History of the Equator Principles

For a number of years, banks working in the Project Finance sector had been seeking ways to assess and manage the environmental and social risks associated with such investment activities.

In October 2002, nine international banks convened in London, together with the International Finance Corporat ion, to discuss these issues. Four of the banks present – ABN Amro, Barclays, Citi and WestLB – acknowledging the general consensus amongst those present, volunteered jointly to develop a banking industry framework for addressing environmental and social risks in project financing that could be applied globally and across all industry sectors.

At the time, the banks soon concluded that the best, most commonly known and widely tested environmental and social policy framework in the finance sector were those established and used by the International Finance Corporation in emerging markets. These standards included International Finance Corporation ’s Environmental and Social Safeguard Policies, Pollution Prevention and Abatement Guidelines (these have evolved into what is currently known as the Performance Standards) and risk categorization screening criteria.

Launch of the Equator Principles

The EPs were launched in Washington D.C. on 4 June 2003 and were initially adopted by ten global financial institutions: ABN AMRO Bank, N.V., Barclays plc, Citi, Crédit Lyonnais, Credit Suisse First Boston, HVB Group, Rabobank Group, The Royal Bank of Scotland, WestLB AG, and Westpac Banking Corporation. Subsequently there were over forty further EP adoptions during the first three year implementation period. See also: What is the origin of the name “Equator Principles ?

Equator Principles Update 2006 – EP II

In the autumn of 2004, the International Finance Corporation announced its intention to update its Environmental and Social Safeguard Policies.

During the public consultation process that accompanied the revision process, the Equator Principles Financial Institutions (EPFIs) participated in a number of consultation meetings with the International Finance Corporation and ultimately an extension of the public consultation period was made in order to receive and fully consider all comments from stakeholders.

Parallel to the International Finance Corporation’s public consultation process, EPFIs engaged with a wide range of stakeholders directly, including NGOs, civil society, clients and industry associations, to listen and learn from their perspectives on the International Finance Corporation's proposed changes. These engagements encompassed in part:

a number of meetings and conference calls with a wide-selection of EPFI clients in various sectors and regions, and industry associations.
bi-lateral meetings/conference calls (and a meeting in London) with 25 NGOs interested in the EPs.
an EPFI meeting held with environmental practitioners from Export Credit Agencies.

In order to reflect the changes in the International Finance Corporation’s new Performance Standards (which were adopted by International Finance Corporation’s Board in February 2006 and came into effect on 30 April 2006) and the EPFI’s implementation experience, the EPFIs embarked on an engagement and review exercise to update the EPs. The revised EPs (EP II) were subsequently released on 6 July, 2006 in London.

The revised EPs incorporated a number of significant and important changes such as a lowering of the dollar threshold from US$ 50 million to US$ 10 million, the inclusion of Project Finance Advisory Services in the EP scope, and the inclusion of stronger and better social standards as outlined in the International Finance Corporation Performance Standards (including enhanced consultation and covenanting requirements, labour standards and project-level grievance mechanisms). The revised EPs also led to increased transparency by requiring each EPFI to report publicly on its implementation of the EPs on an annual basis.

New Equator Principles Association and Governance Rules

In July 2010, the EP Association was instituted to ensure the long-term viability and ease of management of the member EPFIs and Associates.

Equator Principles Strategic Review (October 2010 – May 2011)

In September 2009, the International Finance Corporation launched a review process^[^1] of their Policy and Performance Standards on Social and Environmental Sustainability (on which the EPs are based) and Policy on Disclosure of Information (sustainability framework).

Subsequently in October 2010 the EP Association launched a Strategic Review process to produce a multi-year strategic vision to ensure the EPs continue to be viewed as the “gold standard” in environmental and social risk management for Project Finance within the financial sector.

The EP Strategic Review had the following aims:

take stock of the current state of the EPs and develop a better understanding of the challenges and successes to-date,
identify perceived areas of strength and weakness in the current EP framework through engagement with EPFIs and other stakeholders including clients and industry, civil society, and financial sector peers,
identify recommended action points that will lead to the successful implementation of the vision/plan, and
prepare for an update of the EPs following the conclusion of the International Finance Corporation Performance Standards Review and Update process.

In May 2011 the EP Association publicly released the Executive Summary and Appendix of the Strategic Review consultant report and an associated EP Association Summary Response.

Equator Principles Update 2011 – EP III

Following the conclusion of the International Finance Corporation Performance Standards Update and Review process and the EP Strategic Review process, the EP Association launched the EP III Update process in July 2011 and initiated internal discussions on key thematic areas including:

Scope of the EPs.
Reporting and transparency.
Governance issues, including membership criteria.
Stakeholder engagement during the EP III Update process (including industry and clients, peer financial institutions, and civil society organisations).

The EP Association has set provisional dates (summarised below) for the planned activities, consultation and public comment process however these may be subject to revision or extension at any time.

Phase I – Focused EP Association group work and internal discussion on key topics and thematic areas indentified in the Strategic Review (July – September 2011).
Phase II – Consultation period with the EP Association members, preliminary scoping discussions with key stakeholders and initial drafting of the EP III framework (September 2011 – May 2012).
Phase III - Launch of the formal 60 day Stakeholder Consultation and Public Comment Process (May - July 2012). Note: the EP Association will be providing a more detailed timeline for this at a later date.
Phase IV - Finalisation and launch of the EP III framework (July - October 2012)

It is important to note that the EP Association will be engaging with stakeholders during every phase of the process via the Stakeholder Engagement Working Groups and commits to making the EP III draft public (when available) for a minimum period of 60 days for review and comment. The EP Association will aim to be open and transparent during the EP III Update process, and welcomes feedback and comments from any interested party on both process and substance.

Timeline of Key Events

October 2002	London meeting convened with the International Finance Corporation to discuss environmental and social risk issues in Project Finance.
4 June 2003	Launch of first EPs in Washington,DC and adoption by the first ten financial institutions.
October 2003	Mizuho (Japan), first Asian financial institution, adopts the EPs.
May 2004	EKF (The Netherlands), first export credit agency, adopts the EPs.
4 June, 2004	First anniversary of EPs - The EPs extends to 25 adopting financial institutions located in 14 countries.
June 2004	Unibanco, the first emerging market and South American financial institution, adopt the EPs.
November 2005	Nedbank (South Africa), the first African bank, adopts the EPs.
Sept 2004 - Feb 2006	EPFIs participate in the International Finance Corporation’s Environmental and Social Safeguard Policy Update process. EPFIs consult with NGOs,civil society, clients and industry associations on the International Finance Corporation's proposed changes.
February 2006	The International Finance Corporation’s Board approves new environmental and social Performance Standards with an effective date of 30 April 2006.
Feb – Jun 2006	EPFIs conduct an engagement and review process with NGOs, civil society, export credit agencies, industry associations and clients on the revision of the EPs (EP II) which incorporates the changes in the International Finance Corporation's Performance Standards.
6 July, 2006	Launch of EP II in London - 40 institutions re-adopt the EPs thereby underscoring global application of environmental and social risk management.
April 2007	The International Finance Corporation updates its Environmental Health and Safety Guidelines, which EPFIs incorporate into the EPs.
December 2007	EPFIs publish details of their informal management structure (the original EP Steering Committee), working groups and the paper “Guidance to EPFIs on Equator Principles Implementation Reporting” on the EP website.
April 2008	The EP Secretariat is established.
May 2008	EPFIs celebrate the 5th anniversary of the EPs in Washington, DC.
September 2008	Itau-Unibanco S/A, a Brazilian financial institution and one of the largest emerging markets banks in the world, is announced as the new EP Steering Committee Chair.
October 2008	Industrial Bank, the first domestic Chinese financial institution, adopts the EPs.
August 2009	EPFIs publish the paper "Guidance to EPFIs on Incorporating Environmental and Social Considerations into Loan Documentation" on the EP website.
October 2009	EPFIs participate in the International Finance Corporation’s Sustainability Policy and Performance Standards review and update process.
February 2010	Standard Bank (South Africa), is announced as the first African institution to sit on the EP Steering Committee.
March 2010	Citi is announced as the new EP Steering Committee Chair.
July 2010	Formal establishment of the EP Association and launch of the EP Association Governance Rules.
October 2010	The EP Association announces the commencement of the EP Strategic Review.
May 2011	The EP Association releases a Summary Response to the Strategic Review consultant's report of findings and recommendations. The EP Association launches new website and logo. The International Finance Corporation’s Board approves the updated Sustainability Policy and Performance Standards with an effective date of 1 January 2012.
July 2011	The EP Association announces the commencement of the EP III Update process.
1 January 2012	The newly revised International Finance Corporation Performance Standards become effective. EP Association members apply newly revised Performance Standards – the EP Association Steering Committee issue guidance on implementation.
1 May 2012	ING is announced as the new EP Association Steering Committee Chair.

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^[^1]The International Finance Corporation Review and Update process completed in August 2011 and the updated framework was officially launched on 1 January 2012 – http://www.ifc.org/ifcext/policyreview.nsf/Content/2012-Edition.

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