25/02/2019 - Environment

KEY POINTS

·        The Equator Principles (EPs) is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence and monitoring to support responsible risk decision-making.

·        The EPs apply globally, to all industry sectors and to four financial products 1) Project Finance Advisory Services 2) Project Finance 3) Project-Related Corporate Loans and 4) Bridge Loans.

·        Yes, implementation of Equator principles holds the key for inclusive sustainable development.

Reasons 

·        The EPs have greatly increased the attention and focus on social/community standards and responsibility, including robust standards for indigenous peoples, labour standards, and consultation with locally affected communities within the Project Finance market. They have also promoted convergence around common environmental and social standards.

·        The EPs have also helped spur the development of other responsible environmental and social management practices in the financial sector and banking industry and have supported member banks in developing their own Environmental and Social Risk Management Systems.

·        So far, around 90 financial institutions from 37 countries have officially adopted the Equator Principles, which covers the majority of international project finance debt in emerging and developed markets.

·        Accountability and transparency have long featured as a major outcome. The Equator Principles require those constructing high-risk projects to provide a grievance mechanism for affected communities to voice their concerns. 

·        In 2013, IDFC bank was the first signatory to the Equator Principles from India. Adoption of the Equator Principles is part of IDFC’s goal of contributing to Nation Building in an environmentally and socially sustainable manner.

·        With so many monetary scams and money laundering taking place, the credibility of the global financial institutions is under heavy scrutiny today, especially in markets where social and environmental standards for business are less stringent.

·        Further Equator principles gives fillip to the scope of Environment impact assessment enhancing Transparency and accountability in development projects.

·        The companies with little or no experience in applying mitigation measures often require additional support and advice from their lenders. Implementing the Equator Principles has enhanced the role of project financing; sustainable development has become key issue.

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