Johan Frijns Johan@banktrack.org
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The Equator Principles
The Equator Principles are a risk management framework, created and adopted by financial institutions, for determining, assessing and managing environmental and social risks in financing projects. Currently, 101 Equator Principles Financial Institutions (EPFIs) in 37 countries worldwide have officially adopted the EPs, covering over 70 percent of international Project Finance debt in emerging markets. Over the years, the Principles have become the de facto standard for all banks and investors on how to deal with potential and environmental effects of large scale projects to be financed.
EPFIs commit themselves to implement the EPs in their internal environmental and social policies, procedures and standards for financing projects. According to the Principles, an EPFI will not provide finance services where the client will not, or is unable to, comply with the EPs.
The EPs consist of 10 different Principles, as summarised in the figure below. The principles are applicable for the following types of finance: project finance, project-related corporate loans, project finance advisory services and bridge loans.
The Equator Principles were launched in 2003 and have since been revised three times. The most recent version, EP4, was agreed upon in November 2019 , to come into effect in July 1st 2020.
Project level implementation
The Equator Principles require each EPFI to publicly disclose the names of projects that are financed under the Principles as a project finance arrangement, and have reached financial close in the previous year, this:
- subject to obtaining client consent,
- subject to applicable local laws and regulations, and
- subject to no additional liability for the EPFI as a result of reporting in certain identified jurisdictions."
A list of these projects as per EPFI can be found on the Equator Principles website.
BankTrack and the Equator Principles
However, project name information is reported on the Equator Principles website on a bank-by-bank basis. This means it is not possible to search the EP website to find out which banks financed which project. Similarly it is not possible to search projects financed by sector or by country. This would all be feasible if the same data were presented in a more accessible database format. The limited level of reporting that is currently published on the Equator Principles website also does not stick around for long – only the most recent two years’ reporting data stays on the website. To ensure this data is not lost, and to make analysis of EP reporting data easier, BankTrack collects EP reporting data in a publicly available spreadsheet, available here.
This collection and publication of EP reporting data is one of the ways BankTrack has played a leading role as watchdog on the EPs and the banks adopting them since 2003. BankTrack also has focused campaigns on the Equator Principles that seeking proper implementation of the EPs on project level and assisting communities affected by EP financed projects.
In 2017, following the finacing by Equator banks of the Dakota Access Pipeline Project, BankTrack together with a coalition of civil society groups and indigenous organisations launched the Equator Banks Act campaign, aimed at achieving a major overhaul of the Equator Principles, specifically to ensure that Equator bankss would no longer finance climate disaster projects and projects situated on indigenous land and territories without the consent of Indigenous Peoples. While the campaign led to a revision process of the Equator Principles, the resulting new Principles, EP4, turned out to be a major disappointment, leaving the Equator Principles unfit for the future.