Equator Principles

The Equator Principles (EPs) are a voluntary set of standards for determining, assessing and managing social and 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 (See http://www.bis.org/publ/bcbs118.pdf). 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 in full can be found at http://www.equator-principles.com/resources/equator-principles.pdf.

Equator Principles Financial Institutions (EPFIs) commit to not providing loans to projects where the borrower will not or is unable to comply with their respective social and environmental policies and procedures that implement the EPs.

The Equator Principles were developed by private sector banks – led by Citigroup, ABN AMRO, Barclays and WestLB – and were launched in June 2003. The banks chose to model the Equator Principles on the environmental standards of the World Bank and the social policies of the International Finance Corporation (IFC). Sixty-seven financial institutions (October 2009) have adopted the Equator Principles, which have become the de facto standard for banks and investors on how to assess major development projects around the world. In July 2006, the Equator Principles were revised, increasing their scope and strengthening their processes.

The Equator Principles represent a significant industry-wide initiative. They were drafted by the banks in consultation with the IFC, project sponsors, project engineers, and non-governmental organizations (NGOs). While they have generally been well received, some project sponsors have said they go too far, while some NGOs say they do not go far enough.