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The Equator Principles (EPs) is a risk management
framework, adopted by financial institutions, for determining,
assessing and managing environmental and social risk in projects
and is primarily intended to provide a minimum standard for
due diligence to support responsible risk decision-making.
The EP apply globally, to all industry sectors
and to four financial products 1) Project Finance Advisory Services
2) Project Finance 3) Project-Related Corporate Loans and 4)
Bridge Loans. The relevant thresholds and criteria for application
is described in detail in the Scope section of the EP.
Currently 80 Equator Principles Financial Institutions
(EPFIs) in 35 countries have officially adopted the EPs, covering
over 70 percent of international Project Finance debt in emerging
markets.
EPFIs commit to implementing the EP in their
internal environmental and social policies, procedures and standards
for financing projects and will not provide Project Finance
or Project-Related Corporate Loans to projects where the client
will not, or is unable to, comply with the EP.
While the EP are not intended to be applied
retroactively, EPFIs apply them to the expansion or upgrade
of an existing project where changes in scale or scope may create
significant environmental and social risks and impacts, or significantly
change the nature or degree of an existing impact.
The EPs have greatly increased the attention
and focus on social/community standards and responsibility,
including robust standards for indigenous peoples, labour standards,
and consultation with locally affected communities within the
Project Finance market. They have also promoted convergence
around common environmental and social standards. Multilateral
development banks, including the European Bank for Reconstruction
& Development , and export credit agencies through the OECD
Common Approaches are increasingly drawing on the same standards
as the EPs.
The EPs have also helped spur the development
of other responsible environmental and social management practices
in the financial sector and banking industry (for example, Carbon
Principles in the US, Climate Principles worldwide) and have
provided a platform for engagement with a broad range of interested
stakeholders, including non-governmental organisations (NGOs),
clients and industry bodies.
The Equator Principles (EP) III is effective
from 4 June 2013.
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