Equator Principles – Progress or Failure?
In their letter to Equator Banks, the NGO signatories note that
“Today we find ourselves continuing to campaign against the very same projects that we expected the Principles to prevent or significantly improve: supersized dams blocking life-supporting rivers, driving thousands of people from their submerged villages and lands; huge mining projects scarring entire mountains and polluting rivers and seas with their waste; oil and gas pipelines carrying their toxic load straight through devastated forests and threatening marine sanctuaries; coal power plants belching out millions of tons of greenhouse gases into our already fatigued atmosphere; enormous paper mills with insatiable appetites that devour the last wilderness areas, etc. Much to our disappointment, the Equator Principles allow for all of these disgraces to proceed, only now in an ‘Equator compliant’ mode.”
In reality, the Equator Principles (launched in 2003 and revised in 2006 as 'EP2') were not designed to stop investment in certain sectors mentioned above. Instead, they provided a ‘good practice’ benchmark and, probably more importantly, were designed to counteract a downward spiral of project developers migrating towards financing sources with the lowest environmental, social and transparency requirements.
The question I have is this: are the Equator Principles (and financial institutions and ECAs trying to adopt them) the drivers of an upward or downward spiral? How do sovereign wealth funds and state-owned organizations, which have emerged as major investors in large scale and extractive projects in emerging markets, fit into this picture?