The Equator Principles: Banking on Sustainability

23 August 2013 – Capital Finance International

Financial institutions worldwide are increasingly benchmarking their larger investment projects to the Equator Principles of social and environmental risk assessment. A third and more comprehensive edition of these guiding principles has now been drawn up and is being used by 79 financial institutions in 35 countries to gauge the impact of investments. Read More.

5 things energy companies should know about the Equator Principles

21 August 2013 – GreenBiz, Chris Nolan and John Hodges

Since the inception of the Equator Principles in 2003, the energy and extractives industry has been a major focus of the environmental and social risk reviews conducted by nearly 80 member banks. For example, Bank of Tokyo-Mitsubishi, a leader in project finance, put 225 projects through its Equator Principles review process between 2006 and 2012. Of these, 60 percent were in the mining, oil, gas and energy sectors. Read More.

Time to close accountability gaps in infrastructure project funding

21 August 2013 - CSR Asia Weekly, Leena Wokeck

From January 2014 financial institutions that have adopted the Equator Principles, a risk management framework for determining, assessing and managing social and environmental risks in project finance, will have to implement a new iteration of the framework. Even though action would be much needed and the revisions are relevant in Asia, the impact is sadly likely to be limited.  Of the 78 financial institutions that have committed to the Equator Principles, only five are from Asia, one each from China and India and three from Japan (Industrial Bank Co. Ltd, IDFC Limited, Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank Ltd. and Sumitomo Mitsui Banking Corporation. Read More.

Voluntary bank lending principles now include consideration of climate change

19 August 2013 - Jones Day, Charles Hungerford

Effective June 4, the members of the Equator Principles Association voted to amend and strengthen the Equator Principles to include consideration of the effects of major projects on climate. The Equator Principles are voluntary standards designed to guide banks in their evaluation and management of the environmental and social risks presented by loans used to finance large projects. The Equator Principles are based on Performance Standards developed by the International Finance Corporation ("IFC"), part of the World Bank Group. The Principles provide that member banks will give loans only to covered projects that meet its 10 principles. Read More.

Banking on human rights protection for major infrastructure projects

16 August 2013 - The Guardian Blog - Jennifer Kho

The launch of the third version of the Equator Principles calls on banks to consider human rights risks, Citi's Shawn Miller tells Jennifer Kho what this means for project developers. Banks that finance infrastructure projects such as power stations, pipelines, dams and mines, have to account for a number of risks when assessing loans but human rights has been noticeably absent. Read More.

EP III: an open pit for finance?

12 August 2013 - White and Case LLP - John Tivey, Rebecca Campbell , Mark Castillo-Bernaus and Tallat Hussain

The Equator Principles (EP) is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk. EP applies globally to all industry sectors and covers project finance and various forms of lending. Currently, 79 financial institutions in 35 countries have adopted EP, covering more than 70% of international project finance debt in emerging markets. Financial institutions that follow EPs will not provide project finance or project-related loans where the client will not, or is unable to, comply with EP. The lenders’ mantra was: “We will not provide loans to projects where the borrower will not or is unable to comply with our respective social and environmental policies and procedures that implement the Equator Principles.” Recognising the unavoidable impact on the environment and communities from extractive industries is both complex and challenging. The latest round of revisions to EP – the third set, hence the abbreviation ‘EP III’ – have attempted to dig deeper into the relationship between financing and lender responsibility for the consequences. On the surface, the EP III appears to impose more onerous requirements on borrowers. Yet, they are designed to reconcile the role of lenders with the global consequences of their lending. But are lenders ready to be charged with the responsibility of being custodians of our global commons when the mechanism of financing mining projects, and the banking industry itself, are being re-invented?. Read More.

How to get your arms wrapped around the Equator Principles

19 July 2013 - - John Hodges

While many industries grapple with which sustainability standards to follow, the banking industry has a clear framework for infrastructure finance: the Equator Principles. With the launch of the third version of the Equator Principles, or EP III, last month in Amsterdam, the scope and scale of how banks manage environmental and social risks in their financing activities significantly has increased. The Equator Principles provide a framework for determining, assessing and managing such risks in projects that banks might finance. Read More.

Equator Principles III - New Guidelines for Project Finance

9 July 2013 - Dentons, Mark Cheney and Sarah-Jane Hogg

Ten years after their launch, a third version of the Equator Principles, the Equator Principles III (EP III), was adopted by the Equator Principles Association on 14 May 2013. EP III is more robust than its predecessors and of wider scope, creating new compliance challenges for lenders that have signed up to the Equator Principles, and for borrowers seeking financing for projects within the ambit of EP III. Mark Cheney and Sarah-Jane Hogg explain the key changes. Read More.

New Analysis: The Equator Principles in the OECD

17 June 2013 - Project Finance

Permitting and public participation requirements in the 31 countries that the World Bank classifies as high-income Organization for Economic Cooperation and Development (OECD) generally meet or exceed the initial assessment and review requirements of the Equator Principles (EP).  Therefore, when financing a project located in one of these countries, which include the United States and Canada, obtaining a compliance opinion is usually fairly straightforward.  This process, which takes place at the pre-construction stage, is often based on the results of environmental studies, project design specifications, successful completion of the required permitting process, and is contingent upon financing documents including covenants related to monitoring, reporting and compliance ... Read More.

The Equator Principles: How Will The Revisions Impact You?

12 June 2013 - Mondaq - Milbank, Tweed, Hadley & McCloy LLP, Matthew H. Ahrens and Paul Murphy

The third revision (EP III) of the Equator Principles (EPs) will be launched on June 4, 2013, and it will affect applicable transactions signed on or after January 1, 2014. The EPs will continue to function in a substantially similar manner, but the EP III has, among other things, made the EPs applicable to a wider slate of transactions, expanded the scope of underlying review, and imposed additional disclosure and reporting obligations. Although there is time to internalize the revisions during the transition period, failure to comply with the EP III on a going-forward basis could put financial institutions in non-compliant scenarios, if proper arrangements are not made in advance of the effectiveness of these lending guidelines, as revised. This Client Alert provides some guidance about changes due to the EP III to help financial institutions assess related risks for future transactions. Read More.