Loan to Adani by infrastructure fund could be unlawful, says former clean energy head

Any loan the Northern Australia Infrastructure Facility (Naif) gives to Adani’s Carmichael coalmine project would likely be unlawful, according to the former head of the Clean Energy Finance Corporation (CEFC), which operated under an almost identical mandate. Naif, which was set up to give $5bn of concessional loans to support the development of northern Australia, operates under an investment mandate that includes a clause saying it “must not act in a way that is likely to cause damage to the commonwealth government’s reputation, or that of a relevant state or territory government”. An almost identical clause exists in the investment mandate for the CEFC, which has sought to give $10bn in concessional loans to support the growth of clean energy in Australia, saying it “has a responsibility to act in a way that is not likely to cause damage to the Australian government’s reputation”. In December 2016 it was revealed Naif had granted “conditional approval” for a $1bn loan to Adani to finance a rail link between the Abbot Point export terminal and its proposed Carmichael project, which would be the biggest coalmine built in Australia. Oliver Yates, who was the chief executive of the CEFC since its inception in 2012 until May this year, said that loan should never have progressed past the initial inspection by the Naif board, since it did not pass the reputation test. “It is beyond my understanding how the board of Naif can conclude that providing a subsidised loan to facilitate a project of this nature is ‘not in a way likely to cause damage to the commonwealth government’s reputation’,” Yates told the Guardian. He gave a laundry list of factors that would raise reputational risks for the government. He said the Adani project was inconsistent with the government’s Paris climate change commitments and would likely damage Australia’s international reputation, potentially making its statements on climate change look insincere. Yates also said any reputational concerns that existed around the Adani group itself would likely damage the federal government’s reputation via association. A report by Environmental Justice Australia detailed a long list of findings of environmental damage caused by Adani Enterprises Ltd and its subsidiaries around the world, as well as claims of illegal mineral exports and bribery. Yates said the fact that questions had been raised about the relationships between Australian politicians and Adani was itself a reputational concern, regardless of their validity. Adani has paid for lavish dinners and flights in private jets for Queensland premiers and given donations to political parties. Yates said because of all this, the project should never have passed the first examination from Naif and conducting due diligence on the project was not an “efficient or effective use of taxpayer funds”. “It was my experience at the CEFC that effective use of taxpayers’ funds was paramount,” he said. “Funding a transaction that could damage the reputation of the government would have been rapidly excluded.” He said since the CEFC could invest in projects around the whole continent – and because Naif could invest in projects across half of it – there was no need to even consider investments that raised reputational risks. “It would be illogical to use taxpayer funds to effectively damage the taxpayer by damaging the country’s reputation,” Yates said. Naif, like the CEFC, is bound to follow the investment mandate under the legislation that established it. Failing to do so would be a breach of that act and may open any loans it provides to appeal under judicial review. Yates, as CEO of the CEFC, oversaw $2.3bn of loans, which supported projects with a total value of $5.7bn. He joins a number of other voices that have raised the same issue in relation to any loan made by Naif to Adani, including climate change activist Tim Flannery and John Hewson, the former Liberal party leader and chair of the Asset Owners Disclosure Project. Many banks in Australia and internationally have said they won’t lend to Adani’s coalmine, citing either reputational risks or environmental concerns. A spokeswoman for Naif told Guardian Australia that the facility’s due diligence process and the fact that all projects that received loans must be approved under relevant state, territory or federal regulations would ensure that “Naif will not be acting in a way that is likely to cause reputational damage to Australian governments from an environmental or social risk perspective”. Adani has been contacted for comment. • Support Guardian Australia’s independent journalism and critical reporting on the environment by giving a one-off or monthly contribution