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Banks still under fire for irresponsible investment

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By James Richends, the ENDS report | London, UK, Jan 28 2010

 

The Equator Principles for financing large industrial projects have been savaged by campaign groups for not deterring banks from investing in environmentally damaging developments.

Banks including Barclays, HSBC and RBS have been slammed by a coalition of campaign groups for investing in new fossil fuel energy projects and other environmentally damaging developments.

The criticisms centre on the Equator Principles, a voluntary framework founded by ten financial institutions in 2003 to manage the environmental and social impacts of financing large-scale projects such as power stations, dams, oil and gas facilities, mines and other industrial manufacturing operations.

Campaign coordinator BankTrack has sent an open letter to all 70 Equator Principles signatories on behalf of more than 100 individual campaign groups setting out the principles' shortcomings and making recommendations for improvement.1

One criticism is that banks' implementation of the principles lacks transparency. Signatories must publish little more than an annual summary of the number of projects assessed and a broad categorisation of their potential impact. For example, HSBC says it assessed 47 projects worth $3.5bn against the principles in 2008.

BankTrack wants banks to be made to publish detailed information on each project, including the type of development and the names of its sponsors, as well as impact assessments and improvement plans. Banks claim such information is commercially confidential. BankTrack says the principles also lack any effective management structure or compliance process. It wants an independent body to assess signatories' reports and to expel those that consistently fail to comply.

Some banks such as Barclays and HSBC apply the principles beyond project finance to other types of corporate lending. BankTrack wants all signatories to be required to do this. A fundamental criticism is that the principles do not prevent banks from investing in carbon-intensive projects such as new coal-fired power stations. Indeed, the principles fail to make any reference to climate change or greenhouse gas emissions. The principles are underpinned by more detailed social and environmental performance standards used by the International Finance Corporation, the private sector arm of the World Bank. These only require banks' clients to assess ways to reduce carbon emissions from the project.

BankTrack supported the principles when they were established, but says: "We find ourselves continuing to campaign against the very same projects that we expected the principles to prevent or significantly improve." These include "supersized dams blocking life-supporting rivers, driving thousands of people from their submerged villages and lands; huge mining projects scarring entire mountains and polluting rivers and seas with their waste; oil and gas pipelines... enormous paper mills... much to our disappointment, the principles allow for all of these disgraces to proceed, only now in an ‘Equator-compliant' mode."

ENDS asked the chair of the Equator Principle's steering committee, Brazilian bank Itau Unibanco, to comment on the criticisms, but it refused. RBS, HSBC and Barclays failed to comment.

A statement from the committee secretary said it would be meeting campaigners in February.

 

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