Pressure rising over indigenous rights at bank sustainability initiative the Equator Principles

The Equator Principles face scrutiny later this month when its standards on indigenous peoples’ rights come under the spotlight at the banking sustainability body’s annual meeting in Brazil.

The Equator Principles Association, which runs the initiative, has faced pressure from member banks and campaign groups in recent months over the criteria it uses to assess projects financed by member banks, particularly in the wake of the Dakota Access Pipeline controversy.

The principles, set up in 2003, are a risk management framework for banks to assess and manage environmental and social risk in projects. Ninety-one financial institutions in 37 countries have adopted them.

At issue is the distinction between “Designated and non-Designated” countries. Projects in non-designated countries are currently held accountable to the International Finance Corporation (IFC) Performance Standards. Whereas projects in designated countries – such as the US – substitute the IFC standards with compliance with local laws on the assumption that such laws match or exceed the IFC standards.

Ten Equator Principles member banks wrote to the EP Association – which is run out of an accounting firm in the sleepy English seaside town of Eastbourne — in May 2017 expressing their concerns over this issue at a “project located in a Designated Country”– believed to be the Dakota Access Pipeline project in the US.

RI also understands that an investor statement echoing these concerns is also being prepared.

Responding to the criticism, Nigel Beck, Chair of the Association’s Steering Committee, has stated that a Designated Countries Working Group is “actively considering” the distinction made in the Equator Principles between Designated and non-Designated Countries.Several options will be presented at the meeting in Sao Paulo on October 23.

But Beck, who is also Standard Bank’s Global Head Environmental & Social Management, Corporate & Investment Banking, played down the prospect of any significant revisions to the framework.

In the letter to campaign group BankTrack, he explained that the framework – last updated in 2013 – has historically been revised in “tandem” with the IFC standards.

He, however, did announce that a number of working groups have been created to promote best practice, and assured that:

“The EP Steering Committee actively engages the EPA membership to assure that EP remains an effective risk management process to identify, assess and mitigate environmental and social risks and impacts.”

Speaking to RI, BankTrack CEO Johan Frijns expressed his “disappointment” with the letter.

He said: “We expect them to talk about climate and indigenous rights but also to come up with better than what is now in the EPs, rather than once again focus on implementation and best practices.”

He continued: “The un-willingness to consider a revision of the principles is very disturbing as by definition there will be no improvements”.

RI reported in August that BankTrack had warned that without reform the Principles’ reputation as a “global sustainability gold standard” could be fatally undermined.