Forty financial institutions have come together to revise the Equator Principles, making them much more stringent. The Equator Principles are a voluntary set of guidelines on social and environmental criteria to be used when banks make loan decisions.
They have been a huge step forward for the industry, in terms of having a common framework and language for environmental and social issues in the project finance industry. According to the banks involved in the current revision, their desire to take the Principles to a higher level underscores how far the financial sector has progressed in embedding in the project finance arena a common set of best practices to manage social and environmental risks related to project financing.
Today’s revised principles reflect the experience of the 40 financial institutions around the world that currently apply the Principles. The principles also reflect the recent revisions to the International Finance Corporation’s (IFC) Performance Standards, upon which the Equator Principles are in part based. In developing these changes, the EPFIs actively involved clients, civil society groups and official development agencies, all of whom provided constructive and valuable feedback that the EPFIs reviewed and considered in the revision process.
The Equator Principles apply globally and to all sectors and have been revised in the following ways:
o The Principles apply to all project financings with capital costs above USD 10 million. This threshold was lowered from USD 50 million.
o The Principles now also apply to project finance advisory activities.
o The revised Principles now specifically cover upgrades or expansions of existing projects where the additional environmental or social impacts are significant.
o The approach in applying the Principles to countries with existing high standards for environmental and social issues has been streamlined.
o Each EPFI is now required to report on the progress and performance of Equator Principles’ implementation on an annual basis.
o Stronger and better social and environmental standards, including more robust public consultation standards.
The EPFIs are proud of the progress the Equator Principles have made in the past three years. They have enabled the financial institutions to better assess, mitigate, document and monitor the potentially adverse social and environmental risks associated with financing projects.
Participating financial institutions commit to financing only those projects that comply with the Equator Principles, and commit to implementing the revised Equator Principles into business and risk management processes in a manner consistent with its organizational structure. Of the 40 financial institutions that have shared their experience in devising the revised Equator Principles, 33 have today adopted them and the others are expected to do so in the coming weeks.
The full text of the revised Equator Principles can be found at the following website: