Boston Common Asset Management is calling on fellow investors to back its call for further revisions to the latest draft of the Equator Principles (EPs).
In its planned submission, the dedicated SRI investor states that the proposed changes in the fourth draft of the principles “fall short of providing a strong, global standard for social and environmental risk assessment in the financial sector that protects the Rights of Indigenous Peoples”.
The Principles focus on the sustainability of project finance by banks. They were put out to public consultation in June following an 18-month review by the Equator Principle Association, prompted by widespread criticism of the framework in the wake of the Dakota Access Pipeline controversy.
Boston Common’s submission, on behalf of the Investor and Indigenous Peoples Working Group, recommends that the draft be “strengthened to recognize that Indigenous Peoples have a fundamental right to provide or withhold their free, prior and informed consent (FPIC)” when projects are being financed.
It calls on the EPA to align its principles with UN protocols such as the Declaration on the Rights of Indigenous Peoples (UNDRIP) and the Guiding Principles on Business and Human Rights (UNGPs) – the latter being mentioned only in the preamble of the new draft.
The “unhelpful” distinction between Designated and non-Designated Countries should also be dropped, according to the Boston based investor, arguing that the “same rigorous environmental and social expectations” should be applied regardless of where projects being financed are located.
As it stands, projects in ‘designated countries’ – i.e. high-income OCED ones like the US – rely on the host country’s laws and regulations as a substitute for the principles, on the assumption that they will be more robust.
It was this distinction that prevented the application of the EPs to the Dakota Access Pipeline project, which was a major catalyst for the review of the principles.
13 EP member banks financed the controversial pipeline that crosses the Standing Rock Sioux Tribe’s land in the US, which a UN special rapporteur deemed to have been undertaken “without an adequate social, cultural or environmental assessment”.In May 2017, 10 European banks wrote to the EP Association calling for “a significant improvement” to the framework, to avoid risks from projects where the principle of indigenous peoples informed consent has not been applied.
This was followed by a letter from Boston Common in October 2017 to the EP Association, backed by investors representing $2.67trn, calling for a review of the Principles.
Now, in its response to the draft resulting from that review, Boston Common argues that without enhanced revisions the current draft would not prevent controversies like the Dakota Access Pipeline from occurring again.
According to Carla Fredericks, the Director of First Peoples Worldwide the cost of the Dakota episode for the banks involved was around $4.5bn.
Boston Common’s criticisms echo similar ones made by indigenous rights advocacy group First Peoples Worldwide, which said that without further revisions the draft would “proceed as a flawed framework that perpetuates – and perhaps tacitly endorses – the types of human rights violations and high risk financing scenarios that occurred in DAPL”. See RI’s coverage here.
Responding to questions about criticism of the draft last month, the EP Association’s Chair, Nigel Beck who is also Group Head of Environmental & Social Risk and Finance at Standard Bank Group, told RI: “The draft of EP4 takes important steps forward in addressing topics such as climate change, human rights and Free, Prior and Informed Consent, while staying true to its original purpose as a risk management framework.”
He added that the “draft presented is a result of an extensive period of reflection and consideration, involving a broad strategic review with our stakeholders, expert advice and legal review, and the applied effort of a number of member-led working groups involving the diversity of EPA membership”.
Boston Common is looking for investors to support its submission before the deadline on the 9 August.
*Update: Boston Common’s submission is being backed by NEI Investments, Shareholder Association for Research & Education (SHARE) and Calvert Research and Management.
Indigenous investors organisations that have co-signed the Investor Submission to date, include:
National Aboriginal Trust Officers Association (Canada)
Oneida Trust Committee of the Oneida Nation of Wisconsin (US)
First Nations Community Financial (US)
Mississaugas of the Credit First Nation Community Trust (Canada)