New Rules for Equator Principles – Same Old, Same Old?

 The Equator Principles Financial Institutions have recently adopted new Governance Rules to create a  membership structure - Equator Principles Association - and formalize existing procedures and practices. The Rules introduce delisting provisions for members not meeting public reporting requirements.

The Equator Principles, is the leading voluntary standard for managing social and environmental risk in project financing. The Principles were launched in Washington D.C. in mid 2003 and were revised in 2006 to connect to the IFC Performance Standards.

Currently there are 67 adopters of the Equator Principles. They have committed not to provide project finance to customers who are unable to meet the social and environmental standards described in Equator Principles (largely based on the IFC Performance Standards). The Principles apply where the Equator Principles Financial Institutions provide project finance loans or project finance advisory services for projects having a total capital cost of US$10million or more.

New elements introduced in the Governance Rules (17 pages) include the introduction of an ‘Associate’ category. These will include financial institutions that do not undertake project finance but may be utilizing the Equator Principles as a source of good practice and knowledge for transaction types beyond project finance. The Governance Rules also highlight the need for its members to maintain client confidentiality; comply with applicable law on agreements, concerted practices or exchange of information which may restrict competition; and introduces the usual liability waivers.

Except for the new delisting clauses related to lack of public reporting by Equator Principles Financial Institutions or Associate, none of the elements of the Governance Rules suggest any major changes to the Equator Principles. This is much to the disappointment of advocacy NGOs like BankTrack. To access the original press release issued by the Equator Principles Association click here.