Investors join call to review Equator Principles in light of Dakota Pipeline

Investor statement is being prepared in support of banks

An investor statement supporting a number of banks calling for improvements to the Equator Principles (EPs) is in the pipeline, led by Boston Common Asset Management, Storebrand and the University of Colorado’s First Peoples Investor Engagement Programme, RI can reveal.
According to a draft seen by RI, investors are requesting the measures to the Equator Principles Association (EPA) to maintain the credibility of the principles and ensure that banks have the necessary tools to respond to situations like the Dakota Access Pipeline (DAPL) project in the future. 

“In addition to the reputational damage that this has caused to the banks involved, we believe that this is likely to damage the reputation of the Equator Principles”

In May this year, 10 banks wrote to the EPA calling for “a significant improvement to the EPs” to avoid risks from projects where the principle of free, prior and informed consent (FPIC) of indigenous peoples has not been applied. 
The banks’ concerns appear to have been triggered by the DAPL project, although they avoid explicit mention of it, referring instead to “a recent project located in a Designated Country”.
“In addition to the reputational damage that this has caused to the banks involved, we believe that this is likely to damage the reputation of the Equator Principles as a ‘golden standard’ and common playing field for determining, assessing and managing environmental and social risks in projects,” the banks stated.
Earlier in February, a group of investors representing some $1.7trn, including Boston Common and Storebrand, encouraged a number of banks with financial ties to the DAPL to support requests from the Standing Rock Sioux Tribe – the indigenous people linked to the Dakota project – to reroute the pipeline.
“We understand that the banks providing the project finance have contractual obligations to DAPL, but the extreme controversy tied to the project warrants their urgent action,” the investors stated at the time.
The EPA is holding its steering committee in São Paulo on October 23 and is under increasing scrutiny – notably from campaign group BankTrack – to address indigenous peoples’ rights on the back of the DAPL.Many of the same investors to sign the previous statement are using the occasion to throw their weight behind a multi-stakeholder push to reform the principles.   
According to the draft statement seen by RI, the investors would issue three recommendations:
First, universal application of the International Finance Corporation’s (IFC) Performance Standards. Such a measure, previously suggested by the banks in May, would put an end to exceptions granted to ‘Designated Countries’ – which tend to be high-income ones like the US – currently permitting them to apply their own laws as a substitute for IFC standards.
Second, the establishment of a mechanism that helps EP member-banks resolve issues arising from possible breaches to environmental and social standards.
And third, enhanced reporting on due diligence processes regarding human rights and indigenous peoples. 
Also behind the investors’ campaign is Nick Pelosi, Head of the First Peoples Investor Engagement Programme (formerly First Peoples Worldwide), which is now hosted by the University of Colorado.
Speaking recently in London at an event about the financial materiality of indigenous communities’ consent, Pelosi said that “red flags” around DAPL should have been detected earlier.
“It was more notification than consultation: the whole process began after the route had been decided, so the tribe felt they were being consulted for something for which the major decisions had already been made.”
Pelosi also said that First Peoples Worldwide had conducted its own risk assessment of the DAPL in April 2016, using their indigenous rights metrics for investors. 
“We saw that the company [Energy Transfer Partners] was weakly positioned for community engagement, we saw the presence of community opposition, lawsuits being filed, people were starting to pitch tents at what later became The Camp.”
He added: “April 2016 was months before DAPL became as controversial as it did, and before the banks entered the loans. There were red flags waving all over the place that nobody picked up on.”