Interpretation on Equator Principles
The "Equator Principles"
A financial industry benchmark for determining,assessing and managing social
& environmental risk in project financing
Project financing, a method of funding in which the lender looks primarily to the revenues generated by a single project both as the source of repayment and as security for the exposure, plays an important role in financing development throughout the world.1 Project financiers may encounter social and environmental issues that are both complex and challenging, particularly with respect to projects in the emerging markets.
The Equator Principles Financial Institutions (EPFIs) have consequently adopted these Principles in order to ensure that the projects we finance are developed in a manner that is socially responsible and reflect sound environmental management practices. By doing so, negative impacts on project-affected ecosystems and communities should be avoided where possible, and if these impacts are unavoidable, they should be reduced, mitigated and/or compensated for appropriately. We believe that adoption of and adherence to these Principles offers significant benefits to ourselves, our borrowers and local stakeholders through our borrowers’ engagement with locally affected communities. We therefore recognise that our role as financiers affords us opportunities to promote responsible environmental stewardship and socially responsible development. As such, EPFIs will consider reviewing these Principles from time-to-time based on implementation experience, and in order to reflect ongoing learning and emerging good practice.
These Principles are intended to serve as a common baseline and framework for the implementation by each EPFI of its own internal social and environmental policies, procedures and standards related to its project financing activities. We will not provide loans to projects where the borrower will not or is unable to comply with our respective social and environmental policies and procedures that implement the Equator Principles.
IFC’s Performance Standards on Social and Environmental Sustainability
The IFC’s Performance Standards on Social and Environmental Sustainability (Referred to as Performance Standards hereinafter) is an environmental and social risk management tool provided by the IFC for its investment and financing clients, and is also one of the major applicable standards of the Equator Principles. As the global influence of the Equator Principles has continued to rise, more and more Equator Principles Financial Institutions (EPFI) have been applying the Performance Standards in their assessments of environmental and social impacts. Under this backdrop, the Performance Standards have become the world’s leading system and tool for environmental and social risk management.
The “Performance Standards” consists of eight sub-standards, which set the requirements of EPFI for customers to meet in the “Equator Principles” projects:
Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts
Performance Standard 2: Labor and Working Conditions
Performance Standard 3: Resource Efficiency and Pollution Prevention
Performance Standard 4: Community Health, Safety, and Security
Performance Standard 5: Land Acquisition and Involuntary Resettlement
Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
Performance Standard 7: Indigenous Peoples
Performance Standard 8: Cultural Heritage
Specifically, Performance Standard 1 is a leading standard and establishes the importance of (i) integrated assessment to identify the environmental and social impacts, risks, and opportunities of projects; (ii) effective community engagement through disclosure of project-related information and consultation with local communities on matters that directly affect them; and (iii) the client’s management of environmental and social performance throughout the life of the project. Performance Standards 2 through 8 describe potential environmental and social risks and impacts that require particular attention. Where environmental or social risks and impacts are identified, the client is required to manage them through its Environmental and Social Management System (ESMS) consistent with Performance Standard 1. The eight standards are relatively independent and internally correlative, constituting a complete system for the management of environmental and social risks.
The original text of “Performance Standards” can be downloaded at "the website of IFC".
Environmental, Health and Safety Guidelines
The Environmental, Health and Safety Guidelines (Referred to as EHS Guidelines hereinafter) are technical reference documents developed by the IFC for the management of environmental risks in industry, and are also one of the major applicable standards of the Equator Principles.
The “EHS Guidelines” contain general guidelines applicable to all industry sectors and guidelines for specific industry sectors, which draw on general and industry-specific examples of Good International Industry Practice. The original text of “EHS Guidelines” can be downloaded at "the website of IFC".
Moreover, at the end of 2008, the Chinese Ministry of Environmental Protection finished the translation of the Environmental, Health and Safety Guidelines in collaboration with IFC, and published the book International Experience in Promoting Green Credit: the Equator Principles and IFC Performance Standards and Guidelines, which has greatly boosted the localization of EHS Guidelines in China.TOP