Project finance guidance to get a major overhaulNovember 2010
The Equator Principles on ethical project financing are to be updated. A ‘strategic review’ will be conducted by the newly created Equator Principles Association, which is run by an elected steering committee of up to 15 representatives of companies that have adopted the principles.
The association says the aim is to ensure the principles ‘continue to be viewed as the gold standard in environmental and social risk management for project finance within the financial sector’.
The review will canvass the opinions of a wide variety of stakeholders, including financial sector industry bodies, financial institution peers and civil society.
The number of Equator Principles adopters has grown significantly since their introduction in 2003 – from ten initially to 65 financial institutions worldwide.
The association says the review will help it to take stock of the present state of the principles and ‘develop a better understanding of the challenges and successes to date’. In addition, it will allow adopters to identify strengths and weaknesses in the principles framework.
The review is likely to be finished by the first quarter of 2011, when a summary of the findings and recommendations will be made available to the public.
However, final actions will not be decided until the conclusion of a review of the International Finance Corporation’s performance standards, on which the principles are based. That may not happen until the latter half of 2011.
The principles review will be conducted by the Environmental Resources Management consultancy and the independent sustainable banking consultant Suellen Lazarus.
Shawn Miller, Citi’s global director of environmental and social risk management and the association’s chair, said: ‘Through seven years of proven success and impressive growth, the principles framework has served us well. But during this period, the financial sector’s landscape has changed considerably, while society’s attention and focus on environmental and social issues has increased.
‘The goal is therefore to ensure that the principles continue to be the “go-to” environmental and social risk management standard for the financial sector and our clients.’
Miller said the association would seek ‘candid feedback’ about the effectiveness of the principles.
Efforts have already been made to toughen up the application of the principles. New governance rules which took effect during July state that companies which have adopted the principles but fail to report on them every 12 months will first be given a written reminder of their obligation to do so (EP12, issue 4, p1).
If within three months they have still not reported, then they will be publicly named and sent a final written reminder, with failure to report within a further three months resulting in de-listing.
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