BankTrack critiques new draft Equator Principles
Published by MAC on 2012-10-23Source: SocialFunds.com, BankTrack
For the second time since its formation in 2003, the association of banks subscribing to the The Equator Principles have proposed "improvements" in their commitments to promoting sustainable development.
BankTrack, which monitors the Principles, approves of some of the revised changes - specifically those relating to transparency, the observation of human rights, and the managment of climate change impacts.
However, the Dutch NGO concludes that: "The Association seems prepared to only take tiny, over cautious steptors ahead where bold moves are required, thus risking to be overrun by the very developments and risks the Equator Principles are supposed to manage".
BankTrack not Satisfied with new Draft of Equator Principles
by Robert Kropp
SocialFunds.com
12 October 2012
While acknowledging that the new draft is an improvement, the Netherlands-based NGO finds insufficient commitments by signatory banks to transparency, human rights, and climate change mitigation.
Some of the most environmentally damaging practices of the extractive industries-mountaintop mining and extensive deforestation, to name but two-remain perfectly legal, despite their contributions to climate change and destructive effects on communities.
Such operations require a great deal of money; and since policymakers in the US and elsewhere seem unprepared to outlaw the practices, the Equator Principles were launched in 2003 to bring the management of environmental and social risks to Project Finance transactions.
Currently, 77 financial institutions in 32 countries are signatories to the Principles, including five - Bank of America, CitiGroup, Ex-Im Bank, JPMorgan Chase, and Wells Fargo - that are headquartered in the US. However, despite their expressions of commitment to the Principles, four of the five are among the leading financiers of the construction of coal-fired power plants in the world.
Following last year's updating of the Sustainability Framework of the International Finance Corporation (IFC) , the Equator Principles Association has released a draft of the updated Equator Principles (EP III).
The draft attempts to establish new requirements for the management of climate impacts; emphasize the importance of human rights, especially in the aftermath of John Ruggie's Guiding Principles on Business and Human Rights ; and strengthen reporting and transparency requirements.
This week, BankTrack , a Netherlands-based nongovernmental organization (NGO) whose member groups include the US-based Friends of the Earth and the Rainforest Action Network, submitted comments on the draft version of EP III.
While finding the draft an improvement over EP II, BankTrack was unsparing in its criticism of what it described as a "watered down compromise."
"Far bigger steps must be taken by the EPFIs (Equator Principles Financial Institutions) for the Equator Principles to regain their position as leading industry initiative on sustainable finance," BankTrack states in its comments.
The NGO argues, for example, that "the strong public demand for greater transparency of banks... will not be satisfied by the feeble commitments in Principle 10 to list number and categories of transactions, but without providing any information on the nature of these transactions and their potential impact on people and planet."
Furthermore, despite the draft's reference to the Guiding Principles, "EPIII will also not provide any mechanism accessible to affected communities or the public to address cases of non-compliance with the Principles in a transparent, fair, or effective manner."
Finally, "By merely requiring borrowers to assess alternatives and consider them when financially feasible' or by suggesting borrowers to assess the 'viability of Project operations, of reasonable foreseeable changing weather patterns/climatic conditions, together with adaptation opportunities' without in any way addressing the direct and indirect impact on these 'climatic conditions' of projects," the draft fails to adequately address the impacts of climate change.
Yann Louvel, BankTrack's climate and energy campaign coordinator, said, "It is astonishing and disappointing that the Equator Principles banks, while claiming to adhere to the gold standard for managing environmental and social risk by banks, continue to turn a blind eye to the severe risk they pose on the planet and on themselves by financing projects that exacerbate and accelerate climate change such as tar sands, coal fired power plants or Arctic drilling."
BankTrack Director Johan Frijns added, "There is a real risk that EPIII will not be the commitment we need from banks to take up their responsibilities towards stakeholders, impacted communities and the planet."
BankTrack comments on draft Equator Principles
Tiny steps forward, where bold moves are required
BankTrack Press Release
11 October 2012
Nijmegen, Netherlands - BankTrack, the international NGO network monitoring investment decisions and sustainability commitments of large international banks, today submitted its comments on the Equator Principles III draft text (EPIII) [1]. The submission followed a meeting in London on September 25 where BankTrack shared its view on EPIII with the Equator Principles Association (Association) [3]
Following earlier BankTrack reports [2], this new submission assesses the draft EPIII text on whether it adequately deals with five major issues left unresolved in EPII:
- Increase the transparency of the workings of the Principles and the Association
- Increase the accountability of the Principles and adopting banks towards stakeholders and affected communities
- Extend the scope of the Principles
- Adequately deal with climate change
- Adequately deal with human rights obligations of banks
Overall, BankTrack considers EPIII an improvement over EPII, notably in the extension of the scope of the Principles and the commitment of EPFIs to post more project level information on their website.
Yet, the detailed assessment leads BankTrack to conclude that bigger steps must be taken by the Association if the new Equator Principles are to become a leading initiative on sustainable finance.
The Association seems prepared to only take tiny, over cautious steps ahead where bold moves are required, thus risking to be overrun by the very developments and risks the Equator Principles are supposed to manage.
The absence of any meaningful commitment on tackling climate change is a case in point. The EPFIs are to a substantial extent deepening the climate crisis by continuing to invest in ever more oil, gas, coal extraction, and coal power projects.
This will not be mitigated by merely requiring borrowers to ‘assess less GHG intensive alternatives and consider them when financially feasible' and ‘report on GHG emission levels'.
BankTrack expects the new Equator Principles to include mandatory requirements on borrrowers that will lead to a substantial reduction of the overall climate impact of all projects financed under Equator.
Yann Louvel, BankTrack's climate and energy campaign coordinator, comments: "It is astonishing and disappointing that the Equator Principles banks, while claiming to adhere to the gold standard for managing environmental and social risk by banks, continue to turn a blind eye to the severe risk they pose on the planet and on themselves by financing projects that exacerbate and accelerate climate change such as tar sands, coal fired power plants or Arctic drilling."
Johan Frijns, BankTrack Director, comments: "it took seven years since EPII, and fifteen months of talking by the Equator banks to produce this draft, yet there is a real risk that EPIII will not be the commitment we need from banks to take up their responsibilities towards stakeholders, impacted communities and the planet. We simply expect more of EPIII."
Further information:
[2] See the document section here: http://www.banktrack.org/show/pages/equator_principles
[3] See http://www.equator-principles.com/index.php/ep3
About BankTrack
BankTrack is the global network of civil society organizations targeting the operations and investments of large, international operating commercial banks. Our mission is to promote fundamental changes in the way these banks operate so that they act at the service of society, preserve the ecological well-being of the planet and help offer a decent life free of poverty and repression for all people. As a prerequisite for this, banks must operate fully transparent and be accountable for their activities to all their stakeholders and to society at large.
Further information or interviews
Johan Frijns, Director BankTrack, T: +31 24 3249220
Yann Louvel, climate and energy coordinator, T: +33 688907868