Approved and Released - Equator Principles III

14 May 2013

Equator Principles (EP) Association Members have given overwhelming support to EP III - the third and most robust version of the EP to date. The vote in favour of EP III means that from 4 June 2013 more deals will be assessed under a strengthened environmental and social risk management framework.

The EP framework for determining, assessing and managing environmental and social risk in project finance transactions has extended its scope to Project-Related Corporate Loans and Bridge Loans, and clarifies the requirements for application to Advisory Services. Under EP III, Equator Principles Financial Institutions (the name for adopters of the EP) will benefit from greater consistency in implementation, enhanced transparency through extended reporting and will address emerging environmental and social concerns.

Leonie Schreve, Head of Sustainable Lending at ING, and Chair of the EP Association Steering Committee said;

“For ten years, the EP framework has helped ensure that the environmental and social impacts of large scale project finance deals are minimised and managed responsibly. The approval of EP III will mean many more projects will be captured under the EP framework, which has been welcomed by financial institutions who want to manage environmental and social risk better. Importantly, it is good news for the environment, and for communities around the world, as economic development continues to bring both benefits and challenges.”

The vote by EP Association Members follows a lengthy consultation process with a range of stakeholders, including EP Association Members, clients, industry bodies, NGOs and other investors. Key contributions from the official stakeholder consultation are available on the EP website.

EP III will be formally launched on 4 June 2013 at an EP conference hosted by ING in Amsterdam. The event will also mark 10 years since the launch of the EP in June 2003.

IMPORTANT - TRANSITION GUIDANCE

The effective date for EP III is 4 June 2013. EP Association Members have a transition period from 4 June 2013 to 31 December 2013 to implement EP III for all products in the Scope (i.e. Project Finance, Advisory, Bridge loans and Project-Related Corporate Loans).

The EP Association Steering Committee wishes to ensure that EP Association Members, clients and stakeholders can transition smoothly and consistently to EP III and provides the following guidance on how this can be achieved:

  • EP III is effective from 4 June 2013.
    • Some Equator Principles Financial Institutions (EPFIs) may need further internal preparation time to apply EP III, therefore EP II can be applied to new transactions (i.e. where the mandate is signed after 4 June 2013) up to the end of the transition period (i.e. 31 December 2013).
    • EP III is not intended to be applied retroactively therefore does not apply to transactions where the mandate was signed before 4 June 2013.
    • EPFIs are strongly encouraged to apply EP III as soon as possible and a common approach to applying the EP can be agreed by banks in a syndicate using the new information sharing language of EP III.
  • EP III should be applied to all new transactions from 1 January 2014.

The EP Association Steering Committee accepts that in certain situations there might be legal constraints that prevent this guidance from being strictly applied. Each EP Association Member should endeavour to make all necessary efforts to ensure this guidance is incorporated into their institution's review of transactions according to their own risk management frameworks and engagement with clients. Note that financial institutions that adopt during the transition period should also follow this transition guidance.

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