The Equator Principles
The Equator Principles

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • The Equator Principles
  • Development of the Equator Principles
  • Adoption of the Equator Principles and the implications
  • In what circumstances do the Equator Principles apply?
  • What issues do the Equator Principles address?
  • Principle 1—review and categorisation of projects
  • Principle 2—environmental and social assessment
  • Principle 3—applicable environmental and social standards
  • Principle 4—Environmental and Social Management System and Equator Principles Action Plan
  • Principle 5—stakeholder engagement
  • More...

The Equator Principles

The Equator Principles (EPs) are a risk management framework for determining, assessing and managing environmental and social risk in project financings. Introduced by the International Finance Corporation (IFC) in 2003 with the support of ten financial institutions, they have since become a financial industry minimum standard for due diligence and monitoring to support responsible risk decision-making. Financial institutions adopt the EPs to ensure that the projects they finance are developed in a socially responsible manner, reflecting sound environmental management practices, and, once so adopted, undertake to provide financial services to project financings only if they meet EP criteria. The EPs have focussed the project finance market’s attention on social/community standards and responsibility, including robust standards for indigenous peoples, labour standards, and consultation with locally affected communities. They have also promoted convergence around common environmental and social standards and helped spur the development of other responsible environmental and social management practices across the financial sector and banking industry.

Lawyers advising on large project finance transactions should be aware of and understand the guidelines in the EPs, not least because financial institutions that have adopted the EPs will require certain terms reflecting the EPs to be included in the project finance documents.

Development of the Equator Principles

The EPs were launched by the IFC in 2003 with the backing of ten international banks. They were based on existing environmental

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