Banktrack feels new Equator Principles could be better – but are they failing to see the bigger picture?

It is interesting to consider some of the NGO views on the revisions to the Equator Principles. BankTrack (a network of civil society organisations and individuals tracking the operations of the private financial sector) have highlighted what they consider to be the key improvement to the Equator Principles, together with their main areas of concern:

BankTrack acknowledges the improvements in the new version of the revised Equator Principles (EP2), such as the expansion of the Principles to cover financial advising and the lower threshold, but also believes that the EP2 fail to live up to their potential. BankTrack’s suggestion to regularly review the Principles with an eye toward continuous improvement, was taken on board in the revision and is very much welcome.

However BankTrack feel that:

  • EP banks must adopt more robust governance and implementation systems, such as a procedure for dealing with “free riders” and a regular reporting requirement.
  • EP banks still are involved in environmentally and socially harmful projects. For example, at this time, EP banks represent the majority of financial institutions bidding on the deeply controversial and non-EP compliant Sakhalin II project.
  • BankTrack further believes that the EP banks should adopt an accountability mechanism that would allow communities affected by projects supposedly governed by the EPs to seek redress for problems they may encounter.

BankTrack welcomes the areas in which the revised EPs have embraced higher environmental and social standards. For example, the EPs now have stronger standards on labour and working conditions, and a new requirement to covenant clients to host-country environmental and social laws.

However BankTrack feels that:

  • EP2 did not adopt a new IFC requirement on revenue and contract transparency for extractive industries clients, a measure designed to promote good governance and combat corruption.
  • And on the important issue of Land Acquisition and Involuntary Resettlement, the IFC PS and EP2 actually reverses a previous World Bank policy and no longer recognizes people without ‘recognizable’ land titles.

BankTrack views the EPs as a baseline, rather than best practice, in the field of sustainable financing policies. A recent BankTrack study found that many banks have already adopted individual environmental and social financing policies that go beyond the Equator Principles.

As BankTrack has found out, some banks are already going far beyond the requirements of the Equator Principles, which has been a very positive outcome from this process. BankTrack are generally very supportive of the changes, and have clearly valued the opportunity they were given to comment on the proposed changes.

However, there is a need to recognise that whether or not EP banks finance a particular project is not necessarily the best measure of the success of the Equator Principles. A greater emphasis should be placed on the magnitude of the improvements that are made to individual projects as a result of an EPs banks involvement. NGOs often fail to recognise the need for client confidentiality in relation to particular projects and tend to have overly ambitious desires for disclosure.

It should be recognised that the recently completed Equator Principle revisions process has been a remarkable exercise in itself, with an impressive number of Financial Institutions getting together to discuss and reach a general consensus on how they will manage environmental and social risks. The outcomes have included clear and highly progressive improvements to the Equator Principles, which will certainly result in improved projects and increased shareholder satisfaction.

One Response to Banktrack feels new Equator Principles could be better – but are they failing to see the bigger picture?

  1. Sara says:

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