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Banks increase their environmental requirements By: Andrea Vialli Newspaper article: O Estado de S. Paulo - SP Date: July 23, 2008 Section: Business Page: B15 Sustainability Credit approval for large projects passes through a 'funnel' Large industrial and infrastructure projects, such as for power generation, are becoming increasingly conditioned to social and environmental risk assessments in order to be approved. Banks are increasing their requirements with regards to these aspects for financing large projects. In 2007, 71% of infrastructure projects in emerging countries were submitted to risk assessments pursuant to the Equator Principles, a set of socio-environmental guidelines adopted by 61 banks worldwide for financing projects amounting to US$ 10 million or more. The volume of credit granted under this analysis amounted to US$ 52.9 billion - out of a total of US$ 74.6 billion invested in large-sized projects, as divulged by UK's Infrastructure Journal. Brazil is following the trend: today, seven banks are signatories of the Equator Principles. There are no consolidated figures for the volume of credit granted in the country under these guidelines, however, information provided to O Estado de S. Paulo newspaper by Bradesco, Unibanco, Real and Itau, indicate a volume of roughly R$ 17 billion in 2007. "The risk perception of projects has changed. Banks no longer take into account only the financial risk of projects they are going to finance, but also social and environmental aspects that may damage their reputation", says American Shawn Miller, Citibank's socio-environmental risk analysis executive. On visit to Brazil, Miller - who participated in the creation of the Equator Principles - learned about some of the main projects in the energy and mining areas. "Brazil is way ahead in these matters compared to other emerging countries. In China, for example, only recently has the government required banks doing business in the country to do this", he said. According to Miller, in 2007 Citibank approved nine project finance deals worldwide based on the Equator Principles, totaling US$ 19.5 billion. Growth Last year, banks like Bradesco and Unibanco doubled the volume of financing granted according to these guidelines. At Bradesco, they amounted to R$ 7 billion and a total of 11 projects (R$ 3 billion in 2006). According to Jean Leroy, Bradesco's market relations director, such growth results from the country's good economic moment, as well as the increased concern of entrepreneurs towards sustainability aspects. "There are a large number of projects surfacing that comply with these matters". At Unibanco, the first signatory of the Equator Principles in Brazil, the volume of environmentally friendly credit also doubled between 2005 and 2007. "In 2007, we approved nine deals according to the Equator Principles, amounting to R$ 4.2 billion, compared to R$ 2.3 billion in 2005", says Deives Rezende Filho, Unibanco's compliance superintendent. At Itau and Itau BBA (responsible for large transactions), R$ 4 billion in financing was approved in 2007. At Banco Real, the credit volume under these guidelines has remained stable these past two years. Last year, the bank financed US$ 1 billion (6% of its credit portfolio) compared to US$ 1.5 billion in 2006. According to Cristiane Ronza, socio-environmental risk specialist, the majority of projects focus on renewable energies, such as wind parks, small hydroelectric power plants and sugar & ethanol mills. Link to Portuguese version |
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Environmental standards loom ever larger in banks' lending decisions, by Susanne Bergius, ENDS Report, December 2008
60 Second Profile on the Equator Principles, Good Practice Newsletter from ICMM, December 2008
Banks increase their environmental requirements
Promoting Greater Responsibility in Project Financing by Natasha Cappon, Canada, Spring, 2008
China to bring in green loan benchmark, 25 January, 2008
A Question of Principles, Infrastructure Magazine, by Kimberley Gaskin, June 2007
Citigroup to scale up its green spending,The Financial Times, 8 May 2007.
Polluters Clean Up Act to Attract Lenders, The Moscow Times, 12 October 2005
Mizuho To Adopt Environmental Standards In Project Financing, CNNfn, 26 October 2003
Dexia adhθre aux "Equator principles", La Tribune, 22 September 2003 (in French)
Western Banks Set Standards for Eco-Friendly Lending. Japanese Banks Far Behind. NGO Keeping Close Watch, Nikkei, 5 September 2003
Equator Principles Why Indian Banks Too Should be Guided by Them, The Hindu, 25 July 2003
Project finance Standards for Lending, Financial Mail, 25 July 2003
Banks' green pledge earns mixed response, swissinfo, 10 June 2003
Major Banks Endorse Equator Principles, The Peninsula, Qatar, 5 June 2003
Loan rules with an eye on nature, International Herald Tribune, 5 June 2003
IFC Head's Remarks at Equator Principles Press Conference, 4 June 2003