending tips can “open doorways” for non-governmental organisations like FFT “With this steerage, banks are extra keen to have interaction with different stakeholders,” she mentioned, although including that the Luang Prabang challenge demonstrates that the rules have their limits. “Banks are usually not even responding to our queries.”
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[Other than SCB which has made a disclosure], no banks have come ahead to substantiate that they’re financing the challenge, neither is there public data on it…What’s fascinating is that it’s an indicator that whoever is financing the dam is conscious of how controversial the initiatives are and wish to keep away from scrutiny.
Sarinee Achavanuntakul, head of analysis, Truthful Finance Thailand
FFT’s go to to the resettlement web site final yr discovered that native riverine communities that needed to be resettled have been involved in regards to the lack of expertise on resettlement plans and compensation quantity. For instance, by means of its direct engagement with affected communities, FFT discovered that one of many villages had been relocated to the highest of a mountain with primary homes being offered, however the relocation meant that the fishermen needed to adapt to new lives and depend upon farming for his or her livelihoods.
The Luang Prabang dam can also be constructed throughout the view of Pak Ou cave, a well-liked aspect journey for vacationers visiting Luang Prabang. There are worries that the historic web site, relationship again 1000’s of years and full of over 4,000 Buddha photos, may endure from injury from ecological impacts.
Sarinee mentioned the cumulative impacts of the collection of large hydropower dams in-built fast succession are regarding. Aside from the Luang Prabang dam, the state-owned Electrical energy Producing Authority of Thailand (EGAT) has signed long-term PPAs with two different new dam initiatives on the Decrease Mekong mainstream, together with the Pak Lay and the Pak Beng hydropower initiatives. As of February 2024, 12 dams are working on the Higher Mekong mainstream.
“Even when Luang Prabang is the primary dam to be constructed alongside the Mekong, we’d have considerations,” mentioned Sarinee. “The scary factor is it’s not the primary dam. There are already over 10 dams, and plenty of extra to come back. The results will worsen.”
A girl neighborhood activist from Cambodia dwelling alongside the Mekong River basin. By way of the Mekong Water Governance programme, international organisation Oxfam works with communities throughout borders who’re affected by large-scale water initiatives, together with hydropower initiatives. Picture: Oxfam Mekong Regional Water Governance
Lack of alignment with international due diligence requirements
Past disclosure, there are additionally requires banks and traders financing hydropower initiatives to use environmental and social safeguards, aligned with worldwide requirements, within the development and operation of the hydropower vegetation.
In its newest report “Enhancing sustainable finance in Mekong hydropower”, Truthful Finance Asia (FFA), of which FFT is a part of, performed a coverage evaluation of key FIs within the Mekong subregion, together with Thai FIs similar to Bangkok Financial institution, Krung Thai Financial institution and SCB, based mostly on the worth of their loans to prospects and the proportions of excellent loans within the utilities and companies business, deemed most carefully associated to hydropower. It discovered that the general public insurance policies of the FIs assessed don’t handle precise and potential hostile environmental and social impacts when financing hydropower initiatives.
FFA is a regional community of over 90 Asian CSOs dedicated to making sure that the funding choices of FIs respect the social and environmental well-being of native communities.
This graph reveals the typical coverage evaluation scores of the six FIs assessed within the FFA research throughout 5 totally different themes. The establishments assessed embrace three Thai banks: Bangkok Financial institution, Krung Thai Financial institution, and Siam Business Financial institution. Picture: Truthful Finance Asia
For example, when assessed in opposition to standards based mostly on international sustainability requirements that govern human rights and labour rights, or biodiversity and setting, the six FIs that have been assessed solely had a consolidated common rating of two.8 out of 10, indicating that they don’t seem to be doing sufficient to make sure that their hydropower financing insurance policies uphold the rights of communities and the setting.
Developed in collaboration with Netherlands-based unbiased analysis organisation Profundo, and in session with nationwide coalitions in Cambodia, Laos, and Thailand, the report additionally reveals regulatory inadequacies at nationwide and regional platforms which have resulted in banks not being held accountable for his or her lending choices.
“Communities and CSOs have lengthy raised considerations in regards to the cross-border social and environmental impacts of Mekong hydropower dam initiatives, particularly on Indigenous Peoples and girls. The size of those impacts is so alarming that it begs the query of whether or not hydropower may even be contemplateed a ‘clear’ and ‘simply’ supply of energy within the area’s power transition,” mentioned Bernadette Victorio, programme lead at FFA.
Victorio mentioned that it’s time for FIs, regulators, and different stakeholders to prioritise cross-border financing fashions and laws that forestall and mitigate the precise and potential impacts of those initiatives, in addition to promote accountable hydropower growth in step with worldwide requirements.
Among the many banks assessed, SCB tops the rating with a consolidated rating of 6.1 out of 10. The FFA report additionally highlights that it’s the solely assessed FI that discloses a sector coverage for the hydropower sector, which identifies some environmental and social dangers, similar to lack of pure habitat and neighborhood land rights. In FFA’s view, all banks ought to develop and disclose a sector coverage for the hydropower sector.
SCB additionally identifies key mitigation measures, similar to influence evaluations on wildlife, in addition to resettlement plans for displaced communities. As a signatory to the Equator Ideas, because it has demonstrated in its current disclosures, it commits to figuring out, assessing and managing environmental and social dangers when financing initiatives, utilizing the Worldwide Finance Company (IFC)’s efficiency requirements as a benchmark. Nonetheless, Sarinee reminds that the financial institution appears to solely meet its minimal obligations and has not been conscious of different clarifications that civil society organisations have sought.
In its set of suggestions, FFA means that FIs funding hydropower initiatives take an intersectional strategy that considers the precise dangers confronted by girls, kids, Indigenous Peoples, and ethnic minorities, who’re notably weak to rights violations.
“The truthful illustration of such teams throughout consultations is crucial, and corporations ought to develop detailed plans to mitigate the hostile impacts of hydropower initiatives and devise livelihood methods that handle their totally different wants.”
A fisherman in Pak Ou Village, Luang Prabang province, Laos. Picture: Truthful Finance Asia
Stricter thresholds for what counts as ‘sustainable’ in taxonomies: FFA
FFA goes a step additional to name on policymakers and monetary regulators each on the nationwide and Asean degree to take motion and enhance the transparency and inclusivity of hydropower growth plans.
For now, on the regional degree, Asean considers hydropower an eligible inexperienced class, if quite a lot of standards are met, which makes it doable for banks and FIs to make use of hydropower initiatives as underlying property for a variety of sustainable finance instruments.
FFA believes that which means that extra hydropower initiatives may emerge, posing extra environmental and social dangers. It referred to as for the Asean Taxonomy to be improved, together with introducing stricter thresholds and technical screening standards (TSC) for initiatives, whereas acknowledging that the supply of a Do No Important Hurt (DNSH) standards underneath the taxonomy, used to information the evaluation of sustainable actions for funding to be disbursed, may imply that the general environmental and social outlook of the hydropower sector may enhance.
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The report from Truthful Finance Asia makes the next suggestions:
– Central banks and monetary regulatory authorities ought to make extra lively use of present instruments and tips developed on the regional degree.
– Nations that also lack nationwide taxonomies similar to Laos, Vietnam and Cambodia, ought to develop and launch taxonomies following a clear and inclusive course of.
– Regulators shoud encourage industrial banks and asset managers to develop hydropower sector insurance policies.
– Central banks and monetary regulators, in addition to regional growth banks ought to contemplate altering their strategy to large-scale hydropower based mostly on a extra nuanced evaluation of their cumulative transboundary and basin-level impacts.
– Central banks ought to require the banking sector to incorporate materials ESG dangers, together with these associated to hydropower, of their credit score threat assessments.
– Policymakers ought to prioritise research investigating the cumulative impacts of hydropower dams and combine their findings in nationwide laws, coverage frameworks and strategic planning processes associated ot hydropower growth.
– Nations within the area ought to set stricter necessities for dams and hydropower initiatives, similar to these outlined within the European Union (EU) Taxonomy and different credible requirements.
– Central banks and nationwide governments ought to contemplate introducing incentives for banks and different monetary establishments to extend their portfolios of inexperienced, social and sustainability-linked monetary devices.
– Central banks ought to create civil society roundtables, committees or working teams that function platforms for dialogue with representatives from a variety of analysis and civil society organisations, in addition to neighborhood and voluntary teams.
Supply: Enhancing sustainable finance in Mekong hydropower: Challenges, alternatives and methods ahead
Taxonomies for sustainable finance is an rising new instrument in Asia. Aside from the Asean Taxonomy, Thailand has additionally revealed its first inexperienced taxonomy in June 2023, whereas Vietnam is growing its personal nationwide taxonomy doc.
Individually, Laos’ central financial institution, Financial institution of the Lao PDR (BOL), is receiving technical help from IFC till 2027 because it develops a inexperienced taxonomy, amongst different actions. In 2023, the Nationwide Financial institution of Cambodia additionally signed a technical help cooperation with IFC to develop its inexperienced finance taxonomy by 2025.
Sarinee highlighted that the working group for Thailand’s Part I taxonomy took on board a few of FFT’s suggestions, although the alliance nonetheless decided that the screening standards for hydropower are usually not stringent sufficient.
A doable enchancment can be for the Financial institution of Thailand, a key member of the working group, to make use of present or improved standards and translate them right into a disclosure customary for Thai banks, she prompt. “That may transfer the needle, as a result of then all banks must report on the initiatives they’re financing…Taxonomies are voluntary requirements and their fundamental goal is to spur inexperienced bonds. What’s significant is how they translate into laws.”
Shift in discourse: The anti-coal motion as inspiration
Many international power organisations such because the Worldwide Power Company (IEA) see hydropower as a sustainable supply of power, notably as a dispatchable energy supply that may again up intermittent renewables similar to wind and photo voltaic. More and more, environmental advocates have questioned this view with some arguing that local weather change shouldn’t be used as a pretext to save lots of the declining business. Globally, droughts have taken a toll on hydropower over the previous 20 years.
A key threat that FFT has highlighted with the Luang Prabang dam is how the challenge is positioned to fulfill the “rising power wants” of Thailand, when in truth, the nation is going through a capability extra. Regardless of this threat, key gamers within the Decrease Mekong mainstream dam initiatives, together with Thai main power producer CK Energy, a fundamental shareholder within the firm growing the Luang Prabang dam, have aggressively structured loans to maneuver hydropower initiatives ahead.
In response to Justpow, an power watchdog, Thailand’s power reserve in 2023 stood at 10,000 MW, far surpassing the worldwide safety requirements. The excessively excessive reserve margin locations a burden on Thai electrical energy customers who bear increased prices within the type of gas tariff expenses. PPAs in Thailand are negotiated on a take or pay foundation, the place Thai authorities pay the facility plant operators no matter whether or not the electrical energy is used.
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The size of the impacts [of Mekong dam projects] is so alarming that it begs the query of whether or not hydropower may even be thought of a ‘clear’ and ‘simply’ supply of energy within the area’s power transition.
Bernadette Victorio, programme lead, Truthful Finance Asia
CSOs have additionally highlighted that the shrinking civic area in Asia is a large problem, with human and environmental defenders and affected stakeholders who publicly increase considerations about giant growth initiatives going through intimidation. Some grow to be victims of arbitrary lawsuits and detentions.
Sarinee additionally shared that criticising any giant energy initiatives in Thailand is nearly not possible with the outsized affect of power and development corporations over the native media. She has had opinion items submitted to media retailers taken down. “The media corporations depend on promoting for income, and these corporations are key contributors to that.”
The CSO representatives referenced international anti-coal campaigns and mentioned that the motion to get large-scale hydropower initiatives ultimately on the exclusion lists of main banks might be a long-term endeavour. Sarinee famous how top-tier worldwide banks nonetheless wouldn’t have hydropower on their exclusion checklist and mentioned that it might take incremental steps for due diligence to be improved.
Victorio mentioned that FIs offering lending to and funding within the Mekong hydropower sector should contemplate the rights and wellbeing of communities and ecosystems to make sure the power transition is simply and equitable.
“Sustainable hydropower financing is not only about energy era, but additionally about creating a long-lasting legacy of accountable and equitable useful resource administration for future generations,” mentioned Victorio.
Learn the total report “Enhancing sustainable finance in Mekong hydropower” right here. Truthful Finance Asia has additionally revealed a brand new report on fostering a gender-transformative power transition in Asia.
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