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green@work : Magazine : Back Issues : July/Aug 2003 : Special Section : The Equator Principles

Special Section

The Equator Principles

Project financing plays an important role in financing development throughout the world. In providing financing, particularly in emerging markets, project financiers often encounter environmental and social policy issues. We recognize that our role as financiers affords us significant opportunities to promote responsible environmental stewardship and socially responsible development.

In adopting these principles, we seek to ensure that the projects we finance are developed in a manner that is socially responsible and reflect sound environmental management practices. We believe that adoption of and adherence to these principles offers significant benefits to ourselves, our customers and other stakeholders. These principles will foster our ability to document and manage our risk exposures to environmental and social matters associated with the projects we finance, thereby allowing us to engage proactively with our stakeholders on environmental and social policy issues. Adherence to these principles will allow us to work with our customers in their management of environmental and social policy issues relating to their investments in the emerging markets.

These principles are intended to serve as a common baseline and framework for the implementation of our individual, internal environmental and social procedures and standards for our project financing activities across all industry sectors globally.

In adopting these principles, we undertake to review carefully all proposals for which our customers request project financing. We will not provide loans directly to projects where the borrower will not or is unable to comply with our environmental and social policies and processes.

Statement of Principles
We will only provide loans directly to projects in the following circumstances:

1. We have categorized the risk of a project in accordance with internal guidelines based upon the environmental and social screening criteria of the IFC as described in the attachment to these Principles.

2. For all Category A and Category B projects, the borrower has completed an Environmental Assessment (EA), the preparation of which is consistent with the outcome of our categorization process and addresses to our satisfaction key environmental and social issues identified during the categorization process.

3. In the context of the business of the project, as applicable, the EA report has addressed:

  • assessment of the baseline environmental and social conditions;
  • requirements under host country laws and regulations, applicable international treaties and agreements;
  • sustainable development and use of renewable natural resources;
  • protection of human health, cultural properties and biodiversity, including endangered species and sensitive ecosystems;
  • use of dangerous substances;
  • major hazards;
  • occupational health and safety;
  • fire prevention and life safety;
  • socioeconomic impacts;
  • land acquisition and land use;
  • involuntary resettlement;
  • impacts on indigenous peoples and communities;
  • cumulative impacts of existing projects, the proposed project, and anticipated future projects;
  • participation of affected parties in the design, review and implementation of the project;
  • consideration of feasible environmentally and socially prefer-able alternatives;
  • efficient production, delivery and use of energy;
  • pollution prevention and waste minimization, pollution controls (liquid effluents and air emissions) and solid and chemical waste management.

Note: In each case, the EA will have addressed compliance with applicable host country laws, regulations and permits required by the project. Also, reference will have been made to the minimum standards applicable under the World Bank and IFC Pollution Prevention and Abatement Guidelines and, for projects located in low- and middle-income countries as defined by the World Bank Development Indicators Database, the EA will have further taken into account the then applicable IFC Safeguard Policies. In each case, the EA will have addressed, to our satisfaction, the project’s overall compliance with (or justified deviations from) the respective above-referenced Guidelines and Safeguard Policies.

4. For all Category A projects, and as considered appropriate for Category B projects, the borrower or third party expert has prepared an Environmental Management Plan (EMP) which draws on the conclusions of the EA. The EMP has addressed mitigation, action plans, monitoring, management of risk and schedules.

5. For all Category A projects and, as considered appropriate for Category B projects, we are satisfied that the borrower or third party expert has consulted, in a structured and culturally appropriate way, with project affected groups, including indigenous peoples and local NGOs. The EA, or a summary thereof, has been made available to the public for a reasonable minimum period in local language and in a culturally appropriate manner. The EA and the EMP will take account of such consultations, and for Category A Projects, will be subject to independent expert review.

6. The borrower has covenanted to:

  • comply with the EMP in the construction and operation of the project;
  • provide regular reports, prepared by in-house staff or third party experts, on compliance with the EMP; and
  • where applicable, decommission the facilities in accordance with an agreed Decommissioning Plan.

7. As necessary, lenders have appointed an independent environmental expert to provide additional monitoring and reporting services.

8. In circumstances where a borrower is not in compliance with its environmental and social covenants, such that any debt financing would be in default, we will engage the borrower in its efforts to seek solutions to bring it back into compliance with its covenants.

9. These principles apply to projects with a total capital cost of $50 million or more. The adopting institutions view these principles as a framework for developing individual, internal practices and policies. As with all internal policies, these principles do not create any rights in, or liability to, any person, public or private. Banks are adopting and implementing these principles voluntarily and independently, without reliance on or recourse to IFC or the World Bank.

Source: www.equator-principles.com/principles.shtml

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