Sixty of the world´s leading financial
institutions today mark the fifth anniversary of the Equator Principles
(EPs), voluntary standards for financial institutions to manage
environmental and social risk in their project finance transactions.
The EPs have become the global standard for project finance and have
transformed the funding of major projects globally. In 2007, of the
US$74.6 billion total debt tracked in emerging markets, US$52.9 billion
was subject to the EPs, representing about 71 per cent of total project
finance debt in emerging market economies, according to Infrastructure
Journal.
The EPs are now considered the financial industry "Ëœgold
standard´ for sustainable project finance. The
Principles were revised in June 2006 to reflect current implementation
experience including introduction of a public reporting requirement, as
well as changes made by the International Finance Corporation (IFC) to
its environmental and social standards. They continue to evolve as more
sophisticated funding is undertaken.
An Outreach Committee has been formed and is actively engaged with banks
in China, Russia, India and other key emerging markets. Stakeholder
engagement remains an important element of the EP´s
implementation and the group regularly meets to share experiences with
various stakeholders.
Governance procedures previously handled on an informal basis are now
being formally instituted to ensure long-term viability and ease of
management of the Equator Principles Financial Institutions (EPFIs).
These include formalizing the EPFI´s operating
structure, voting procedures and annual meeting arrangements, and
monitoring of fulfillment of the public reporting requirement. The EP
website continues to be developed to provide greater transparency. The
EPFI´s management structure is now posted on
the website along with direct links to the annual reports of 53
financial institutions describing their implementation experience.
The EPs´ success lies in the cooperation and
trust among the participating financial institutions working to achieve
a common good. Institutions implement the EPs independently, always
maintaining client confidentiality, while sharing best practice, to
ensure an evolving and improving standard.
Although limited to project finance, the EPs have helped spur the
development of other responsible environmental and social management
practices in the financial sector and banking industry. Other business
areas have benefited from the spillover effect improving environmental
outcomes throughout the banking industry. For example, in the US several
banks recently announced their adoption of the Carbon Principles to
manage carbon risk in thermal power investments.
The EPs have promoted convergence around common environmental and social
standards. Multilateral development banks, including the European Bank
for Reconstruction & Development (EBRD), and export credit agencies
through the OECD Common Approaches are increasingly drawing on the same
standards as the EPs. Such convergence will result in improved
environmental and social outcomes as project sponsors begin implementing
these standards from the earliest stages of project planning and design.
When first launched in June 2003 in Washington DC, 10 initial adoptees
agreed to lend only to those projects where the borrower provided
evidence of compliance with these standards, and committed to developing
them in a socially responsible manner and according to sound
environmental management practices.
The financial institutions agree that they will "not
provide loans directly to projects where the borrower will not or is
unable to comply with our environmental and social policies and
procedures." The 60 institutions that today
apply the EPs recognize their role and responsibility for promoting
sustainable investment. The EP framework, based on environmental and
social standards of the International Finance Corporation (IFC), the
private sector arm of the World Bank Group, now apply to projects with
capital costs above USD10 million.
These 60 financial institutions constitute a broad cross-section of the
financial industry including most of the world´s
major banks as well as insurance companies, bilateral development
agencies, and export credit agencies. They also represent a wide
geographic distribution coming from all continents and include banks
from Argentina, Brazil, Chile, Uruguay, Togo, South Africa and Oman.
Note to editors:
Full text of the EPs is available at www.equator-principles.com including translations in Chinese
French, Japanese and Russian. Translations in Portuguese and Spanish
will follow.
The full list of Equator Principle Financial Institutions are: http://www.equator-principles.com/
For Frequently Asked Questions about the Equator Principles, go to:
http://www.equator-principles.com/faq.shtml
