The European Investment Bank (EIB) has halted all loans to commodities trader Glencore and all of its subsidiaries, citing serious problems with the company’s corporate governance.
The shock cessation of funding comes after a subsidiary of the Swiss trading house Mopani Copper Mines had a leaked preliminary tax audit circulated which accuses the Zambian firm of tax avoidance – a charge which Glencore denies.
“Due to serious concerns about Glencore’s governance which have been brought to light recently and which go far beyond the Mopani investment, the president of the EIB has instructed the services to decline any further finance request from this company or one of its subsidiaries,” the EIB said in a statement.
The EIB has claimed that it will follow protocol and complete an independent investigation.
The allegations are based on an incomplete, draft desktop study.”
A Glencore spokesperson told news agency Reuters that the firm was confident that it will be completely exonerated.
“The allegations are based on an incomplete, draft desktop study that was circulated in Zambia several months ago. We publicly refuted the draft conclusions of this document at the time,” the spokesperson continued.
The move comes at a time when the EIB is under increasing pressure from the European parliament to reform the way the bank lends to mining projects.
An open letter sent to Herman Van Rompuy president of the European council and José Manuel Barroso, president of the European Commission, among others, and had EIB president Philippe Maystadt carbon copied in, was signed by more than 50 members of the European parliament.
The letter called for a moratorium on European funding for mining projects “until adequate standards and regulations are in place”.
“Every year, millions of euros of EU public money flow to mining projects under the veil of bringing development. However, the mining sector’s contribution to development has been repeatedly questioned by politicians, academics and civil society organisations. Recent cases show current standards and regulation are inadequate to guarantee positive development impacts,” the letter reads.