The equator principles

By Nick Crawley on August 30 2010

Very briefly, the equator principles are a set of guidelines which govern the way lenders need to address socio-environmental risks and their responsibilities. We have more information on the equator principles in our e-book.

My view on the equator principles

Personally, I am a great supporter of the intention and content of the equator principles. However alarmingly few banks seem to have signed up to it and I have not identified a driving force incentivising banks, with adoption seemingly left open if a bank feels it suits them and their shareholders.

So it’s good but not really enough. In fact I have a real issue with the fact that only ”financial institutions” can formally adopt the principles. I propose that it would make just as much sense for all project advisors, consultants, lawyers, engineers and all-round influencers within the Project Finance and simply project market to abide by these guidelines.

The world bank is policing the wrong parties

Projects that would be governed by the equator principles are by definition in developing countries. These are the markets where participation by blue chip financial institutions is at its thinnest and investment by parties that are a long way from signing up to this framework is highest. My view is that these companies should be on the hook too.

Open up the principles to the whole market

By opening up the equator principles to the wider market the World Bank would demonstrate that this a genuine framework that governs the socio-economic actions of all parties involved in transactions in the developing world. My experience is that advisors and consultants are often involved in a project long before a financial institution would be and are generally the primary influencers in those projects that don’t have or need a “financial institution” – what is the world bank saying, people can do what they like on those projects?! A further suggestion if they are opened up is that parties bidding on ADB, IFC, World Bank projects need to have not only signed up but also fully embraced them in their culture. It is one small but easy step to make profiteering in the developing markets that little bit more ethical and responsible.