Equator Principles: New BankTrack database sheds light on patchy project name reporting
In an effort to increase the transparency of project finance by banks under the Equator Principles (EPs), BankTrack has compiled the last five years of project name reporting into a searchable database, available here.
The database is published alongside a new analysis of project name reporting ‘under Equator’, below, which shows patchy implementation of existing rules, alongside other reporting problems and inconsistencies.
The need for a searchable database
Since the launch of the third version of the EPs in 2013, each signatory bank or financial institution (EPFI) has been required to publicly disclose project names for Project Finance transactions that have reached financial close in the previous year. Project names are reported on the Equator Principles’ website, with disclosure subject to certain conditions, including obtaining client consent.
However, there are several problems with the way project names are reported. Firstly, data is reported on a bank-by-bank basis, which makes it impossible to search which banks financed a particular project. Secondly, only data from the most recent two years is kept on the Equator Principles website; after that, the information goes ‘down the memory hole’.
In response to these issues, BankTrack has made banks’ project name reporting for the last five years available in a searchable database, allowing greater visibility on which banks have reported financing which project, and returning historical information to the public record. The database uses information as reported on the Equator Principles website, maintaining, for example, the inconsistencies in how project names are reported.
The Equator Principle Association (EPA) has stated that it will consider improved transparency and reporting as a priority area beyond the delivery of EP4. In an effort to ensure full transparency, we urge the EPA to create its own searchable database of Equator projects in order to make the data more accessible.
Issues with the most recent year of reporting
Another significant problem with project name reporting under the Equator Principles is the need for client consent to be obtained before project names are published, which means in practice that not all project names are reported. We have also found in our research and discussions with banks that some simply make more effort to obtain client consent than others.
BankTrack examined the most recent period of reporting for each EPFI under the EPs to assess which banks are most likely to report project names. We found that, of the 71 EPFIs that reported at least one Project Finance (PF) transaction in the most recent reporting period, 18 reported names for less than half of the transactions they financed, and of these, 11 reported no project names at all. These banks are reported below. (Data for all EP signatory institutions is available here).
Looking at data from previous years shows that some EPFIs have been consistently bad at reporting project names. For example, Lloyds Banking Group Plc and Mauritius Commercial Bank Ltd have reported no project names in 2016, 2017 or 2018. Others, such as Bank of Montreal and DekaBank have reported project names for all Project Finance transactions in previous years, but have reported none in the most recent reporting period.
What needs to be done?
Project name reporting is critical to informing stakeholders of the benefits they are supposed to reap from the EPs being applied to a project, and to ensuring these stakeholders can seek accountability where their rights are impacted. If client confidentiality considerations prevail over full transparency as to where, when, how and by whom the EPs are implemented, the supposed commitments to communities remain largely empty and meaningless.
Small improvements to EPFI reporting requirements have been included in EP4, but these do not go far enough to provide the transparency that is essential for the Equator Principles to achieve a meaningful measure of accountability. Under EP4, project name reporting now extends beyond Project Finance transactions and is also “encouraged for Project-Related Corporate Loans that have reached Financial Close”. Additionally, there is a new provision which seeks to promote consistency in project name reporting, where client consent is obtained. These are welcome measures, but still allow projects to be financed under the Equator Principles entirely in secret, where the client requests it. This is incompatible with accountability.
BankTrack urged the EPA as part of the review into EP4 to ensure client consent to disclose project names was obtained as standard. Given the requirements the Equator Principles already place on project sponsors, this transparency is unlikely to be a significant extra burden – and it should raise serious red flags if clients do resist.
The EPA’s consultants, BSR, agreed, advising the EPA to remove the words “subject to obtaining client consent” (page 39), noting that “EP reporting requirements should be agreed to by clients before financial closure as opposed to negotiated after financial closure.” The EPA has, so far, neglected to act on this straight-forward recommendation.
We urge the EPA to require all financing ‘under Equator’ to be conditional upon project sponsors agreeing to the loans being publicly reported by the banks. This should be a top priority for the EPA beyond the delivery of EP4 as part of a broader effort to ensure the Equator Principles are developed into a standard with transparency and accountability at its core.
Equator Principles project database
The Equator Principles project database can be accessed below and on this page.