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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New Climate Principles for Financial Institutions

December 30, 2008

On the 4th December 2008, five leading financial institutions signed up to the Climate Principles, new guidelines developed to deal with the risks and opportunities posed by climate change.

The initial take-up was not as wide as hoped, possibly due to the financial crisis. However, Banks Crédit Agricole, HSBC, Standard Chartered, and reinsurers Swiss Re and Munich Re in signing up to what the Climate Group describes as “the first comprehensive industry framework” to address climate change.

The Climate Principles address the management of operational greenhouse gas (GHG) emissions. More importantly, they provide strategic direction on managing climate change across the full range of financial products and services, including: research activities; asset management; retail banking; insurance & re-insurance; corporate banking; investment banking & markets; project finance.


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 2008 Environmental and Social Policy

May 15, 2008

The 2008 Environmental and Social Policy is a key document of the Bank which details the commitments of the agreement establishing the Bank particularly for the “promotion of environmentally sound and sustainable development”. The 2003 Environmental Policy has been revised in order to reaffirm and strengthen these commitments and also to enhance commitments to social issues and good governance.


2008 FT Sustainable Banking Awards

March 31, 2008

There have been a record number of entries for the FT Sustainable Banking Awards this year, with 128 institutions in 54 countries submitting a total of 181 applications

The awards were created by the Financial Times and IFC, a member of the World Bank Group, to recognise banks and other financial institutions that have shown leadership and innovation in integrating social, environmental and corporate governance considerations into their operations.

The winners of the awards will be announced at a special dinner at the Dorchester in London on 3 June 2008.


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.