New report sees both progress and serious challenges at 2nd Anniversary of Equator Principles Unproven Principles

New report sees both progress and serious challenges at 2nd Anniversary of Equator Principles Unproven Principles

Contacts:

Utrecht, Netherlands:
BankTrack, Johan Frijns

Washington DC, USA:
Friends of the Earth US, Michelle Chan-Fishel +1-202-427-3000

New report sees both progress and serious challenges at 2nd Anniversary of Equator Principles

Utrecht, The Netherlands – The Equator banks have improved their record in implementing and applying the Equator Principles, but public reporting remains problematic and their effect on the ground is unclear, concludes a new BankTrack report on the Equator Principles (EP), a bank-led initiative to establish common environmental and social standards for project finance that was launched two years ago.

The report, titled ‘Unproven Principles; The Equator Principles at age two’, reviews EP banks’ efforts on the implementation and application of the Principles. The review is based solely on what EP banks have publicly disclosed.

The report finds that overall transparency regarding EP implementation has been lacking. Although rates and quality of EP reporting have improved compared to last year, the vast majority of adopting banks (80%) continue to provide limited or no disclosure at all.

Also like last year, implementation of the EPs has varied greatly among banks. While a few lead banks have made significant efforts to incorporate the principles in everyday business practices, less than half created new procedures, standards, tools, etc. to implement the EPs.

The report also notes positive developments, such as the decision of six banks – ABN AMRO, Barclays, Citigroup, HSBC, JPMorgan Chase, and Westpac – to expand the scope of EPs to transactions that fall under the $50 million threshold, and/or to certain corporate loans.

“We commend the handful of banks that are really trying to follow the ‘spirit of Equator’, but they do not offset the practices of others that have failed to demonstrate that they are even following the ‘letter of Equator’,” said Michelle Chan-Fishel of Friends of the Earth US, author of the report. “Some banks still fail to see that mere adoption of the Principles, without actions to back it up and public transparency to prove it, threatens the credibility of the Principles as a whole”.

 

The report was released together with a Statement of the BankTrack member organisations. While criticising the Equator banks for lack of progress regarding across the board transparency and accountability, it also acknowledges that the Principles have become the de facto standard to which any bank claiming to be a responsible player in the project finance market should aspire to. The Statement asserts that key project finance banks, such as BNP Paribas, Societe Generale and Sumitomo Mitsui Banking that continue to opt out of the EPs are out of touch with public expectations.

The Statement also lists several controversial deals that will test the credibility of the Principles, particularly the Sakhalin II project, which according to an earlier BankTrack study violates the EPs on several counts. The Statement points out that rules for project finance can only do so much if such projects with possible severe environmental and social effects obtain financing through non-project finance avenues, and it welcomes the development of broader policies by some of the Equator banks.

“BankTrack has welcomed the launch of new environmental and social financing standards that have been developed in the past year,” said Johan Frijns, coordinator of BankTrack, referring to recent standards such as HSBC’s freshwater policy which is based on World Commission on Dams recommendations, and the weapons financing policies of KBC, ING, Dexia and Fortis. “As banks develop new policies addressing issues like human rights or specific sectors, the Equator Principles become less of a vanguard for sustainability and more of a minimum expectation for project finance banks.”

 

Note for editors:

Report and Statement

– BankTrack is a network of fourteen NGOs monitoring the activities of the private financial sector. It consists of: Amigos da Terra, Brazilian Amazon; Amis de la Terre, France; Berne Declaration, Switserland; Campaign to Reform the World Bank, Italy; Friends of the Earth, UK; Friends of the Earth, US; International Rivers Network, US; Milieudefensie, Netherlands; Mineral Policy Institute, Australia; Netwerk Vlaanderen, Belgium; Platform, UK; Rainforest Action Network, US; Urgewald, Germany; WWFUK, UK