Review of the Equator Principles – Towards EP4

16 March 2018

The EP Association is undertaking a targeted review of the Equator Principles (see statement released in November 2017). Since the announcement following the 2017 EP AGM, the EP Association has initiated internal discussions on key thematic areas including:

  • Social impact and human rights
  • Climate change
  • Designated Countries and Applicable Standards
  • Scope of applicability of the EPs

Our ambition is that the update process will take up to 18 months, and have set provisional dates for the planned activities, internal and external stakeholder engagement and public commenting process, however these may be subject to revision or extension at any time.

  • Phase I – Organization and set-up for EP4 review process (January – March 2018)
  • Phase II – Focused EP Association group work and internal discussion on key topics and thematic areas, including Initial Stakeholder Consultation (March – September 2018)
  • Phase III – Agreement with the EP Association membership and initial drafting of the EP4 targeted update (September – January 2019)
  • Phase IV – Second round of stakeholder consultation (February – May 2019). Note the EP Association will be providing a more detailed timeline for this at a later date.
  • Phase V – Finalisation and launch of the EP4 targeted update (May – August 2019)

As part of the external stakeholder engagement process, the EP Association will take the opportunity to gather feedback and recommendations that will be considered for strategic direction of the EPA and subsequent updates. Any interested stakeholder may submit feedback within the review (below), and sign up to be alerted when any EP review updates are posted.

Please note: The Association appreciates all submissions and will take all stakeholder feedback in aggregate into account, however, we do not have the capacity to respond individually to each submission.

UPDATE: 22 June 2018

The EP Association is currently in Phase II of the EP4 update, with two streams of work underway:

Stakeholder consultations

An independent third party has been engaged to undertake a review covering elements of the wider EP strategy and the targeted ‘EP4’ update. The review includes a set of interviews, an online survey, and written feedback received via the form available on this page. Stakeholders representing regulators, academia, financial institutions, clients, industry associations and civil society groups are among the groups included. The review is expected to be completed by the end of July 2018.

EPFI Working Groups

Parallel to the stakeholder consultations, EPFI Working Groups are reviewing the sections of the EPs relevant to the key thematic areas identified for targeted update: social impact and human rights, climate change, designated countries and applicable standards, and scope of applicability of the EPs. Once each Working Group is in the process of proposing changes to the text, they will be reviewed initially by the Steering Committee, then presented to the membership. The Working Groups are led by EPFIs themselves and comprise members that volunteered to engage in the review process. Any member EPFI is eligible to join a Working Group to contribute to the process of working towards draft text for EPA-wide review at the annual meeting in October this year.

As always, any interested stakeholder is invited to subscribe to news alerts, and to submit feedback via the online web form. A second round of stakeholder consultation is planned for early 2019 (indicatively February – May 2019), on the basis of a set of potential changes to the EP text.

UPDATE: 8 October 2018

The EP Association is making tangible progress with the targeted update of the EPs, with a draft set of ‘EP4’ thematic proposals for members to debate at the upcoming Annual Meeting.

The first round of stakeholder consultation has now been completed. As communicated on the EP website previously, Phase II of the EP4 update process entailed focused EP Association group work and internal discussion on key topics and thematic areas, as well as external Stakeholder Consultation, and lasted from March – September 2018. The EP Association appreciated receiving feedback from a diverse group of stakeholders, and would like to express our thanks for the input received. An independent third party (ERM) was engaged in May to undertake a review covering elements of the wider EP strategy and the targeted EP4 update. ERM led the external Stakeholder Consultation process, which included interviews, an online survey, and written feedback via the EP website was conducted with a diverse group of stakeholders representing regulators, academia, financial institutions, clients, industry associations and civil society groups.

Taking stakeholders’ views and expectations into consideration, member-led working groups have been active developing and reviewing thematic proposals on changed wording. Proposed draft changes to the EP text have been developed for the following target areas:

• Social Risk (social impact and human rights)
• Climate Change
• Designated Countries and applicable standards, and
• Scope of Applicability of the EPs.

The Association has now moved into Phase III of the update process as we share detailed working group proposals with the wider EPFI membership. The proposals are being shared through the EP Association regional groups and detailed discussions will occur at the upcoming Annual Meeting during October 2018. An update will be shared by the Association after the event*.

A second round of public and stakeholder consultation is planned for early 2019 (indicatively February – May 2019), which will be conducted on the basis of the draft changes to the EP text.

Any interested organisation or individual is invited to subscribe to news alerts, and to submit feedback via the online web form. All subscribers to the EP4 mailing list will receive notice when consultation on the draft text is announced.

* Following the 2017 EP AGM and as part of the announcement of the EP 4 update process, the EP Association discussed developing a clarification note regarding application of the EPs in Designated Countries. As EP4 update working group discussions began, it became clear that our efforts should focus on the longer update process, as a quick agreement on clarifications for Designated Countries would distract from the work needed to develop the EP4 draft. All work on updating our approach in Designated Countries will be reflected in the EP4 update rather than in an interim clarification note.

UPDATE: Equator Principles Annual Meeting 2018 – Meeting Outcomes

The Equator Principles Association Annual Meeting was held in Washington D.C. on 16-18 October with attendees from over 50 Equator Principles Financial Institutions (EPFIs).

15thAnniversary of the EPs

The Chair’s opening recognised that the Equator Principles (EPs) launched 15 years ago and has had a strong impact on the project financing market.  The Chair also recognized that an update to the Principles was necessary to keep up with the changing sustainable finance landscape. The Association thanks the International Finance Corporation (IFC) for early support, positive communications around the anniversary, and most of all for hosting this milestone event.

EP4 themes

The focus of the meeting this year was on evaluating proposed updates to the Equator Principles. The targeted update to the EPs  – ‘EP4’ – considers four key  themes: Social Impact and Human Rights, Climate Change, Designated Countries, and Scope of Applicability of the EPs. An additional proposal on biodiversity data sharing was also discussed.

Over the course of 2.5 days, each of the four key Working Groups presented their detailed proposals to the wider membership for feedback and debate. All of the sessions were very engaging with presentations, detailed discussions between members, question and answer and straw polling. Significant progress was made in narrowing down options for inclusion in the updated text. General agreements were made under each of the themes.

While the EP4 update will remain in the project-related space, work groups will be strategically formed to consider environmental and social risk decision-making in other financial products.

Over the next few weeks, the draft EP4 proposed text will be updated by the Working Groups, taking into account the feedback given at the meetings as well as some legal and feasibility checks.

The EP Association aims to be ready for Round 2 of external stakeholder consultation in Q1 2019 (per the originally communicated timetable)which will involve stakeholder consultation on the draft including a series of regional meetings or webinars. The intent would be to get feedback on the proposed changes from clients, Affected Communities and other stakeholders.

Commissioned reports

As inputs to the meeting, the Association commissioned a Strategic Review (conducted by ERM) and guidance to the Social Risk Working Group (provided by Shift). Summaries of each report and their recommendations will be released in the coming weeks.

Key themes for further inquiry

The meeting recognised that other important themes exist which were not addressed through the targeted EP4 update. Among the topics discussed were opportunities and the need to improve: transparency, disclosure and reporting; consistency in implementation; eligibility, accountability, and assurance; and grievance handling.The Steering Committee is currently considering additional efforts required around these themes and how to take them forward.

Stakeholder input

On Tuesday 16 October, several EPFIs attended an event organised by BankTrack and hosted at Friends of the Earth USA. Representatives from a number of civil society groups were present, including theWomen’s Earth and Climate Action Network (WECAN), Honor The Earth, Rainforest Action Network, Market Forces, Sierra Club, and Greenpeace USA. The Association recognizes the efforts of BankTrack in initiating this valuable event.

As always, any interested organisation or individual is invited to subscribe to news alerts, and to submit feedback via the online web form. All subscribers to the EP4 mailing list will receive notice when consultation on the draft EP4 text is announced.