As growing numbers of business are “going green”, the vast majority of international financial institutions have adopted sustainable measures through the implementation of the Equator Principles. The Equator Principles are voluntary measures adopted by financial institutions that serve as benchmarks for determining, assessing and managing social and environmental risk towards project financing. In order for proper compliance of these principles, banks agree to be transparent in their lending for projects. Banks adopting the Equator Principles are known as Equator Principle Financial Institutions (EPFIs).
Banks benefit from being recognized as social and environmental responsible institutions. It is in their best interest to shift towards more sustainable practices and avoid repercussions from potential environmentally detrimental activities. As a society we are moving towards collective condemning practices that put our globe at risk. Initiatives such as the Equator Principles help institutions and businesses take a step forward in protecting society and the environment, but unfortunately, there are institutions that still chose to carry out “business as usual”.
Some even have the audacity to claim adoption and support of the principles while at the same time taking a step back by not assuming responsibility for their actions. Eighty-six environmental campaign groups from 27 countries sent a letter to 60 banks, including Barclays and Royal Bank of Scotland, claiming that banks that signed the Equator Principles seven years ago have not ceased to lend to environmentally damaging projects, such as strip coal mining or massive dam projects.
ANZ Bank, an international Australian Bank listed as an EPFI, has reportedly provided loans to a dam project in Laos that has displaced hundreds of poor villagers and destroyed their land, breaking not only the Equator Principles they have adopted, but also local Laotian resettlement law. Bank representatives have chosen not to comment on their client’s operations, failing to be transparent. On the other hand, another bank funding the project, BNP Paribas, the worlds largest global banking group as well as an EPFI, has opted to remain transparent and address the issues raised.
Likewise, some mining companies are carrying out efforts to operate in compliance with the Equator Principles to qualify for loans. Frontier Mining, operating in Kazakhstan, has announced it will preform an Environmental Social Impact Assessment (ESIA) on its Benkala project to qualify for HSBC’s loan of US$4 million. HSBC is also an EPFI.
The Equator Principles are “only” a guidance framework and does not posses the supranational legal power to enforce that loans for projects are in compliance with the principles. Therefore, it is in the hands of these institutions to govern and lend in accordance to the principles. The Equator Principles are one step forward in developing environmentally friendly projects.