Linklaters Comments on the Equator Principles

London - 23 July 2003

The Equator Principles – protecting green shoots

The recent launch of the “Equator Principles” casts a fresh light on the environmental and social impacts of project financing, particularly in the emerging markets. The banks who have adopted the “Equator Principles” aim to address environmental and social issues in their review of project proposals and to require sponsor compliance with environmental and social policies that are based on World Bank/IFC requirements http://www.ifc.org.

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Equator Principles – New Environmental and Social Guidelines for Project Finance Transactions

New York - 18 June 2003 and London - June 2003

Two prominent project finance law firms, Sullivan & Cromwell in the US, and Norton Rose in the UK, have issued commentary on the Equator Principles to their clients. In its letter to clients, Sullivan & Cromwell said that the Equator Principles represent a step towards the adoption of IFC's environmental standards "even where financing is expected to come primarily from private sources of capital. Sponsors should continue to plan larger projects, especially in low- and middle-income countries, with a view towards adopting these policies and procedures." In assessing the implications of the Equator Principles for lenders, Norton Rose recommends that "lenders should from now on include specific reference to the Equator Principles when negotiating term sheets." In assessing their impact on borrowers, Norton Rose commented that "in many instances the application of the Equator Principles will not significantly increase the compliance burden faced by project sponsors. However, the Equator Principles will impose additional burdens in some areas," particularly in the emerging markets. "The guidelines are significant in that they impose requirements in relation to the social implications of projects."

Full text of Sullivan & Cromwell's letter (pdf - 109k)

Full text of Norton Rose's letter (pdf - 138k)