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October 24, 2011
Time to Improve the Equator Principles, BankTrack Says
by Robert Kropp
As the Equator Principles Association prepares a draft of new principles, BankTrack calls for
increased transparency and more attention to climate change and human rights.
Banks subscribing to the Equator
Principles commit to managing environmental and social risks in their project finance
transactions. At present, 70 banks in 27 countries have been designated as Equator Principles
Financial Institutions (EPFIs). EPFIs fulfill their mission by not financing projects that are not
in compliance with social and environmental policies and procedures established by the International
Finance Corporation (IFC) and the World Bank.
Four of the 70 EDFIs—Bank of America, Citigroup, Ex-Im Bank, and JPMorgan Chase—are
based in the US.
The Equator Principles Association is scheduled to release a draft text
of its new version of the Principles this week, a step made necessary by the publication in August
of a new Sustainability Framework by IFC.
In advance of the Association's draft text, BankTrack, a Netherlands-based nongovernmental organization
(NGO), has published
recommendations to ensure that the draft text makes "a positive difference to project affected
communities and to the environment."
In recent years, BankTrack states, EPFIs have
improved risk management associated with the adoption of the Principles. However, the report
states, EPFIs have expended less effort on "improving the impact the Principles are supposed to
make on communities and the environment. The Equator Principles thus risk to become an inward
looking initiative, largely irrelevant to outside stakeholders."
"The world does not need
improved risk management as a goal in itself," BankTrack continues. Instead, what it needs is an
end to projects that threaten the environment and ignore the concerns of key stakeholders; in other
words, the report states, "proper risk management for all involved."
BankTrack made the
following recommendations to the Equator Principles Association:
expand the transparency of the Principles and the Association, as well as the disclosure of
information by clients to local stakeholders.
• Increase the accountability of the
initiative and adopting banks towards stakeholders
• Expand the scope of the Principles, to
cover all financial services provided to clients to finance projects
• Adequately deal
with the impact of bank operations on climate change
• Adequately deal with the human
rights obligations of banks
"The process must deliver substantial improvements on the
functioning of the Equator Principles," BankTrack concludes, in order to make "a real difference on
the lives of people and the state of the planet."
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