A development bank like the Deutsche Investitions- und Entwicklungsgesellschaft naturally has to face up to public criticism. However, one should expect fair and balanced reporting from serious investigative journalists. However, the article by Gesa Steeger entitled “Deforestation – DEG promotes environmental destruction” fails to do just that. In the following article, Roger Peltzer shows how, on the basis of a single possible misconduct by a company financed by DEG, the steep thesis is put forward, practically without evidence, that DEG predominantly finances projects that are questionable in terms of development policy.
Recently, the Recherche Collectiv network published an extremely tendentious article on the investment activities of DEG – Deutsche und Investitions- und Entwicklungsgesellschaft – under the title “Deforestation – German Development Bank promotes environmental destruction”, which was peppered with questionable claims.
Based on satellite images that allegedly show that 7000 hectares of high-quality forest have been cut down in the Payco concession area, the author comes to the conclusion that DEG is systematically financing developmentally questionable and scandalous projects from which corrupt businessmen, among others, would also benefit. In addition, according to the quote from a development expert mentioned in the article, nobody knows what DEG is actually doing and, moreover, DEG is subsidizing the profits of private companies through its financing.
A quick click on the DEG website should show that the claim that nobody knows what DEG is doing is absurd. All of the projects financed by DEG are listed there. Moreover, the author does not provide a single piece of evidence for the claim that DEG favors corrupt business people. No evidence is provided for the statement that DEG “subsidizes” projects. DEG always finances projects at market conditions. Nevertheless, Gesa Steeger’s claims have been quoted by Focus and Der Spiegel, among others.
How is the argumentation pattern of the article structured? The starting point is the aforementioned satellite photo. It does indeed suggest that the Payco company, in which DEG holds a stake, has cleared forest worthy of protection in breach of contract. However, the clearing obviously took place after DEG acquired a stake in this company. If the deforestation is confirmed – which is currently being investigated – Payco will have acted in breach of contract. This should indeed be clarified and must also be publicly debated. DEG is now investing in hundreds of companies. Despite all due care, it cannot be ruled out that individual companies may behave contrary to the contract. To draw the conclusion from this that DEG systematically invests in projects that are questionable in terms of development policy is, first of all, extremely dubious from a journalistic point of view.
How does the author come to this generalized conclusion? First of all, it also criticizes DEG’s investment in the ARBARO fund, which finances timber and reclamation projects worldwide. The European Investment Bank is also involved in this fund. Ms. Steeger’s criticism: ARBARO had not yet achieved its investment targets, was aiming for a return of 12% and had planted eucalyptus trees on land in Paraguay that had previously been used for grazing, which were also sprayed with glyphosate. It is normal for funds to take time, sometimes more than planned, to achieve their investment objectives. If loans to developing countries are currently subject to interest rates of around – 9 %, it is also completely normal for equity investors, who bear a higher risk than lenders, to expect a return on their capital that is higher than the interest rate on the loan. There is nothing offensive about that. While the cultivation of eucalyptus trees is certainly not the ultimate in sustainable forestry, ARBARO states that the biodiversity on the reforested areas is greater than that of the previously practiced pasture use. That sounds plausible. And glyphosate is still permitted in the EU, although DEG’s environmental department is certainly working with the fund to ensure that the use of glyphosate is discontinued. So where is the developmentally questionable project here?
In order to substantiate her claim that DEG systematically promotes projects that are questionable in terms of development policy, the author then lists a number of other DEG financing projects that are allegedly controversial. However, apart from the fact that individual non-governmental organizations have criticized these projects, the author provides no further evidence for the alleged problems of these projects.
Now, no wind turbine or railroad line would be built or extended in Germany if individual citizen protests were the yardstick for determining whether these projects make sense or not.
One example of the author’s dubious approach is the Lake Turkana wind farm in Kenya, which DEG co-financed together with many other development finance institutions under the leadership of the African Development Bank. This wind farm is also described by the author as a questionable project. The completed Lake Turkan wind farm now accounts for 15% of Kenya’s total electricity supply. It is one of the reasons why Chancellor Scholz was able to see during his visit to Kenya that the country has already switched to almost 100% renewable energy. The geothermal power plants also financed by DEG and KfW have also contributed to this. Lake Turkana is also by far the largest commercially financed (i.e. without budgetary funds) wind farm in sub-Saharan Africa. Its realization undoubtedly represents a milestone in the fight against climate change in Africa.
There is a comprehensive environmental and social impact study on this project, which is easy to find on the Internet. This study has been prepared after consultation with all those affected by the project. The responsible and democratically elected District Council approved the project on this basis and leased the land to the project company. The study states, among other things, that the project area is largely deserted and that alternative water points have been set up for the nomads living there during the construction period. There was a resettlement in connection with the construction of the access road. The residents of this village have therefore been adequately compensated. Nevertheless, there is still criticism from some NGOs: The compensation is not sufficient, the project has attracted many “foreigners” to the area… Do these individual protests justify the statement that DEG invests predominantly in developmentally questionable projects?
To summarize, it can be said that Recherche-Collectiv, which prides itself on its research skills, comes to conclusions in the case of the DEG article that are not even remotely tenable upon thorough investigation. In the case of the DEG article, there was obviously no thorough research, and magazines such as Focus and Spiegel, which have their own research departments, reprinted it without checking it. The Relotius case sends its regards.
Of course, development banks like DEG also have to face up to public debate and criticism. There can also be controversial discussions about what makes sense in terms of development policy and what does not. However, all those who invest in difficult countries at high risk are entitled to fair and balanced research. If every partial misconduct is directly scandalized and generalized as the prevailing business practice, this will only lead to an environment in which more and more decision-makers shy away from risks anyway and ultimately refrain from investing in Africa, for example. Is that the goal of critical research?
The Korrektiv Recherche-Netzwerk, which so vehemently demands transparency, has still not printed my statement on the article.
