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NGO calls on UN Global Compact to mediate in Vigeo Eiris Moroccan green bond case

Western Sahara Resource Watch writes to UN corporate sustainability body

An NGO backed by Norwegian trade union Industri Energi has called on the UN Global Compact to mediate a dispute with ESG research firm Vigeo Eiris over a Moroccan green bond launched at the COP22 climate talks last year, which the NGO says is being used to finance a wind project in the disputed Western Sahara region.

The NGO, Western Sahara Resource Watch (WSRW), wants greater scrutiny of the bond’s financing of three solar projects, two of them in locations (Laayoune and Boujdour) that are in the Western Sahara, outside Morocco’s internationally recognized borders.

Vigeo Eiris says its role in the assessment was not to adjudicate on a complex international legal situation, but only to assess the climate terms of the bond for investors.

The controversy follows Vigeo Eiris’ verification of a 1 billion dirham (€258m) bond that was underwritten by a Moroccan state guarantee and sold via private placement to Al Barid Bank, Attijariwafa Bank, La Caisse Marocaine des Retraites and La Société Centrale de Réassurance.

In a letter to the Global Compact seen by Responsible Investor, WSRW Board Member Erik Hagen, said: “Over the last past three months, we have tried to get clarifications from the UK-French company Vigeo Eiris as to the measures it has taken, or not taken, in relation to a certification of bonds for a Moroccan project in Western Sahara.”

A precedent, WSRW says, is a previous case involving Lifosa AB, a Lithuanian chemicals firm that was de-listed from the Global Compact in 2011 for “failure to engage in dialogue”.

“We hereby seek the assistance of the UN Global Compact to engage as mediator between us and Vigeo Eiris, taking the same measures as in the case of Lifosa,” the letter concludes.

The campaign group cites a judgment from the EU Court of Justice on December 21 last year, which it says “is very clear on the necessity to seek consent from the people of Western Sahara”.

“It is our opinion that Vigeo Eiris has a responsibility to not facilitate the financing of such a project which is to the detriment of the wishes, interests and rights of the people of the territory,” Hagen says.A separate letter to Vigeo Eiris President Nicole Notat from WSRW Chair Joanna Allen, dated today (March 3), says: “We note that Vigeo Eiris is a participant in the UN Global Compact initiative. A prerequisite for being a participant is that one responds to questions from civil society.” Allan’s letter is copied to UN envoys Christopher Ross and Kim Bolduc.

The Frente Polisario, the UN-recognised representative organisation of the local Sahrawi people, has also questioned the second-party opinion provided by the ESG research house.

Mhamed Khadad, a senior member of Polisario’s leadership who advises the President of the Sahrawi Arab Democratic Republic on natural resources, told RI that none of the companies involved in the construction of the solar projects, nor in the financial supply chain linked to them, have ever given them a say on the transactions.

Vigeo Eiris announced on November 16 that it had “provided an opinion on the environmental and social purposes” of the “first green issuance certified by the Climate Bond Initiative in Morocco” issued by MASEN, the Moroccan Agency for Solar Energy – a public limited company whose chairman is appointed by the King of Morocco.

Khadad, who is also coordinator at the UN-peace keeping mission MINURSO, said Polisario had observed the involvement of Vigeo Eiris with concern, considering that it facilitates the financing of “illegal energy projects” thus giving Morocco “a helping hand in its efforts to profit” from Western Saharan resources without their consent.

This lack of consent is among the main reasons why many companies with interests in Western Sahara have been excluded from investors’ portfolios, most recently by the ethical fund option of UK’s National Employment Savings Trust (NEST), the influential workplace scheme: Link to RI story:

Khadad stated: “It has been strange to observe how a company like Vigeo Eiris fails to understand basic aspects of the status of the territory and the conflict. The company gives investors advice internationally on ethics and law, but they look very poorly advised themselves. As a very minimum, one could expect that a company would apply terminology and maps of the United Nations.”

The scrutiny on Vigeo Eiris scrutiny started after November 16 when Hagen and Peter Webster, Director of International Affairs at Vigeo Eiris and CEO of the Eiris Foundation, participated in a panel discussion organised by the UN High Commissioner for Human Rights in Geneva on responsible business in occupied territories.

Hagen told RI: “Ironically, he (Peter Webster) talked about the database they have built on occupied territories Business In Occupied Lands and the day after we discovered that they have certified a green bond in Western Sahara.”

Since then, Hagen has written repeated letters to Vigeo Eiris and the Climate Bonds Initiative (CBI) (the green bond has been certified as compliant with CBI standards), seeking more information on the due diligence employed by the ESG research house to verify the bond.

Of the total 33 climate bonds certified by the CBI, MASEN is the only one where the verifier’s report is not publicly available, although there are other privately-placed green bonds whose issuers have chosen not to make their second-party reviews public.

Hagen has copied his correspondence with Vigeo Eiris to the OECD National Contact Points in the UK and France. The NCP system is a grievance mechanism under the OECD Guidelines for Multinational Enterprises corporate accountability framework.

The NGO is asking Vigeo Eiris to withdraw the assessment and the Climate Bonds Initiative to clarify on its website that the projects are in Western Sahara and not Morocco.

Vigeo Eiris’s Webster told RI that the company doesn’t agree with WSRW’s arguments, saying that they are “missing the target” about alerting investors to any potential risk of the green bond. Webster, a board director of the Principles for Responsible Investment (PRI), says the green bond has been issued to a limited group of investors that have decided not to make the verifier’s report public, but who wanted to go through the Climate Bonds Initiative’s verification process in order to make sure the bond achieves carbon reduction targets.“We are not trying to adjudicate on the international legal situation, we are simply reporting on the value of this particular project from the climate bond perspective.”

Webster continued: “It’s a complicated international situation and I understand WSRW are doing their best for the people they stand up for — that’s their job, but not ours. They have an objection to anybody investing in that territory without its future being resolved. I’m not sure why attacking us is relevant to that position, because our job is to provide information for investors who make their own decisions.”

Regarding the underlying conflict between environmental and social goals of the bond suggested by WSRW, Webster said Vigeo Eiris is not aware of other criticism from stakeholders about the possible social impact of the bond.

Asked whether Vigeo Eiris has contacted Polisario, Webster said: “I don’t think we have on this occasion because it’s not part of the climate bond process to ask these questions, but I think we are quite clear that Polisario is a representative, at the very least, of some of the people who are affected by the bond. So it’s not that we are suggesting that they should be excluded.”

The first version (1) of the CBI Standard had required “environmental and social integrity” to be enshrined and that issuers should state that the project complied with “international, regional and national environmental and social laws and regulations”. But such requirements are not in the latest version (2) of the CBI standard. At the time of writing, neither CBI nor MASEN had responded to requests for comment. The correspondence is summarized here.

(1) https://www.climatebonds.net/files/files/CB%20Standard%20V1_0(1).pdf
(2) https://www.climatebonds.net/files/files/Climate%20Bonds%20Standard%20v2_1%20-%20January_2017(1).pdf