The long awaited new, third version of the Equator Principles (EPIII) (1) will have a deeply underwhelming impact on safeguarding the rights and interests of communities affected by ‘Equator compliant‘ projects, as well as on efforts to stop runaway climate change. Thus concludes BankTrack, the global network of NGOs closely monitoring the Principles since their inception in 2003, at the formal launch of EPIII, today in Amsterdam at the 10^th Anniversary Conference of the Equator Principles.

"BankTrack considers EPIII a modest improvement over EPII (2), especially with regards to their expanded scope (3) and the transparency requirements for adopting banks. But the new principles are outright disappointing in their absence of any new commitments on strengthening community rights and on combating climate change", said Johan Frijns, BankTrack coordinator. "We expected this extensive review process, involving hundreds of stakeholders and taking over two years to complete, to come up with a breakthrough on both crucial matters; this is a huge missed opportunity that leaves the Principles stranded in the Minor League for years to come."

Community rights

The new Principles fail to strengthen the ability of communities to effectively invoke the Principles to defend their rights and interests. As in EPII, communities are not considered rights holders but remain seen as passive stakeholders in projects that befall on them. The EP requirements on conducting impact assessments, stakeholder engagements, the development of management plans and action plans and the establishment of grievance mechanisms all presume that the project envisioned by the sponsor eventually will proceed as planned.

Despite consistent demands raised by BankTrack and numerous other civil society groups (4) over the last ten years, the Equator Principles Financial Institutions (EPFIs) have also again refused to establish an accountability and compliance mechanism, where affected stakeholders could have filed complaints on non compliance with the Principles.

"The absence of such an accountability mechanism, by now standard procedure with all multilateral development banks and some Export Credit Agencies, makes a mockery of stated ambitions of EPFIs to set a gold standard in social and environmental risk management", said Michelle Chan, Director, Economic Policy Program for Friends of the Earth US, "Such accountability mechanisms, apart from being essential to ensure access to remedy, are also a vital part of any adequate risk management system, providing banks with an external source of information on their clients' performance."

Climate change

The new Equator Principles contain only two climate related ‘requirements' for clients, requirements that are so devoid of any ambition as to render them meaningless in the global fight against climate change. None of the proposals made by BankTrack and other stakeholders to include financed emission reduction targets and opt for the categorical exclusion of certain high impact sectors (coal mining, tar sands) and project types (coal power plants) found their way in the final EPIII.

One ‘requirement' is that "for all Projects, in all locations, when combined Scope 1 and Scope 2 Emissions are expected to be more than 100,000 tonnes of CO2 equivalent annually, an alternatives analysis will be conducted to evaluate less Greenhouse Gas (GHG) intensive alternatives." However, it is then left entirely to the client to decide what to do with the outcome of the analysis, with no obligation at all imposed on him to opt for the less GHG intensive alternative.

The second ‘requirement' is for "the client to report publicly on an annual basis on GHG emission levels (combined Scope 1 and Scope 2 Emissions) during the operational phase for Projects emitting over 100,000 tonnes of CO2 equivalent annually". The threshold of 100,000 tonnes is far higher than the 25,000 tonnes required in the Performance Standards of the International Finance Corporation, to which EPIII is pegged. Given the absence of any obligatory reduction targets over time, such reporting requirements alone will also do little to nothing to reduce emissions.

"It took exactly ten years for the very word ‘climate' to first appear in this environmental risk management tool for banks. But when it finally does, there still seems to be no appreciation whatsoever of the magnitude of the threat posed by climate change to all of us, banks included, let alone any corresponding ambition level" said Yann Louvel, BankTrack's climate and energy coordinator, "Banks should not need an ‘alternative analysis' or an ‘emission levels report' to understand that they must immediately terminate the financing of coal power plants, coal mines, and oil and gas exploration and infrastructure projects altogether; only that is adequate risk management"

Belo Monte Dam

The launch of the new Equator Principles coincides with the latest occupation by 170 indigenous people armed with bows and arrows of the construction site of the ‘Belo Monte' Dam in Brazil. The groups have vowed to defend their land with their own lives, leading to fears that this may lead to a massacre due to police repression (5).

The project is mostly financed by funding from BNDES of Brazil that is passed through EPFI Caixa Econômica Federal. According to the loan contract, seen by BankTrack, the project is to meet all relevant Equator Principles requirements, including those on stakeholder consultation and indigenous peoples' consent. However, indigenous people say that project developer Norte Energia, S.A. is far from implementing those commitments.

"It is a testimony to the sorry state of the Principles that horrible projects such as the Belo Monte Dam are allowed to proceed with an Equator stamp of approval.  Affected indigenous people stand to lose their lives defending their lands, right at the moment when Equator banks toast on their tenth anniversary",commented Zachary Hurwitz, Policy Coordinator at International Rivers; "If the Principles do not even make a difference in such dire situations, then what are they to deliver elsewhere?"

(1) See http://www.equator-principles.com/index.php/all-news-media/ep-association-news

(2) EPII was launched in June 2006. EPIII is in place from June 4 2013 but there is a transition period lasting until January 1^st 2014 for existing EPFIs to transfer to EPIII.

(3) The scope of EPIII now includes also a strictly defined set of large corporate loans where proceeds are known and bridge loans. See the text of EPIII.

(4) For a full overview of all publications of BankTrack on, and correspondence with the Equator Principles Association see the document section at: http://www.banktrack.org/show/pages/equator_principles

(5) For further details on Belo Monte see:

http://www.internationalrivers.org/campaigns/belo-monte-dam

http://amazonwatch.org/work/belo-monte-dam

http://www.banktrack.org/show/dodgydeals/belo_monte_dam