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.


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.

    Inadequate integration of human rights law – the need for additional risk management

    January 23, 2008

    The risks associated with financing projects can vary significantly according to the geographical location of the project. While many projects that the banks are asked to consider financing are in compliance with national legislation and permit requirements, they may fall short of international standards and best practice. A detailed understanding of the project’s political and legal framework is required in order to judge the extent to which national requirements meet the risk management needs of international financial organisations.

    Use, misuse and abuse of human rights rhetoric: the case of Serbia

    National application of human rights law is one of the most important tests of its efficacy. This article examines the integration of international human rights law into Serbia’s legal system. The paper argues that the use of human rights language does not necessarily indicate the proper and correct use of human rights norms

    The paper covers the following:

    • an overview on the intersection of international and national law with special reference to Serbia and Montenegro
    • the existing legal framework for the integration of international human rights law
    • an examination of the propriety of human rights law language discourse
    • a discussion on the separation of the executive and the judiciary

    The paper makes the following conclusions:

    • the legislative framework in Serbia favours the integration of human rights law
    • despite some successes there some legislative acts and a lack of human right jurisprudence indicates that international human rights law has not been properly integrated into the legal system
    • there has been a misuse of human rights law and clash between judicial and political discourse on human rights
    • the inadequate training of the judiciary has led to judicial deference to the executive branch of government.

    Equator Principles Signatories: Progress with Disclosure

    January 12, 2008

    The Equator Principles website now has a “disclosure section” which provides information on how the EP signatories are progressing with their annual disclosure reports.

    Disclosure Reports

    The progress made by the 56 EP signatories on the 13 December 2007 was as follows:

    • 33 – Reported (including some in the 1st year grace period)
    • 10 – In the 1st year grace period
    • 9 – No information made available
    • 4 – Will report soon

    It is encouraging to note that EP signatories in their 1st year grace period are producing disclosure reports. A few of the signatories clearly need to get on and prepare their report in order to comply with the requirements of Principle 10 . This section provides a valuable addition to the EP website with useful links to the available disclosure reports.



    First bank from the Middle East to adopt the Equator Principles

    September 17, 2007

    BankMuscat is the first bank from the Middle East region to take this ‘environment-friendly’ stand and adopt the ‘Equator Principles’, a set of globally recognized, voluntary guidelines established to assess and manage social and environmental risk in project financing, especially in the emerging markets (August 18, 2007).

    Speaking on the occasion, AbdulRazak Ali Issa, Chief Executive, BankMuscat said:

    I am delighted that BankMuscat is the first bank from the Sultanate to join a select and of environment-conscious financial institutions. Environmentalists from across the world have lauded the pristine beauty of our beloved country. Given these lessings, and the vision of His Majesty Sultan Qaboos bin Said, to manage the growth and development of the nation while preserving the natural beauty of Oman, we believe it our duty to take meaningful steps in the same direction.