Johan Frijns Johan@banktrack.org
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In 2017 BankTrack, in collaboration with several environmental, human rights and indigenous peoples' organisations, launched the “Equator Banks, Act!” campaign. Together these groups built a substantial coalition around the demand for a revision to update and strengthen the current Equator Principles (EP III). This campaign was successful, as the EP Association announced its plans for a ‘limited review’ of the EPs in 2017. BankTrack has been in consultation on this revision process. The updated version of the Equator Principles is expected to be published before COP25, taking place from December 2 until December 13 2019.
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, 98 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 original Equator Principles were launched in 2003 and have since been revised twice. The most recent version, Equator Principles III are the product of the 2013 revision. The revision process for Equator Principles IV began in 2018 and is ongoing.
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." (Source: EP III).
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 2016 BankTrack launched the Equator Principles Track and Chase Project (EPTC). This project aimed to strengthen public scrutiny of the activities of the Equator Principles Association and the implementation of the Equator Principles by individual Equator Principles Financial Institutions. BankTrack has done this by:
- actively engaging with the EP Association and individual EPFIs on the implementation and strengthening of the Principles;
- providing support to communities that are affected by projects financed "under Equator";
- assessing compliance of specific projects financed under EPs and taking action when projects appear not compliant; and
- training civil society groups on the use of the EPs in advocacy work.
Revisions for EP IV
The 2017 campaign BankTrack coordinated, calling on the Equator Principles Association to revise the principles, met success when the Equator Principles Association announced its plans to revise the EPs. This "targeted update process" was expected to generate a new set of Equator Principles (EP IV) by mid-2019. BankTrack, again in conjunction with other civil society organizations, has been and continues to be in consultation on the revision process.
In October 2019, the updated version of the EPs was expected to be published before COP25.