Incorporating Environmental and Social considerations into Loan Documentation – New Guidance for Equator Principles Financial Institutions

August 14, 2009

A new guidance document ‘Guidance on incorporating environmental and social considerations into project finance loan documentation” has been released which can be expected to provide Equator Principles Financial Institutions with valuable advice on how to ensure the Equator Principles are applied to the projects they finance.

The loan documentation is a key document for ensuring the project sponsor applies the Equator Principles beyond the signing of the loan agreement, right through the construction and operation, and where appropriate the decommissioning, phases of the project. 

Failure to comply with the loan covenants may prevent or delay the project sponsor being able to drawdown on the loan, or even an event of default whereby, the lenders are entitles to cancel the loan, and all monies lend are immediately payable by the borrower.

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China drafts environmental guidelines for firms investing abroad

September 16, 2008

China is drafting environmental guidelines for companies investing in or providing economic aid to overseas countries.

 The work is being undertaken by the Chinese Academy for Environmental Planning (CAEP), in cooperation with the Global Environmental Institute (GEI) and the University of International Business and Economics. The first draft is now being discussed, the GEI said.

 A report released by the CAEP last week said the country lacked comprehensive environmental protection policies in its overseas projects, although investment had been expanding.

 Statistics show that between 2002 and 2006, China’s overseas non-financial direct investment grew by 60 percent annually. By the end of 2006, 5,000 Chinese companies had set up nearly 10,000 directly invested firms and invested $90.6 billion in 172 countries.

China’s overseas investment and aid mainly focuses on exploring oil and other resources, processing, manufacturing, and construction in African and Southeast Asian countries. Without proper management, such projects are likely to cause environmental problems, the report said.

In April, several companies, including China Mobile, Haier Group, and China International Marine Containers, joined “Caring for Climate”, a voluntary UN initiative to combat global climate change. Liu Meng, director of UN Global Compact China Office, told China Daily earlier that these companies’ participation suggests that China’s business sector is catching up with its international counterparts on climate issues.

China National Petroleum Corporation, the country’s largest oil producer, has pledged to stick to stringent environmental requirements before deciding on overseas projects.

Currently, only four banks in China have either formulated independent environmental standards for financing, or have joined the United Nations Environment Program Finance Initiative to reduce environmental risks.


EBRD Publishes Public Information Policy

May 15, 2008

The new EBRD Public information policy (PIP) was approved on the 12th May. It sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. At the same time, the PIP establishes clear lines of demarcation to distinguish information which is made publicly available (either on a routine basis or upon request) from information which may not be disclosed on the grounds of being confidential. This is to ensure that mutual trust is maintained between the Bank, its business clients and other partners.


Engineers Against Poverty provides practical guidance to oil, gas and mining companies on local enterprise development

April 29, 2008

EAP has produced an eight-page briefing note to guide oil, gas and mining (OGM) companies on how they can maximise the contribution of local enterprises to the supply chain of their projects in low income countries. The document was produced with the support and assistance of the International Finance Corporation (IFC) PENSA Program in Indonesia.


Embedding Human Rights in Business Practice II

April 7, 2008

The Global Compact Office and the Office of the UN High Commissioner for Human Rights have announced the release of the second edition in the Embedding Human Rights in Business Practice series. The publication features 20 case studies from Global Compact signatories around the world.

Among the companies profiled are: ABB, Achilles, Anglogold Ashanti, AREVA, Barloworld, BASF, Eskom, Ipek Kagit, Ketchum, MAS Holdings, Newmont Mining Corporation, NIKE Inc, Novartis, Sasol, Royal Dutch Shell, Starbucks, Titan Industries, Volkswagen and Westpac Banking Corporation.


Chinese Banks would benefit from disclosed environmental policies

April 1, 2008

Banktrack has released an interesting report on the environmental performance standards of China’s financial institutions. The report recognises the need for policies to be put in place, as China’s financial institutions are becoming important players in financing environmentally and socially sensitive activities around the world.

The report found that:

Only two of China’s ten most important banks — China Development Bank (CDB) and the Export-Import Bank of China (Chexim) — have publicly-disclosed environmental policies…   … The rest of the eight banks surveyed had no publicly-available environmental financing standards.

There are also some encouraging sign that suggest progress is being made:

The Peoples’ Bank of China has recently developed a new credit database which includes borrowers’ environmental compliance data. This will allow Chinese banks to evaluate how well companies have followed environmental laws before offering loans.

The report also claims that many international banks, who own significant shares of Chinese banks, have the ability to institute world-class environmental standards through their strategic investment agreements. This is another example of the growing environmental demands being placed on international banks, and there needs to be careful consideration as to whether the demands are reasonable and if there is genuine scope for influence.


Equator Principle Financial Institutions Meet to Share Best Practice

January 27, 2008
  • On 3 December representatives from 25 EPFIs met to discuss the ongoing development of the Equator Principles. The meeting was hosted by ING Group. The discussions focussed on Equator Principle governance and the management structure, reporting, and shared good practice.
  • On 4 December the EPFIs met with 15 NGOs at ABN Amro’s headquarters. A pre-agreed agenda was followed based on items of mutual interest, which included governance, transparency, and grievance mechanisms at the project level.
  • On 5 December EPFIs were pleased to be invited to meet 23 OECD Export Credit Agencies in Hamburg, hosted by Euler Hermes. The meeting provided an opportunity to better understand each others approach on transparency, experience in implementing the IFC Performance Standards, and how to further cooperation between the EPFIs and ECAs. The EPFIs also presented their experience in implementing the Equator Principles. In each instance, the meetings proved useful in furthering a better understanding by all sides and facilitating future discussion.