Equator Principles for sustainable project finance under pressure from signatories, NGOs

Campaigners call for fundamental revision amid Dakota Access controversy

The Equator Principles, the sustainable project finance guidelines for financial institutions, have come under attack from campaign group BankTrack – which is calling for a fundamental revision of its sustainability framework.

It follows similar pressure from a group of signatory banks earlier this year.

The Dutch finance-focused non-profit has warned the Equator Principles’ governing body that its reputation as a “global sustainability gold standard” could be fatally undermined without reform.

The warning comes as the NGO launches its campaign calling on the Equator Principles Association’s Steering Committee – the body that co-ordinates the principles – to strengthen its commitment to climate change and indigenous rights.

The Equator Principles were established in 2003, and most recently updated in 2013, to be a “minimum standard” to ensure projects financed are “developed in a manner that is socially responsible and reflects sound environmental management practices”.

Ninety-one financial institutions in 37 countries have adopted the Principles, covering over 70% of international project finance debt in emerging markets.

BankTrack’s campaign comes after 10 Equator Principles member banks wrote to the Equator Principles Association in May echoing similar concerns.

The banks cited reputational damage some banks, and the Equator Principles themselves, suffered due to a lack of “leverage” offered by the sustainability standards in relation to a recent “project located in a Designated Country”– believed to be the controversial Dakota Access Pipeline project in the US.

The banks, including ABN Amro, BNP Paribas, Credit Agricole and Natixis, also called for “significant improvement to the EPs” to “avoid similar situations in the future”.

The Steering Committee issued a statement on May 18 acknowledging that “certain transactions” have highlighted the challenges in the differentiated approach between Designated and non-Designated countries. It said it was “listening and responding” to concerns and that it was forming a working group on the topic, headed up by Citi and Crédit Agricole CIB.The body’s secretariat was not immediately available for comment to Responsible Investor today.

BankTrack’s campaign has been kicked off with an open letter, signed by over 60 NGOs and indigenous group representatives.

It urges Nigel Beck, Standard Bank’s Global Head Environmental & Social Management, Corporate & Investment Banking and Chair of the Association’s Steering Committee, to commit at its forthcoming annual meeting to a formal revision of the current principles.

The next annual meeting of the Equator Principles Association is set for October 23 in Sao Paulo, Brazil.

The letter cites the controversial, albeit Equator-compliant, Dakota Pipeline project (DAPL) throughout as an example of how the framework is failing.

It specifically calls for the Principles to include an explicit commitment to the 2015 Paris Agreement goal of limiting global temperature rise to well below 2°C, and as such rule out finance for any new fossil fuel extraction, transportation, and power projects.

BankTrack criticises the Association’s “stagnation” to date and claims its ambitions in relation to climate has been “entirely determined by those of its least ambitious member”.

BankTrack similarly slams the Association’s response to concerns surrounding the Equator Principles ability to adequately protect indigenous groups, rejecting as “wholly unjustified” the Association’s claim that the Principles “provide a robust due diligence framework to manage and mitigate risks”.

It calls for a clear commitment from all Equator Banks to fully respect the internationally recognised rights of indigenous peoples to withhold their consent for projects on their traditional territories, and to rule out financing any projects that violate these rights.

BankTrack’s campaign is launched just a week after it was forced to deny allegations of involvement in “eco-terrorism” brought against it and other NGOs by Energy Transfer Partners, the US group behind the Dakota pipeline.