Drafk Prinicipios Del Ecuador

7/30/2019 Drafk Prinicipios Del Ecuador

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DRAFT OF UPDATED EQUATOR PRINCIPLES (EP III)

RELEASED MONDAY 13 AUGUST 2012

This package includes an Introduction, a Summary of Proposed Key Changes and Areas of Development, the

draft of EP III (clean), the draft of EP III (marked up in track changes) and a Frequently Asked Questions

document.

INTRODUCTION

The Equator Principles (EP) Association released the draft of the updated Equator Principles (EP III) for

stakeholder consultation and public comment on 13 August 2012.

The formal stakeholder consultation and public comment period will continue for a minimum of 60 days giving

all interested parties and stakeholders (including EP Association members, other financial institutions, clients,

industry bodies and associations, non-governmental organisations, consultants, law firms and regulatory

bodies) an opportunity to review the EP III draft and provide comments.

The EP Association is committed to openness, transparency and responsiveness and will consider all

stakeholder feedback. You can submit your views and participate in the process in one or more of the

following ways:

• Complete the online submission form.

• Email comments to [email protected].

• Participate in a webinar and/or face-to-face meeting – details are published on the EP III web pages.

Note that places are limited and by invitation only – you can register your interest in attending by

emailing [email protected].

http://www.equator-principles.com/index.php/ep3



mailto:[email protected]















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SUMMARY OF PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

KEY TOPIC RELEVANT SECTION DESCRIPTION

Structure and

Language

All • The document has been divided in to 3 distinct sections to

enable clear distinction between mandatory requirements

in Main Text and Annexes, and supporting information in

the Exhibits:

1. Main Text – Preamble, Scope and Statement of

Principles.

2. Annexes – This contains implementation requirements

for applying certain aspects of the EP framework. The

content of the Annexes are an integral part of the EP

and the requirements within them are mandatory.

3. Exhibits – This contains supporting information

including a new Glossary of Terms.

• Several footnotes have been incorporated in the main text

or added to the Glossary of Terms.

• Several Principles have been shortened and language has

been adjusted or clarified.

• The document language has been refined to align with

new/changed language in the 2012 IFC Performance

Standards.

Scope • Scope

• Principles 2, 4, 7,

and 9

• Exhibit I

• The inclusion of Project-Related Corporate Loans

(Corporate Loans related to one specific project) subject

to a US$100m threshold and a loan tenor of at least 2

years. It should be noted that general corporate purposes

loans are excluded from the scope of the EP (refer to the

Scope section of the EP III draft for the criteria).

• The inclusion of Bridge Loans that will be refinanced by

Project Finance or a Project-Related Corporate Loan.



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Categorisation • Principle 1

• Exhibit I in EP II

• Exhibit I has been deleted and Categorisation has been

included in the main text. It should be noted that further

guidance material on Categorisation will be developed.

Climate

Change

• Principle 2 and

10

• Annex A

• There is a new requirement for an analysis of alternatives,

including less carbon intensive fuel sources and

technologies, for projects emitting over 100.000 tonnes

CO2 equivalent. It should be noted that the alternatives

analysis is based on the requirements stipulated in theupdated IFC Performance Standards.

• There is a new requirement for borrowers to publicly

report on emissions for projects emitting over 100.000

tonnes CO2 equivalent.

• It should be noted that further guidance material on

implementation of these requirements will be developed.

Applicable

Environmental

and Social

Standards

• Preamble

• Principle 3

• Various other

Principles

• An overarching statement regarding the application of the

EP framework in High-Income OECD Countries has been

included in the Preamble.

• Principle 3 now provides clarity to EPFIs and clients on the

meaning and intent of the application of standards in

different jurisdictions. Where possible, reference to

application in High-Income OECD Countries has been

deleted from individual Principles.

• Principle 3 now states that the EPFI, at its sole discretion,

may seek to benchmark projects in these countries against

these or other internationally recognised environmental

and social assessment standards.

Action Plan

and

Managementsystems

• Principle 4

• Exhibit I

• The definition and purpose of an Action Plan, and related

management plans has been clarified.



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Stakeholder

Engagement

and Human

Rights

• Preamble

• Principles 5, 6

and 10

• Exhibit I

• Exhibit II

• New language in the Preamble and Exhibit II

acknowledges the UN "Protect, Respect and Remedy"

Framework for Business and Human Rights and Guiding

Principles on Business and Human Rights, and the

importance of human rights in the due diligence process.

• Principles 5 and 6 include new language related to

Stakeholder Engagement (replacing the current

Consultation and Disclosure) to reflect the updatedlanguage in the IFC Performance Standards on stakeholder

engagement hierarchy.

• The text referencing Free, Prior and Informed Consent for

projects in non-OECD countries and OECD countries not

designated as High-Income has been inserted so that it

reflects the important changes in the IFC Performance

Standards.

• Principle 6 has been shortened to reduce duplication of

the requirements in the IFC Performance Standards.

• Assessment disclosure requirements have been moved to

Principle 10.

Covenants • Principle 8, 2 and

4

• The requirement for covenants now explicitly refers to all

projects.

• Requirements for Bridge Loans and Project Finance

Advisory services have been included in Principle 2 and

Principle 4.

http://www.reports-and-materials.org/Ruggie-report-7-Apr-2008.pdf




http://www.ohchr.org/EN/PublicationsResources/Pages/ReferenceMaterial.aspx










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Reporting and

Transparency

• Principles 2, 5

and 10

• Annex B

• Principle 10 now includes all reporting and disclosure

requirements and is divided in to “Project Reporting” and

“EPFI Reporting”.

• Annex B includes detailed requirements for EPFI reporting.

• In addition to the client’s responsibility to disclose the

project Environmental Impact Assessment (EIA) locally,

the text now includes the requirement to disclose the EIAand Environmental and Social Management Plan (ESMP)

(which is normally a component of the EIA), online unless

the borrower does not have a company website.

• Annex B also includes a new requirement to provide,

subject to borrower consent, a list of projects for

publication on the EP website.

• It should be noted that a grace period for reporting onProject-Related Corporate Loans will be reflected in EP

Association Governance Rules.



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OFFICIAL FIRST DRAFT OF EP III

FOR PUBLIC CONSULTATION

13 AUGUST 2012

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THE EQUATOR PRINCIPLES12

[DATE TBC]13

14

A financial industry benchmark for determining, assessing15

and managing environmental and social risk in projects16http://www.equator-principles.com 17

18

http://www.equator-principles.com/





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13 AUGUST 2012

CONTENTS19

20PREAMBLE ................................................................................................................................... 221

22SCOPE .......................................................................................................................................... 323

24STATEMENT OF PRINCIPLES .......................................................................................................... 325

26Principle 1: Review and Categorisation .............................................................................................. 427

28Principle 2: Environmental and Social Assessment ............................................................................ 429

30Principle 3: Applicable Environmental and Social Standards.............................................................. 531

32Principle 4: Environmental and Social Management System and Action Plan ................................... 533

34Principle 5: Stakeholder Engagement ................................................................................................. 635

36Principle 6: Grievance Mechanism...................................................................................................... 637

38Principle 7: Independent Review ........................................................................................................ 739

40Principle 8: Covenants ........................................................................................................................ 741

42Principle 9: Independent Monitoring and Reporting .......................................................................... 843

44 Principle 10: Reporting and Transparency .......................................................................................... 84546

DISCLAIMER ................................................................................................................................. 94748

ANNEXES: IMPLEMENTATION REQUIREMENTS ........................................................................... 104950

Note: The implementation requirements detailed in these annexes are an integral part of the Equator 51Principles and are mandatory requirements for Equator Principles Financial Institutions.52

53Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of Greenhouse54Gas Emissions .................................................................................................................................... 1055

56

Annex B - Minimum Reporting Requirements .................................................................................. 115758

EXHIBITS: SUPPORTING INFORMATION ...................................................................................... 135960

Exhibit I - Glossary of Terms .............................................................................................................. 136162

Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the63Environmental and Social Assessment Documentation ................................................................... 1764

65Exhibit III: IFC Performance Standards on Environmental and Social Sustainability and66Environmental, Health and Safety Guidelines .................................................................................. 1867

68

69



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13 AUGUST 2012

PREAMBLE70

71 Large infrastructure and industrial Projects can have adverse impacts on people and on the72

environment. As financiers and advisors, we work in partnership with our clients to identify, assess73

and manage environmental and social risks and impacts in a structured way, and on an ongoing74

basis. Such collaboration promotes sound and sustainable environmental and social performance,75

and can lead to improved financial, environmental and social outcomes.76

77

We, the Equator Principles Financial Institutions (EPFIs), have adopted the Equator Principles in78

order to ensure that the Projects we finance are developed in a manner that is socially responsible79

and reflects sound environmental management practices. By doing so, negative impacts on Project-80

affected ecosystems, communities, and the climate should be avoided where possible. If these81

impacts are unavoidable, they should be minimised and compensated for, or offset appropriately.82

83

We believe that adoption of and adherence to the Equator Principles offers significant benefits to us,84

our borrowers, and local stakeholders through our borrowers’ engagement with locally affected85

communities. We therefore recognise that our role as financiers affords us opportunities to promote86

responsible environmental stewardship and socially responsible development, including fulfilling our87

responsibility to respect human rights by undertaking due diligence in accordance with the Equator88

Principles.89

90

The Equator Principles are intended to serve as a common baseline and framework for the91

implementation of each EPFI’s internal environmental and social policies, procedures and standards92

related to its financing of Projects. We will not provide Project related loans and Project Finance93

Advisory services, as described and per the requirements in the Scope, to Projects where the94

borrower will not, or is unable to comply with, the Equator Principles.95

96

The Equator Principles apply globally and to all sectors. In High-Income OECD Countries, relevant97

host country laws, regulations and permits generally meet or exceed the requirements of the98

Equator Principles. For Projects located in these countries, host country requirements may be used99as a substitute for the requirements in the Equator Principles.100

101

EPFIs review the Equator Principles from time-to-time based on implementation experience, and in102

order to reflect ongoing learning and emerging good practice.103

104

105



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13 AUGUST 2012

SCOPE106

107The Equator Principles apply to the four financial products described below:108

109

1. Project Finance Advisory services where total Project capital costs are US$ 10 million or more.110

111

2. Project Finance with total Project capital costs of US$10 million or more.112

113

3. Project-Related Corporate Loans where all five of the following criteria are met:114

115

i. the loan is related to a single Project,116

ii. the total aggregate loan amount is at least US$100 million,117

iii. the EPFI’s individual Initial Exposure is at least US$50 million,118

iv. the loan tenor is at least two years, and119

v. the borrower has Effective Operational Control (either direct or indirect) over the120

Project.121

122

4. Bridge Loans with a tenor of less than two years that are intended to be refinanced by a Project123

Finance or Project-Related Corporate Loan. The requirements for Bridge Loans vary depending124

on the Project’s stage of development. 125

126

While the Equator Principles are not intended to be applied retroactively, EPFIs will apply them to127

the expansion or upgrade of an existing Project where changes in scale or scope may create128

significant environmental and/or social impacts, or significantly change the nature or degree of an129

existing impact.130

131

STATEMENT OF PRINCIPLES132

133

EPFIs will only provide Project related loans and Project Finance Advisory services, as described in134

the Scope, to Projects that conform to Principles 1-10 below:135

136

Recognising business confidentiality and applicable laws and regulations, mandated EPFIs will137

endeavour to share relevant environmental and social information with other mandated financial138

institutions with a view to seeking, where appropriate, consistent application of the Equator139

Principles to Projects financed. Any decision as to whether, or on what terms, to provide Project-140

Related loans and Project Finance Advisory services will be for each EPFI to make in accordance with141

their own risk management policies. Timing constraints may lead EPFIs considering a transaction to142

seek authorisation from their clients to start such information sharing before all relevant EPFIs are143

formally mandated. EPFIs expect clients to provide such authorisation on a best efforts basis.144

145



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Principle 1: Review and Categorisation146

147

When a Project is proposed for financing, the EPFI will, as part of its internal environmental and148

social review and due diligence, categorise such Project based on the magnitude of its potential risks149

and impacts. Such screening is based on the environmental and social categorisation scheme of the150

International Finance Corporation (IFC).151

152

Using categorisation, the EPFI’s environmental and social due diligence is commensurate with the153

nature, scale and stage of the Project, and with the level of environmental and social risks and154

impacts. The categorisation scheme is:155

156

Category A – Projects with potential significant adverse environmental and social risks and/or157

impacts that are diverse, irreversible or unprecedented;158

159

Category B – Projects with potential limited adverse environmental and social risks and/or impacts160

that are few in number, generally site-specific, largely reversible and readily addressed through161

mitigation measures; and162

163

Category C – Projects with minimal or no adverse environmental and social risks and/or impacts.164

165

Principle 2: Environmental and Social Assessment166

167

Where EPFIs are providing Project Finance Advisory services or a Bridge Loan, EPFIs will make the168

client aware of the content, application and benefits of applying the Equator Principles to the169

anticipated Project. The EPFI will request that the client communicates to the EPFI its intention to170

adhere to the requirements of the Equator Principles when subsequently seeking financing. In their171

advisory capacity the EPFI will guide and support the client through the steps leading to Equator172

Principles application.173

174

For each Project assessed as being either Category A or Category B, the EPFI will require the175

borrower to conduct an Environmental and Social Assessment (“Assessment”) process to address, as176

appropriate and to the EPFI’s satisfaction, the relevant environmental and social risks and impacts of 177

the proposed Project (which may include, if relevant, the illustrative list of issues found in Exhibit II).178

The Assessment should also propose measures to prevent, mitigate and manage adverse impacts in179

a manner relevant and appropriate to the nature and scale of the proposed Project.180

181

The Assessment will be an adequate, accurate and objective evaluation and presentation of the182

risks, whether prepared by the borrower, consultants or external experts. The Assessment183

document may comprise a full-scale environmental and social impact assessment, a limited or184focused environmental or social assessment (e.g. audit), or straight-forward application of 185



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13 AUGUST 2012

environmental siting, pollution standards, design criteria, or construction standards. One or more186

specialised studies may also need to be undertaken.187

188

Regardless of the location, for all Projects which are expected to emit more than 100,000 tonnes of 189

CO2 equivalent annually, an alternatives analysis will be conducted to evaluate less GHG intensive190

alternatives. Refer to Annex A for alternatives analysis requirements.191

192

Principle 3: Applicable Environmental and Social Standards193

194

The EPFI will require that the Assessment process evaluates compliance as follows:195

196

1. For Projects located in non-OECD countries and OECD countries not designated as High-Income,197

the Assessment process evaluates compliance with the then applicable IFC Performance198

Standards (Exhibit III), and IFC Environmental, Health and Safety (EHS) Guidelines (Exhibit IV).199

200

2. For Projects located in High-Income OECD Countries, the Assessment process evaluates201

compliance with relevant host country laws, regulations and permits that pertain to202

environmental and social matters as they are generally considered to meet or exceed the203

requirements of the Equator Principles. This substitution may extend to environmental and/or204

social assessments (Principle 2), management systems and plans (Principle 4), stakeholder205

engagement (Principle 5) and, disclosure and grievance mechanisms (Principle 6).206

207

The Assessment will establish to a participating EPFI’s satisfaction the Project's overall compliance208

with, or justified deviation from, the applicable standards. The applicable standards (as described209

above) represent the minimum standards adopted by EPFIs and individual EPFIs may, at their sole210

discretion, apply additional requirements.211

212

Principle 4: Environmental and Social Management System and Action Plan213

214

For all Category A and Category B Projects, the EPFI will require the borrower to develop or maintain215

an Environmental and Social Management System (ESMS).216

217

Further, an Environmental and Social Management Plan (ESMP) will be prepared by the borrower to218

address issues raised in the Assessment and incorporate actions required to comply with the219

applicable standards. Where the applicable standards are not met to the EPFIs satisfaction, the220

borrower and the EPFI will agree an Action Plan (AP). The AP is intended to outline gaps and221

commitments to meet EPFI requirements in line with the applicable standards.222

223

For Bridge Loans where impacts have been identified and Project development is expected to begin224during the tenor of the loan, the borrower will identify an Independent Environmental and Social225



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impede access to judicial or administrative remedies. The borrower will inform the Affected265

Communities about the mechanism in the course of the Stakeholder Engagement process.266

267

Principle 7: Independent Review268

269

Project Finance270

271

For all Category A and, as appropriate, for Category B Projects, an Independent Environmental and272

Social Consultant, not directly associated with the borrower, will carry out an Independent Review of 273

the Assessment, ESMP, ESMS and consultation process documentation in order to assist the EPFI's274

due diligence, and assess Equator Principles compliance.275

276

The Independent Environmental and Social Consultant will also propose or opine on a suitable AP277

capable of bringing the Project into compliance with the Equator Principles, or indicate when278

compliance is not possible.279

280

Project-Related Corporate Loans281

282

An Independent Review by an Independent Environmental and Social Consultant is required for283

Projects with high risk impacts including, but not limited to, any of the following:284

285

• Adverse impacts on indigenous people,286

• Critical habitat impacts,287

• Significant cultural heritage impacts,288

• Large-scale resettlement.289

290

In other Category A, and as appropriate Category B, Project-Related Corporate Loans, the EPFI may291

determine whether an Independent Review is appropriate or if internal review by the EPFI is292

sufficient. This may take into account the due diligence performed by an Official Agency, if relevant.293

294

Principle 8: Covenants 295

296

An important strength of the Equator Principles is the incorporation of covenants linked to297

compliance. For all Projects, the borrower will covenant in the financing documentation:298

299

a) to comply with all relevant host country environmental and social laws, regulations and300

permits in all material respects;301

302

b) to comply with the ESMPs and AP (where applicable) during the construction and operation303of the Project in all material respects;304



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c) to provide periodic reports in a format agreed with the EPFIs (with the frequency of these305

reports proportionate to the severity of impacts, or as required by law, but not less than306

annually), prepared by in-house staff or third party experts, that i) document compliance307

with the ESMPs and AP (where applicable), and ii) provide representation of compliance308

with relevant local, state and host country environmental and social laws, regulations and309

permits; and310

311

d) to decommission the facilities, where applicable and appropriate, in accordance with an312

agreed decommissioning plan.313

314

Where a borrower is not in compliance with its environmental and social covenants, the EPFI will315

work with the borrower on remedial actions to bring the Project back into compliance to the extent316

feasible. If the borrower fails to re-establish compliance within an agreed grace period, the EPFI317

reserves the right to exercise remedies, as considered appropriate.318

319

Principle 9: Independent Monitoring and Reporting320

321

Project Finance322

323

To assess Project compliance with the Equator Principles and ensure ongoing monitoring and324

reporting over the life of the loan, the EPFI will, for all Category A and, as appropriate, Category B325

Projects, require the appointment of an Independent Environmental and Social Consultant, or326

require that the borrower retain qualified and experienced external experts to verify its monitoring327

information which would be shared with the EPFI.328

329


331

For Projects where an Independent Review is required under Principle 7, the EPFI will require the332

appointment of an Independent Environmental and Social Consultant, or require that the borrower333

retain qualified and experienced external experts to verify its monitoring information which would334be shared with the EPFI.335

336

Principle 10: Reporting and Transparency337

338

Project Reporting Requirements339

340

For all Category A and, as appropriate, Category B Projects located in non-OECD countries and OECD341

countries not designated as High-Income, the EPFI will require the borrower to disclose the342



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Assessment documentation and the ESMP online1. The borrower will take account of and document343

the process and results of the stakeholder consultation, including any actions agreed resulting from344

the consultation process. For Projects with adverse environmental or social impacts, disclosure345

should occur early in the Assessment process, and in any event before the Project construction346

commences, and on an ongoing basis.347

348

For all Category A and, as appropriate Category B Projects, in all countries, the EPFI will require the349

borrower to publicly report greenhouse gas emission levels during the operational phase for Projects350

emitting over 100,000 tonnes of CO2 equivalent annually. Refer to Annex A for detailed351

requirements on greenhouse gas emissions reporting.352

353

EPFI Reporting Requirements354

355

The EPFI will report publicly at least annually on transactions screened and closed, and about its356

Equator Principles implementation processes and experience, taking into account appropriate357

confidentiality considerations. The EPFI will report according to the minimum reporting358

requirements detailed in Annex B.359

360

DISCLAIMER361

362

The EPFIs view the Equator Principles as a financial industry benchmark for developing individual,363

internal environmental and social policies, procedures and practices. As with all internal policies, the364

Equator Principles do not create any rights in, or liability to, any person, public or private.365

Institutions adopt and implement the Equator Principles voluntarily and independently, without366

reliance on or recourse to the IFC, the World Bank or other EPFIs.367

368

1Except in cases where the borrower does not have a company website.



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ANNEXES: IMPLEMENTATION REQUIREMENTS369

370Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of 371

Greenhouse Gas Emissions372

373

Where an alternatives analysis is required by a regulating permitting process, the analysis will follow374

the methodology and time frame required by the relevant process. Following completion of an375

alternatives analysis, the borrower will provide evidence of technically and financially feasible and376

cost-effective options available to reduce Project-related GHG emissions during the design,377

construction and operation of the Project.378

379Quantification of GHG emissions will be conducted by the borrower in accordance with380

internationally recognised methodologies and good practice, for example, the GHG Protocol. For381

Scope 1 emissions, this analysis will include consideration of alternative fuel or energy sources.382

Additionally, for Projects in sectors with the highest carbon intensity, the alternatives analysis will383

include comparisons to other viable technologies used in the same industry in the country or region384

with the relative energy efficiency of the selected technology.385

386

High carbon intensity sectors include the following, as outlined in the IFC EHS Guidelines:387

388• thermal power,389

• cement and lime manufacturing,390

• integrated steel mills,391

• base metal smelting and refining,392

• foundries.393

394

The EPFI will require the borrower to publicly report on greenhouse gas emission levels during the395

operational phase for Projects emitting over 100,000 tonnes of CO 2-equivalent annually (combined396

Scope 1 and Scope 2), and they will be encouraged to report publicly on Projects emitting over397

25,000 tonnes. Public reporting requirements can be satisfied via regulatory requirements for398

reporting or environmental impact assessments, or voluntary reporting mechanisms such as the399

Carbon Disclosure Project where such reporting includes emissions at Project level.400

401

The borrower will quantify direct emissions from the facilities owned or controlled within the402

physical Project boundary (Scope 1 emissions), as well as indirect emissions associated with the off-403

site production of energy used by the Project (Scope 2 emissions).404

405

http://www.ghgprotocol.org/



http://www.cdproject.net/






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Annex B - Minimum Reporting Requirements406

407

These reporting requirements apply to Project Finance Advisory services, Project Finance and408

Project-Related Corporate Loans, unless specified otherwise.409

410

Reporting data will be published in a single location. If data is displayed in different locations (e.g.411

website, reports) the EPFI will provide links to facilitate information gathering.412

413

The EPFI will report annually at a minimum and will specify the reporting period (e.g. start and end414

dates).415

416

Aggregated Data Reporting417

418

1. The EPFI will report the number of transactions screened for the first time during the reporting419

period. The EPFI will provide a definition of “transactions screened”.420

421

2. Data for Project Finance Advisory services and Project Finance will be displayed separately from422

Project-Related Corporate Loans.423

424

3. The EPFI will display a breakdown of the data as follows:425

426

• Category (A, B, or C);427

• Category (A, B, or C) and by Sector and Region i.e. (Mining, Infrastructure, Oil and Gas,428

Power, Others) and (Americas, Europe Middle East and Africa, Asia Pacific);429

• Category (A, B, or C) and by Host Country Classification (e.g. High-Income OECD);430

• Category (A or B) and whether an Independent Review has been carried out.431

432

4. The EPFI will report on the number of Project Finance and Project-Related Corporate Loans that433

have reached Financial Close during the reporting period and will display a breakdown of the434

data by Category (A, B, or C). Note this requirement does not apply to Project Finance Advisory435services.436

437

Implementation Reporting438

439

1. The EPFI will report on their implementation of the Equator Principles, including:440

441

• The mandate of the Equator Principles Reviewers (e.g. responsibilities and staffing);442

• The respective roles of the Equator Principles Reviewers and business lines involved in the443

transaction review process;444



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• The level of senior management involvement for Category A and, as appropriate, Category B445

transactions;446

• The incorporation of the Equator Principles in their credit and risk management policies and447

procedures.448

449

2. EPFIs, in their first year of Equator Principles adoption, will provide details of their internal450

preparation and staff training.451

452

Project-Specific Data Reporting453

454

Project-Specific Data reporting is:455

456

• applicable only to Project Finance transactions that have reached Financial Close,457

• subject to obtaining client consent,458

• subject to applicable local laws and regulations, and459

• subject to any reduction in the rights, or increase in the liability, of the EPFI.460

461

The EPFI will seek client consent at a time during the loan documentation process deemed462

appropriate by the EPFI or at Financial Close.463

464

The EPFI will submit data (or a link to the data on their website) to the Equator Principles Secretariat465

for publication on the Equator Principles website. The data will include:466

467

• Project name (as per the loan agreement);468

• Sector: Mining, Infrastructure, Oil and Gas, Power, Others;469

• Region: Americas, Europe Middle East and Africa, Asia Pacific;470

• The calendar year in which the loan reached Financial Close.471

472



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EXHIBITS: SUPPORTING INFORMATION473

474Exhibit I - Glossary of Terms475

476

Action Plan (AP) is prepared, as a result of EPFI due diligence, to describe and prioritise the actions477

needed to address any gaps in the Assessment or ESMPs to bring the Project in line with applicable478

standards as defined in the Equator Principles. The AP is typically tabular in form and lists distinct479

actions from mitigation measures to follow-up studies or plans that complement the Assessment.480

481

Affected Communities are local communities, within the Project's area of influence, directly affected482

by the Project.483484

Bridge Loan is an interim loan given to a business until the longer term stage of financing can be485

obtained. 486

487

Effective Operational Control includes both direct control of the Project by the borrower and488

indirect control, for example where a subsidiary of the borrower operates the Project. 489

490

Environmental and Social Assessment (Assessment) is a process that determines the environmental491

and social risks and impacts (including labour, health, and safety) of a proposed Project in its area of 492

influence. 493

494

Environmental and Social Management Plan (ESMP) is a summary of borrower commitments to495

mitigate risks and impacts identified in the Assessment. This may range from a brief description of 496

routine mitigation measures to a series of documents (e.g. resettlement action plan, indigenous497

peoples plan, emergency preparedness and response plan, decommissioning plan). The level of 498

detail and complexity of the ESMP and the priority of the identified measures and actions will be499

commensurate with the Project’s potential risks and impacts.500

501

Environmental and Social Management System (ESMS) is the overarching environmental, social,502

health and safety management system which may be applicable at a corporate or Project level. The503

system is designed to identify, assess and manage risk in respect to the Project on an ongoing basis.504

The system consists of manuals and related source documents, including policies, management505

programs and plans, procedures, requirements, performance indicators, responsibilities, training506

and periodic audits and inspections with respect to environmental or social matters. It is the507

overriding framework by which an ESMP and/or AP is implemented. The term may refer to the508

system for the construction phase or the operational phase of the Project, or to both as the context509

may require.510

511



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13 AUGUST 2012

Equator Principles Reviewers are EPFI employees responsible for reviewing the environmental and512

social aspects of loans subject to the Equator Principles. They may be a distinct Equator Principles513

team or members of banking, credit risk, corporate sustainability (or similar) who are tasked with514

applying the Equator Principles internally.515

516

Financial Close is defined as the date on which all conditions precedent to initial drawing of the debt517

have been satisfied or waived. 518

519

High-Income OECD Countries are countries that are members of the Organisation for Economic Co-520

Operation and Development (OECD) and designated High-Income by the World Bank Development521

Indicators Database.522

523

Informed Consultation and Participation is an in-depth exchange of views and information and an524

organised and iterative consultation that leads the borrower to incorporate the views of Affected525

Communities, on matters that affect them directly (such as proposed mitigation measures, the526

sharing of development benefits and opportunities, and implementation issues), into their decision-527

making process.528

529

Independent Environmental and Social Consultant is a qualified independent firm or consultant530

(not directly tied to the borrower) acceptable to the EPFI. 531

532Independent Review is a review of the Assessment, ESMP and consultation process documentation533

carried out by an Independent Environmental and Social Consultant. 534

535

Initial Exposure is the initial amount (not the amount after sell down or syndication) committed to536

the loan.537

538

Known Use of Proceeds is the information provided by the borrower on how the borrowings will be539

used.540

541Non-High Income OECD Countries are countries that are members of the OECD that are not542

designated as High-Income by the World Bank Development Indicators Database. 543

544

Non-OECD Countries are countries that are not members of the OECD.545

546

Official Agency is a multilateral development bank, a multilateral or bilateral financial institution or547

an OECD Export Credit Agency548

549



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13 AUGUST 2012

Other Stakeholders are those not directly affected by the Project but that have an interest in it. They550

could include national and local authorities, neighbouring Projects, and/or non-governmental551

organisations.552

553

A Project is a development (in any sector) at an identified location. It includes an expansion or554

upgrade of an existing operation that results in a material change in output or function. Examples of 555

Projects that trigger the Equator Principles include, but are not limited to; a power plant, mine, oil556

and gas Project (including drillships and Floating Production Storage and Offloading (FPSO) vessels),557

chemical plant, infrastructure development, manufacturing plant, large scale real estate558

development, or any other Project that creates significant environmental and/or social impacts. 559

560

Project Finance is a method of financing in which the lender looks primarily to the revenues561

generated by a single Project, both as the source of repayment and as security for the exposure. This562

type of financing is usually for large, complex and expensive installations that might include, for563

example, power plants, chemical processing plants, mines, transportation infrastructure,564

environment, and telecommunications infrastructure. Project Finance may take the form of 565

financing of the construction of a new capital installation, or refinancing of an existing installation,566

with or without improvements. In such transactions, the lender is usually paid solely or almost567

exclusively out of the money generated by the contracts for the Project’s output, such as the568

electricity sold by a power plant. The borrower is usually a Special Purpose Entity that is not569

permitted to perform any function other than developing, owning, and operating the installation.570The consequence is that repayment depends primarily on the Project’s cash flow and on the571

collateral value of the Project’s assets. For reference go to “Basel Committee on Banking Supervision,572

International Convergence of Capital Measurement and Capital Standards ("Basel II")” , November573

2005. http://www.bis.org/publ/bcbs118.htm. Reserve-Based Financing in extractive sectors that is574

non-recourse and where the proceeds are used to develop one particular reserve (e.g. an oil field or575

a mine) is considered to be a Project Finance transaction covered under the Equator Principles.576

577

Project Finance Advisory is the provision of advice on the potential financing of a development578

where one of the options may be Project Finance.579580

Project-Related Corporate Loans are corporate loans, made to business entities (either privately,581

publicly, or state-owned or controlled) related to a single Project, either a new development,582

expansion (e.g. where there is an expanded footprint) or upgrade, where the Known Use of Proceeds583

is related to a single Project in one of the following ways:584

585

a. The lender looks primarily to the revenues generated by the Project as the source of 586

repayment (as in Project Finance) and where security exists in the form of a corporate or587

parent company guarantee;588

589

http://www.bis.org/publ/bcbs118.htm






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13 AUGUST 2012

b. Documentation for the loan indicates that the majority of the proceeds of the total loan are590

directed to the Project. Such documentation may include the term sheet, information591

memorandum, credit agreement, or other representations provided by the borrower into its592

intended use of proceeds for the loan.593

594

In the case of Export Finance, the infrastructure or industrial project to which the export is intended595

will be considered the “Project”.596

597

Excluded transactions include Asset Finance (such as for cargo ships or airplanes), general working598

capital facilities, and general capital expenditure facilities used to maintain, enhance and upgrade a599

company's operations.600

601

Loans that are not directed towards a Project, for example general corporate purposes loans, are not602

in the scope the Equator Principles.603

604

Stakeholder Engagement refers to IFC Performance Standards provisions on external605

communication, environmental and social information disclosure, informed consultation, and606

grievance mechanisms. For the Equator Principles, Stakeholder Engagement also refers to the overall607

requirements described under Principle 5.608

609

610611



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13 AUGUST 2012

Exhibit II: Illustrative List of Potential Environmental and Social Issues to be612

Addressed in the Environmental and Social Assessment Documentation613614

In the context of the business of the Project, the Assessment documentation will address, where615

applicable, the following issues:616

617

a) assessment of the baseline environmental and social conditions618

b) consideration of feasible environmentally and socially preferable alternatives619

c) requirements under host country laws and regulations, applicable international treaties and620

agreements621

d) protection of human rights by acting with due diligence to prevent, mitigate and manage622

adverse human rights impacts623

e) protection of community health, safety and security (including risks, impacts and management624

of Project’s use of security personnel)625

f) protection of cultural property and heritage626

g) protection and conservation of biodiversity, including endangered species and sensitive627

ecosystems in modified, natural and critical habitats, and identification of legally protected areas628

h) sustainable management and use of renewable natural resources (including sustainable629

resource management through appropriate independent certification systems)630

i) use and management of dangerous substances631

j) major hazards assessment and management632

k) labour issues (including the four core labour standards), and occupational health and safety633

l) fire prevention and life safety634

m) socio-economic impacts635

n) land acquisition and involuntary resettlement636

o) impacts on affected communities, and disadvantaged or vulnerable groups637

p) impacts on indigenous peoples, and their unique cultural systems and values638

q) cumulative impacts of existing Projects, the proposed Project, and anticipated future Projects639

r) consultation and participation of affected parties in the design, review and implementation of 640

the Project641

s) efficient production, delivery and use of energy642

t) pollution prevention and waste minimisation, pollution controls (liquid effluents and air643

emissions) and solid and chemical waste management644

u) viability of Project operations, of reasonable foreseeable changing weather patterns/climatic645

conditions, together with adaptation opportunities.646

647

Note: The above list is for illustrative purposes only. The Assessment process of each Project may or648

may not identify all issues noted above, or be relevant to every Project.649

650



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13 AUGUST 2012

Exhibit III: IFC Performance Standards on Environmental and Social Sustainability651

and Environmental, Health and Safety Guidelines652653

The Equator Principles refer to two separate parts of the IFC Sustainability Framework as “the then654

applicable environmental and social standards” under Principle 3.655

656

1. The IFC Performance Standards on Environmental and Social Sustainability657

658

As of January 1, 2012, the following Performance Standards were applicable:659

660

1 - Assessment and Management of Social and Environmental Risks and Impacts661

2 - Labor and Working Conditions662

3 - Resource Efficiency and Pollution Prevention663

4 - Community Health, Safety and Security664

5 - Land Acquisition and Involuntary Resettlement665

6 - Biodiversity Conservation and Sustainable Management of Living Natural Resources666

7 - Indigenous Peoples667

8 - Cultural Heritage668

669

Guidance Notes accompany each Performance Standard. EPFIs do not formally adopt the Guidance670

Notes however EPFIs and borrowers may find them useful points of reference when seeking further671

guidance on or interpreting the Performance Standards.672

673

The IFC Performance Standards, Guidance Notes and Industry Specific Guidelines can be found at674

http://www.ifc.org/ifcext/policyreview.nsf/Content/2012-Edition. 675

676

2. The IFC Environmental, Health and Safety (EHS) Guidelines677

678

The IFC EHS Guidelines are technical reference documents containing examples of Good679

International Industry Practice (GIIP), as defined in Performance Standard 3 on Resource Efficiency680

and Pollution Prevention. They contain the performance levels and measures that are normally681

considered acceptable for Projects in emerging markets, as well as being achievable in new facilities682

at reasonable costs by existing technology. Two Guidelines are used:683

684

The General EHS Guidelines685

686

These Guidelines contain information on cross-cutting environmental, health, and safety issues687

potentially applicable to all industry sectors. They are divided into sections entitled: Environmental;688

Occupational Health and Safety; Community Health and Safety; Construction; and Decommissioning.689They should be used together with the relevant Industry Sector Guideline(s).690

http://www.ifc.org/ifcext/policyreview.nsf/Content/2012-Edition


http://www1.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC+Sustainability/Sustainability+Framework/Environmental%2C+Health%2C+and+Safety+Guidelines/






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13 AUGUST 2012

The Industry Sector Guidelines691

692

These Guidelines contain information on industry-specific impacts and performance indicators, plus693

a general description of industry activities. They are grouped as follows:694

695

Agribusiness/Food Production696

• Annual Crop Production697

• Aquaculture698

• Breweries699

• Dairy Processing700

• Fish Processing701

• Food and Beverage Processing702

• Mammalian Livestock Production703

• Meat Processing704

• Plantation Crop Production705

• Poultry Processing706

• Poultry Production707

• Sugar Manufacturing708

• Vegetable Oil Processing709

710

Chemicals711

• Coal Processing712

• Large Volume Inorganic Compounds713

Manufacturing and Coal Tar Distillation714

• Large Volume Petroleum-based Organic715

Chemicals Manufacturing716

• Natural Gas Processing717

• Nitrogenous Fertilizer Manufacturing718

• Oleochemicals Manufacturing719

• Pesticides Formulation, Manufacturing and720

Packaging721

• Petroleum-based Polymers Manufacturing722

• Petroleum Refining723

• Pharmaceuticals and Biotechnology724

Manufacturing725

• Phosphate Fertilizer Manufacturing726

727

728

729

Forestry730

• Board and Particle-based Products731

• Forest Harvesting Operations732

• Pulp and Paper Mills733

• Sawmilling and Wood-based Products734

735

General Manufacturing736

• Base Metal Smelting and Refining737

• Cement and Lime Manufacturing738

• Ceramic Tile and Sanitary Ware739

Manufacturing740

• Construction Materials Extraction741

• Foundries742

• Glass Manufacturing743

• Integrated Steel Mills744

• Metal, Plastic, Rubber Products745

Manufacturing746

• Printing747

• Semiconductors and Electronics748

Manufacturing749

• Tanning and Leather Finishing750

• Textiles Manufacturing751

752

753

754

755

756

757

758

759

760

761

762

763

764



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13 AUGUST 2012

Infrastructure765

• Airlines766

• Airports767

• Crude Oil and Petroleum Product768

Terminals769

• Gas Distribution Systems770

• Health Care Facilities771

• Ports, Harbors and Terminals772

• Railways773

• Retail Petroleum Networks774

• Shipping775

• Telecommunications776

• Toll Roads777

• Tourism and Hospitality Development778

• Waste Management Facilities779

• Water and Sanitation780

Mining781

• Mining782

783

Oil and Gas784

• Offshore Oil and Gas Development785

• Onshore Oil and Gas Development786

• Liquefied Natural Gas (LNG) Facilities787

788

Power789

• Electric Power Transmission and790

Distribution791

• Geothermal Power Generation792

• Thermal Power793

• Wind Energy794

795

796

797



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1

2

3

4

5

6

7

8

9

10

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THE EQUATOR PRINCIPLES12

[DATE TBC]13

14

A financial industry benchmark for determining, assessing15

and managing environmental and social and environmental risk in projects financing 16http://www.equator-principles.com 17

18






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13 AUGUST 2012

CONTENTS 19

20PREAMBLE ................................................................................................................................... 221

22SCOPE .......................................................................................................................................... 323

24STATEMENT OF PRINCIPLES .......................................................................................................... 425

26Principle 1: Review and Categorisation .............................................................................................. 427

28Principle 2: Environmental and Social Assessment ............................................................................ 529

30Principle 3: Applicable Environmental and Social Standards.............................................................. 631

32Principle 4: Environmental and Social Management System and Action Plan ................................... 733

34Principle 5: Stakeholder Engagement ................................................................................................. 835

36Principle 6: Grievance Mechanism...................................................................................................... 937

38Principle 7: Independent Review ........................................................................................................ 939

40Principle 8: Covenants ...................................................................................................................... 1041

42Principle 9: Independent Monitoring and Reporting ........................................................................ 1143

44 Principle 10: Reporting and Transparency ........................................................................................ 114546

DISCLAIMER ............................................................................................................................... 124748

ANNEXES: IMPLEMENTATION REQUIREMENTS ........................................................................... 134950

Note: The implementation requirements detailed in these annexes are an integral part of the Equator 51Principles and are mandatory requirements for Equator Principles Financial Institutions.52

53Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of Greenhouse54Gas Emissions .................................................................................................................................... 1355

56

Annex B - Minimum Reporting Requirements .................................................................................. 145758

EXHIBITS: SUPPORTING INFORMATION ...................................................................................... 165960

Exhibit I - Glossary of Terms .............................................................................................................. 166162

Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the63Environmental and Social Assessment Documentation ................................................................... 2064

65Exhibit III: IFC Performance Standards on Environmental and Social Sustainability and66Environmental, Health and Safety Guidelines .................................................................................. 2267

68

6970



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PREAMBLE71

72Large infrastructure and industrial Projects can have adverse impacts on people and on the73

environment. As financiers and advisors, we work in partnership with our clients to identify, assess74

and manage environmental and social risks and impacts in a structured way, and on an ongoing75

basis. Such collaboration promotes sound and sustainable environmental and social performance,76

and can lead to improved financial, environmental and social outcomes. 77

78

Project financing, a method of funding in which the lender looks primarily to the revenues generated79

by a single project both as the source of repayment and as security for the exposure, plays an80

important role in financing development throughout the world1. Project financiers may encounter81

social and environmental issues that are both complex and challenging, particularly with respect to82

projects in the emerging markets. 83

84

We, Tthe Equator Principles Financial Institutions (EPFIs), have consequently adopted these Equator85

Principles in order to ensure that the pProjects we finance are developed in a manner that is socially86

responsible and reflects sound environmental management practices. By doing so, negative impacts87

on pProject-affected ecosystems, and communities, and the climate should be avoided where88

possible., and iIf these impacts are unavoidable, they should be minimised and reduced, mitigated89

and/or compensated for, or offset appropriately.90

91

We believe that adoption of and adherence to these Equator Principles offers significant benefits to 92

us ourselves, our borrowers, and local stakeholders through our borrowers’ engagement with locally93

affected communities. We therefore recognise that our role as financiers affords us opportunities to94

promote responsible environmental stewardship and socially responsible development, including95

fulfilling our responsibility to respect human rights by undertaking due diligence in accordance with96

the Equator Principles. As such, EPFIs will consider reviewing these Principles from time-to-time97

based on implementation experience, and in order to reflect ongoing learning and emerging good98

practice. 99

100

1 Project finance is “a method of funding in which the lender looks primarily to the revenues generated by a single project,

both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and

expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation

infrastructure, environment, and telecommunications infrastructure. Project finance may take the form of financing of the

construction of a new capital installation, or refinancing of an existing installation, with or without improvements. In such

transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the

facility’s output, such as the electricity sold by a power plant. The borrower is usually an SPE (Special Purpose Entity) that is

not permitted to perform any function other than developing, owning, and operating the installation. The consequence is

that repayment depends primarily on the project’s cash flow and on the collateral value of the project’s assets.” Source:Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards ("Basel

II"), November 2005. http://www.bis.org/publ/bcbs118.htm.



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13 AUGUST 2012

These Equator Principles are intended to serve as a common baseline and framework for the101

implementation by of each EPFI’s of its own internal environmental and social and environmental 102

policies, procedures and standards related to its financing of Pprojects financing activities. We will103

not provide Project related loans and Project Finance Advisory services, as described and per the104

requirements in the Scope, to pProjects where the borrower will not, or is unable to comply with, 105

our respective social and environmental policies and procedures that implement the Equator106

Principles.107

108

The Equator Principles apply globally and to all sectors. In High-Income OECD Countries, relevant109

host country laws, regulations and permits generally meet or exceed the requirements of the110

Equator Principles. For Projects located in these countries, host country requirements may be used111

as a substitute for the requirements in the Equator Principles.112

113

EPFIs review the Equator Principles from time-to-time based on implementation experience, and in114

order to reflect ongoing learning and emerging good practice.115

116

SCOPE117

118

The Equator Principles apply to the four financial products described below:119

120

1. Project Finance Advisory services where total Project capital costs are US$ 10 million or more.121

122

2. Project Finance with total Project capital costs of US$10 million or more.123

124

3. Project-Related Corporate Loans where all five of the following criteria are met:125

126

i. the loan is related to a single Project,127

ii. the total aggregate loan amount is at least US$100 million,128

iii. the EPFI’s individual Initial Exposure is at least US$50 million,129

iv. the loan tenor is at least two years, and130

v. the borrower has Effective Operational Control (either direct or indirect) over the131

Project.132

133

4. Bridge Loans with a tenor of less than two years that are intended to be refinanced by a Project134

Finance or Project-Related Corporate Loan. The requirements for Bridge Loans vary depending135

on the Project’s stage of development. 136

137

all new project financings globally with total project capital costs of US$10 million or more, and138

across all industry sectors. In addition, wWhile the Equator Principles are not intended to be applied139retroactively, we EPFIs will apply them to all project financings covering the expansion or upgrade of 140



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13 AUGUST 2012

an existing Projectfacility where changes in scale or scope may create significant environmental141

and/or social impacts, or significantly change the nature or degree of an existing impact. The142

Principles also extend to project finance advisory activities. In these cases, EPFIs commit to make the143

client aware of the content, application and benefits of applying the Principles to the anticipated144

project, and request that the client communicate to the EPFI its intention to adhere to the145

requirements of the Principles when subsequently seeking financing. 146

147

STATEMENT OF PRINCIPLES148

149

EPFIs will only provide Project related loans and Project Finance Advisory services, as described in150

the Scope, to pProjects that conform to Principles 1-109 below:151

152

Recognising business confidentiality and applicable laws and regulations, mandated EPFIs will153

endeavour to share relevant environmental and social information with other mandated financial154

institutions with a view to seeking, where appropriate, consistent application of the Equator155

Principles to Projects financed. Any decision as to whether, or on what terms, to provide Project-156

Related loans and Project Finance Advisory services will be for each EPFI to make in accordance with157

their own risk management policies. Timing constraints may lead EPFIs considering a transaction to158

seek authorisation from their clients to start such information sharing before all relevant EPFIs are159

formally mandated. EPFIs expect clients to provide such authorisation on a best efforts basis.160

161

Principle 1: Review and Categorisation 162

163

When a pProject is proposed for financing, the EPFI will, as part of its internal environmental and164

social and environmental review and due diligence, categorise such pProject based on the165

magnitude of its potential risks and impacts. and risks in accordance with Such screening is based on166

the environmental and social screening criteriacategorisation scheme of the International Finance167

Corporation (IFC) (Exhibit I).168

169

Using categorisation, the EPFI’s environmental and social due diligence is commensurate with the170

nature, scale and stage of the Project, and with the level of environmental and social risks and171

impacts. The categorisation scheme is:172

173

Category A – Projects with potential significant adverse environmental and social risks and/or174

impacts that are diverse, irreversible or unprecedented;175

176

Category B – Projects with potential limited adverse environmental and social risks and/or impacts177

that are few in number, generally site-specific, largely reversible and readily addressed through178

mitigation measures; and179180



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13 AUGUST 2012

Category C – Projects with minimal or no adverse environmental and social risks and/or impacts. 181

182

Principle 2: Environmental and Social and Environmental Assessment 183

184

Where EPFIs are providing Project Finance Advisory services or a Bridge Loan, EPFIs will make the185

client aware of the content, application and benefits of applying the Equator Principles to the186

anticipated Project. The EPFI will request that the client communicates to the EPFI its intention to187

adhere to the requirements of the Equator Principles when subsequently seeking financing. In their188

advisory capacity the EPFI will guide and support the client through the steps leading to Equator189

Principles application.190

191

For each pProject assessed as being either Category A or Category B, the EPFI will require the192

borrower has to conducted an Environmental and Social and Environmental Assessment193

(“Assessment”) process2 to address, as appropriate and to the EPFI’s satisfaction, the relevant194

environmental and social and environmental risks and impacts and risks of the proposed pProject195

(which may include, if relevant, the illustrative list of issues as found in Exhibit II). The Assessment196

should also propose mitigation and management measures to prevent, mitigate and manage197

adverse impacts in a manner relevant and appropriate to the nature and scale of the proposed198

pProject.199

200

The Assessment will be an adequate, accurate and objective evaluation and presentation of the201

risks, whether prepared by the borrower, consultants or external experts. The Assessment202

document may comprise a full-scale environmental and social impact assessment, a limited or203

focused environmental or social assessment (e.g. audit), or straight-forward application of 204

environmental siting, pollution standards, design criteria, or construction standards. One or more205

specialised studies may also need to be undertaken.206

207

Regardless of the location, for all Projects which are expected to emit more than 100,000 tonnes of 208

CO2 equivalent annually, an alternatives analysis will be conducted to evaluate less GHG intensive209

alternatives. Refer to Annex A for alternatives analysis requirements.210

211

212

213

2 Social and Environmental Assessment is a process that determines the social and environmental impacts and risks

(including labour, health, and safety) of a proposed project in its area of influence. For the purposes of Equator Principles

compliance, this will be an adequate, accurate and objective evaluation and presentation of the issues, whether prepared

by the borrower, consultants or external experts. Depending on the nature and scale of the project, the assessment

document may comprise a full-scale social and environmental impact assessment, a limited or focused environmental or

social assessment (e.g. audit), or straight-forward application of environmental siting, pollution standards, design criteria,

or construction standards. One or more specialised studies may also need to be undertaken.



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13 AUGUST 2012

Principle 3: Applicable Environmental and Social and Environmental Standards 214

215

The EPFI will require that the Assessment process evaluates compliance as follows:216

217

1. For pProjects located in non-OECD countries, and those located in OECD countries not218

designated as High-Income, as defined by the World Bank Development Indicators Database, the219

Assessment process evaluates compliance with will refer to the then applicable IFC Performance220

Standards (Exhibit III), and the then applicable Industry Specific IFC Environmental, Health and221

Safety (EHS) Guidelines (“EHS Guidelines”) (Exhibit IV). 222

223

2. For Projects located in High-Income OECD Countries, the Assessment process evaluates224

compliance with relevant host country laws, regulations and permits that pertain to225

environmental and social matters as they are generally considered to meet or exceed the226

requirements of the Equator Principles. This substitution may extend to environmental and/or227

social assessments (Principle 2), management systems and plans (Principle 4), stakeholder228

engagement (Principle 5) and, disclosure and grievance mechanisms (Principle 6).229

230

The Assessment will establish to a participating EPFI’s satisfaction the pProject's overall compliance231

with, or justified deviation from, the applicable standardsrespective Performance Standards and EHS232

Guidelines. The applicable standards (as described above) represent the minimum standards233

adopted by EPFIs and individual EPFIs may, at their sole discretion, apply additional requirements.234235

The regulatory, permitting and public comment process requirements in High-Income OECD236

Countries, as defined by the World Bank Development Indicators Database, generally meet or237

exceed the requirements of the IFC Performance Standards (Exhibit III) and EHS Guidelines (Exhibit238

IV). Consequently, to avoid duplication and streamline EPFI's review of these projects, successful239

completion of an Assessment (or its equivalent) process under and in compliance with local or240

national law in High-Income OECD Countries is considered to be an acceptable substitute for the IFC241

Performance Standards, EHS Guidelines and further requirements as detailed in Principles 4, 5 and 6242

below. For these projects, however, the EPFI still categorises and reviews the project in accordance243with Principles 1 and 2 above.244

245

The Assessment process in both cases should address compliance with relevant host country laws,246

regulations and permits that pertain to social and environmental matters. 247

248

249

250

251



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13 AUGUST 2012

Principle 4: Environmental and Social Management System and Action Plan and252

Management System 253254

For all Category A and Category B pProjects, the EPFI will require the borrower to develop or255

maintain an Environmental and Social Management System (ESMS).256

257

Further, an Environmental and Social Management Plan (ESMP) will be prepared by the borrower to258

address issues raised in the Assessment and incorporate actions required to comply with the259

applicable standards. Where the applicable standards are not met to the EPFIs satisfaction, the260

borrower and the EPFI will agree an Action Plan (AP). The AP is intended to outline gaps and261

commitments to meet EPFI requirements in line with the applicable standards.262

263

For Bridge Loans where impacts have been identified and Project development is expected to begin264

during the tenor of the loan, the borrower will identify an Independent Environmental and Social265

Consultant and develop a scope of work to conduct an Independent Review. Where the Project is in266

the feasibility phase and no impacts are expected during the tenor of the loan, the EPFI will include a267

loan covenant, or a condition precedent to disbursement, requiring confirmation that an Assessment268

process or other assessment study (if applicable to the stage of development of the Project) has269

been assigned. 270

271

located in non-OECD countries, and those located in OECD countries not designated as High-Income,272

as defined by the World Bank Development Indicators Database, the borrower has prepared an273

Action Plan (AP)3 which addresses the relevant findings, and draws on the conclusions of the274

Assessment. The AP will describe and prioritise the actions needed to implement mitigation275

measures, corrective actions and monitoring measures necessary to manage the impacts and risks276

identified in the Assessment. Borrowers will build on, maintain or establish a Social and277

Environmental Management System that addresses the management of these impacts, risks, and278

corrective actions required to comply with applicable host country social and environmental laws279

and regulations, and requirements of the applicable Performance Standards and EHS Guidelines, as280

defined in the AP.281

282

For projects located in High-Income OECD countries, EPFIs may require development of an Action283

Plan based on relevant permitting and regulatory requirements, and as defined by host-country law.284

3The Action Plan may range from a brief description of routine mitigation measures to a series of documents (e.g.

resettlement action plan, indigenous peoples plan, emergency preparedness and response plan, decommissioning plan,

etc). The level of detail and complexity of the Action Plan and the priority of the identified measures and actions will be

commensurate with the project’s potential impacts and risks. Consistent with Performance Standard 1, the internal Social

and Environmental Management System will incorporate the following elements: (i) Social and Environmental

Assessment; (ii) management program; (iii) organisational capacity; (iv) training; (v) community engagement; (vi)

monitoring; and (vii) reporting.



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Principle 5: Consultation and DisclosureStakeholder Engagement285

286

For all Category A and, as appropriate, Category B pProjects, the EPFI will require the borrower to287

demonstrate effective Stakeholder Engagement as an ongoing process located in non-OECD288

countries, and those located in OECD countries not designated as High-Income, as defined by the289

World Bank Development Indicators Database, the government, borrower or third party expert has290

consulted with project affected communities in a structured and culturally appropriate manner with291

Affected Communities and, where appropriate, Other Stakeholders.4 For pProjects with potentially292

significant adverse impacts on aAffected cCommunities, the borrowers will conduct an Informed293

Consultation and Participation process. will ensure their free, prior and informed consultation and294

facilitate their informed participation as a means to establish, to the satisfaction of the EPFI,295

whether a project has adequately incorporated affected communities’ concerns.5The borrower will296

tailor its consultation process to the language preferences of the Affected Communities, their297

decision-making processes, and the needs of disadvantaged and vulnerable groups. This process298

should be free from external manipulation, interference, coercion and intimidation.299

300

EPFIs recognise that indigenous people are often a vulnerable segment of Project-Affected301

Communities. Projects affecting indigenous peoples will be subject to a process of Informed302

Consultation and Participation, and will comply with applicable national law, including those laws303

implementing host-country obligations under international law. In non-OECD countries and OECD304

countries not designated as High-Income, consistent with special circumstances described in IFC305

Performance Standard 7, Projects with adverse impacts on indigenous people will require their free,306

prior and informed consent.307

308

To facilitate Stakeholder Engagement, the borrower will make the Assessment documentation and309

the ESMP readily available to the public in the relevant local language and in a culturally appropriate310

manner. Refer to Principle 10 for Project Reporting requirements. 311

312

In order to accomplish this, the Assessment documentation and AP, or non-technical summaries313

thereof, will be made available to the public by the borrower for a reasonable minimum period in314the relevant local language and in a culturally appropriate manner. The borrower will take account315

4 Affected communities are communities of the local population within the project’s area of influence who are likely to be

adversely affected by the project. Where such consultation needs to be undertaken in a structured manner, EPFIs may

require the preparation of a Public Consultation and Disclosure Plan (PCDP).5 Consultation should be “free” (free of external manipulation, interference or coercion, and intimidation), “prior” (timely

disclosure of information) and “informed” (relevant, understandable and accessible information), and apply to the entire

project process and not to the early stages of the project alone. The borrower will tailor its consultation process to the

language preferences of the affected communities, their decision-making processes, and the needs of disadvantaged or

vulnerable groups. Consultation with Indigenous Peoples must conform to specific and detailed requirements as found in

Performance Standard 7. Furthermore, the special rights of Indigenous Peoples as recognised by host-country legislation

will need to be addressed.



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13 AUGUST 2012

of and document the process and results of the consultation, including any actions agreed resulting316

from the consultation. For projects with adverse social or environmental impacts, disclosure should317

occur early in the Assessment process and in any event before the project construction commences,318

and on an ongoing basis. 319

320

Principle 6: Grievance Mechanism 321

322

For all Category A and, as appropriate, Category B pProjects, the borrower will, as part of the ESMS, 323

located in non-OECD countries, and those located in OECD countries not designated as High-Income,324

as defined by the World Bank Development Indicators Database, to ensure that consultation,325

disclosure and community engagement continues throughout construction and operation of the326

project, the borrower will, scaled to the risks and adverse impacts of the project, establish a327

grievance mechanism designed to receive and facilitate resolution of concerns and grievances about328

the Project’s environmental and social performance. as part of the management system. This will329

allow the borrower to receive and facilitate resolution of concerns and grievances about the330

project’s social and environmental performance raised by individuals or groups from among project-331

affected communities. The borrower will inform the affected communities about the mechanism in332

the course of its community engagement process and ensure that the mechanism addresses333

concerns promptly and transparently, in a culturally appropriate manner, and is readily accessible to334

all segments of the affected communities. 335

336The grievance mechanism should be scaled to the risks and impacts of the Project and have Affected337

Communities as its primary user. It will seek to resolve concerns promptly, using an understandable338

and transparent consultative process that is culturally appropriate, readily accessible, at no cost, and339

without retribution to the party that originated the issue or concern. The mechanism should not340

impede access to judicial or administrative remedies. The borrower will inform the Affected341

Communities about the mechanism in the course of the Stakeholder Engagement process. 342

343

Principle 7: Independent Review 344

345Project Finance346

347

For all Category A projects and, as appropriate, for Category B pProjects, an iIndependent348

Environmental and sSocial Consultant, or environmental expert not directly associated with the349

borrower, will carry outreview an Independent Review of the Assessment, AP ESMP, ESMS and350

consultation process documentation in order to assist the EPFI's due diligence, and assess Equator351

Principles compliance.352

353



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13 AUGUST 2012

The Independent Environmental and Social Consultant will also propose or opine on a suitable AP354

capable of bringing the Project into compliance with the Equator Principles, or indicate when355

compliance is not possible.356

357


359

An Independent Review by an Independent Environmental and Social Consultant is required for360

Projects with high risk impacts including, but not limited to, any of the following:361

362

• Adverse impacts on indigenous people,363

• Critical habitat impacts,364

• Significant cultural heritage impacts,365

• Large-scale resettlement.366

367

In other Category A, and as appropriate Category B, Project-Related Corporate Loans, the EPFI may368

determine whether an Independent Review is appropriate or if internal review by the EPFI is369

sufficient. This may take into account the due diligence performed by an Official Agency, if relevant.370

371

Principle 8: Covenants 372

373

An important strength of the Equator Principles is the incorporation of covenants linked to374

compliance. For Category A and Ball pProjects, the borrower will covenant in the financing375

documentation:376

377

a) to comply with all relevant host country environmental and social and environmental laws,378

regulations and permits in all material respects;379

380

b) to comply with the ESMPs and AP (where applicable) during the construction and operation381

of the pProject in all material respects;382

383c) to provide periodic reports in a format agreed with the EPFIs (with the frequency of these384

reports proportionate to the severity of impacts, or as required by law, but not less than385

annually), prepared by in-house staff or third party experts, that i) document compliance386

with the ESMPs and AP (where applicable), and ii) provide representation of compliance387

with relevant local, state and host country environmental and social and environmental 388

laws, regulations and permits; and389

390

d) to decommission the facilities, where applicable and appropriate, in accordance with an391

agreed decommissioning plan.392393



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13 AUGUST 2012

Where a borrower is not in compliance with its environmental and social and environmental 394

covenants, the EPFIs will work with the borrower on remedial actions to bring it the Project back into395

compliance to the extent feasible, . and iIf the borrower fails to re-establish compliance within an396

agreed grace period, the EPFIs reserves the right to exercise remedies, as they considered 397

appropriate.398

399

Principle 9: Independent Monitoring and Reporting400

401

Project Finance402

403

To assess Project compliance with the Equator Principles and To ensure ongoing monitoring and404

reporting over the life of the loan, the EPFIs will, for all Category A projects, and, as appropriate, for405

Category B pProjects, require the appointment of an iIndependent eEnvironmental and/or sSocial406

Consultantexpert, or require that the borrower retain qualified and experienced external experts to407

verify its monitoring information which would be shared with the EPFIs.408

409


411

For Projects where an Independent Review is required under Principle 7, the EPFI will require the412

appointment of an Independent Environmental and Social Consultant, or require that the borrower413

retain qualified and experienced external experts to verify its monitoring information which would414

be shared with the EPFI.415

416

Principle 10: EPFI Reporting and Transparency 417

418

Project Reporting Requirements419

420

For all Category A and, as appropriate, Category B Projects located in non-OECD countries and OECD421

countries not designated as High-Income, the EPFI will require the borrower to disclose the422

Assessment documentation and the ESMP online6. The borrower will take account of and document423

the process and results of the stakeholder consultation, including any actions agreed resulting from424

the consultation process. For Projects with adverse environmental or social impacts, disclosure425

should occur early in the Assessment process, and in any event before the Project construction426

commences, and on an ongoing basis.427

428

For all Category A and, as appropriate Category B Projects, in all countries, the EPFI will require the429

borrower to publicly report greenhouse gas emission levels during the operational phase for Projects430

6Except in cases where the borrower does not have a company website.



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12



13 AUGUST 2012

emitting over 100,000 tonnes of CO2 equivalent annually. Refer to Annex A for detailed431

requirements on greenhouse gas emissions reporting.432

433

EPFI Reporting Requirements434

435

The EPFI will report publicly at least annually on transactions screened and closed, and about its436

Equator Principles implementation processes and experience, taking into account appropriate437

confidentiality considerations. The EPFI will report according to the minimum reporting438

requirements detailed in Annex B.Each EPFI adopting the Equator Principles commits to report439

publicly at least annually about its Equator Principles implementation processes and experience,440

taking into account appropriate confidentiality considerations.7 441

442

DISCLAIMER443

444

The adopting EPFIs view these Equator Principles as a financial industry benchmark for developing445

individual, internal environmental and social and environmental policies, procedures and practices.446

As with all internal policies, these Equator Principles do not create any rights in, or liability to, any447

person, public or private. Institutions are adopting and implementing these Equator Principles448

voluntarily and independently, without reliance on or recourse to the IFC, or the World Bank or449

other EPFIs.450

451

7

Such reporting should at a minimum include the number of transactions screened by each EPFI, including thecategorisation accorded to transactions (and may include a breakdown by sector or region), and information regarding

implementation.



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13 AUGUST 2012

ANNEXES: IMPLEMENTATION REQUIREMENTS452

453Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of 454

Greenhouse Gas Emissions455

456

Where an alternatives analysis is required by a regulating permitting process, the analysis will follow457

the methodology and time frame required by the relevant process. Following completion of an458

alternatives analysis, the borrower will provide evidence of technically and financially feasible and459

cost-effective options available to reduce Project-related GHG emissions during the design,460

construction and operation of the Project.461

462Quantification of GHG emissions will be conducted by the borrower in accordance with463

internationally recognised methodologies and good practice, for example, the GHG Protocol. For464

Scope 1 emissions, this analysis will include consideration of alternative fuel or energy sources.465

Additionally, for Projects in sectors with the highest carbon intensity, the alternatives analysis will466

include comparisons to other viable technologies used in the same industry in the country or region467

with the relative energy efficiency of the selected technology.468

469

High carbon intensity sectors include the following, as outlined in the IFC EHS Guidelines:470

471• thermal power,472

• cement and lime manufacturing,473

• integrated steel mills,474

• base metal smelting and refining,475

• foundries.476

477

The EPFI will require the borrower to publicly report on greenhouse gas emission levels during the478

operational phase for Projects emitting over 100,000 tonnes of CO 2-equivalent annually (combined479

Scope 1 and Scope 2), and they will be encouraged to report publicly on Projects emitting over480

25,000 tonnes. Public reporting requirements can be satisfied via regulatory requirements for481

reporting or environmental impact assessments, or voluntary reporting mechanisms such as the482

Carbon Disclosure Project where such reporting includes emissions at Project level.483

484

The borrower will quantify direct emissions from the facilities owned or controlled within the485

physical Project boundary (Scope 1 emissions), as well as indirect emissions associated with the off-486

site production of energy used by the Project (Scope 2 emissions).487

488







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13 AUGUST 2012

Annex B - Minimum Reporting Requirements489

490

These reporting requirements apply to Project Finance Advisory services, Project Finance and491

Project-Related Corporate Loans, unless specified otherwise.492

493

Reporting data will be published in a single location. If data is displayed in different locations (e.g.494

website, reports) the EPFI will provide links to facilitate information gathering.495

496

The EPFI will report annually at a minimum and will specify the reporting period (e.g. start and end497

dates).498

499

Aggregated Data Reporting500

501

1. The EPFI will report the number of transactions screened for the first time during the reporting502

period. The EPFI will provide a definition of “transactions screened”.503

504

2. Data for Project Finance Advisory services and Project Finance will be displayed separately from505

Project-Related Corporate Loans.506

507

3. The EPFI will display a breakdown of the data as follows:508

509

• Category (A, B, or C);510

• Category (A, B, or C) and by Sector and Region i.e. (Mining, Infrastructure, Oil and Gas,511

Power, Others) and (Americas, Europe Middle East and Africa, Asia Pacific);512

• Category (A, B, or C) and by Host Country Classification (e.g. High-Income OECD);513

• Category (A or B) and whether an Independent Review has been carried out.514

515

4. The EPFI will report on the number of Project Finance and Project-Related Corporate Loans that516

have reached Financial Close during the reporting period and will display a breakdown of the517

data by Category (A, B, or C). Note this requirement does not apply to Project Finance Advisory518services.519

520

Implementation Reporting521

522

1. The EPFI will report on their implementation of the Equator Principles, including:523

524

• The mandate of the Equator Principles Reviewers (e.g. responsibilities and staffing);525

• The respective roles of the Equator Principles Reviewers and business lines involved in the526

transaction review process;527



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15



13 AUGUST 2012

• The level of senior management involvement for Category A and, as appropriate, Category B528

transactions;529

• The incorporation of the Equator Principles in their credit and risk management policies and530

procedures.531

532

2. EPFIs, in their first year of Equator Principles adoption, will provide details of their internal533

preparation and staff training.534

535

Project-Specific Data Reporting536

537

Project-Specific Data reporting is:538

539

• applicable only to Project Finance transactions that have reached Financial Close,540

• subject to obtaining client consent,541

• subject to applicable local laws and regulations, and542

• subject to any reduction in the rights, or increase in the liability, of the EPFI.543

544

The EPFI will seek client consent at a time during the loan documentation process deemed545

appropriate by the EPFI or at Financial Close.546

547

The EPFI will submit data (or a link to the data on their website) to the Equator Principles Secretariat548

for publication on the Equator Principles website. The data will include: 549

550

• Project name (as per the loan agreement);551

• Sector: Mining, Infrastructure, Oil and Gas, Power, Others;552

• Region: Americas, Europe Middle East and Africa, Asia Pacific;553

• The calendar year in which the loan reached Financial Close.554

555



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16



13 AUGUST 2012

EXHIBITS: SUPPORTING INFORMATION556

557Exhibit I - Glossary of Terms558

559

Action Plan (AP) is prepared, as a result of EPFI due diligence, to describe and prioritise the actions560

needed to address any gaps in the Assessment or ESMPs to bring the Project in line with applicable561

standards as defined in the Equator Principles. The AP is typically tabular in form and lists distinct562

actions from mitigation measures to follow-up studies or plans that complement the Assessment.563

564

Affected Communities are local communities, within the Project's area of influence, directly affected565

by the Project.566567

Bridge Loan is an interim loan given to a business until the longer term stage of financing can be568

obtained. 569

570

Effective Operational Control includes both direct control of the Project by the borrower and571

indirect control, for example where a subsidiary of the borrower operates the Project. 572

573

Environmental and Social Assessment (Assessment) is a process that determines the environmental574

and social risks and impacts (including labour, health, and safety) of a proposed Project in its area of 575

influence. 576

577

Environmental and Social Management Plan (ESMP) is a summary of borrower commitments to578

mitigate risks and impacts identified in the Assessment. This may range from a brief description of 579

routine mitigation measures to a series of documents (e.g. resettlement action plan, indigenous580

peoples plan, emergency preparedness and response plan, decommissioning plan). The level of 581

detail and complexity of the ESMP and the priority of the identified measures and actions will be582

commensurate with the Project’s potential risks and impacts.583

584

Environmental and Social Management System (ESMS) is the overarching environmental, social,585

health and safety management system which may be applicable at a corporate or Project level. The586

system is designed to identify, assess and manage risk in respect to the Project on an ongoing basis.587

The system consists of manuals and related source documents, including policies, management588

programs and plans, procedures, requirements, performance indicators, responsibilities, training589

and periodic audits and inspections with respect to environmental or social matters. It is the590

overriding framework by which an ESMP and/or AP is implemented. The term may refer to the591

system for the construction phase or the operational phase of the Project, or to both as the context592

may require.593

594



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17



13 AUGUST 2012

Equator Principles Reviewers are EPFI employees responsible for reviewing the environmental and595

social aspects of loans subject to the Equator Principles. They may be a distinct Equator Principles596

team or members of banking, credit risk, corporate sustainability (or similar) who are tasked with597

applying the Equator Principles internally.598

599

Financial Close is defined as the date on which all conditions precedent to initial drawing of the debt600

have been satisfied or waived. 601

602

High-Income OECD Countries are countries that are members of the Organisation for Economic Co-603

Operation and Development (OECD) and designated High-Income by the World Bank Development604

Indicators Database.605

606

Informed Consultation and Participation is an in-depth exchange of views and information and an607

organised and iterative consultation that leads the borrower to incorporate the views of Affected608

Communities, on matters that affect them directly (such as proposed mitigation measures, the609

sharing of development benefits and opportunities, and implementation issues), into their decision-610

making process.611

612

Independent Environmental and Social Consultant is a qualified independent firm or consultant613

(not directly tied to the borrower) acceptable to the EPFI. 614

615Independent Review is a review of the Assessment, ESMP and consultation process documentation616

carried out by an Independent Environmental and Social Consultant. 617

618

Initial Exposure is the initial amount (not the amount after sell down or syndication) committed to619

the loan. 620

621

Known Use of Proceeds is the information provided by the borrower on how the borrowings will be622

used.623

624Non-High Income OECD Countries are countries that are members of the OECD that are not625

designated as High-Income by the World Bank Development Indicators Database. 626

627

Non-OECD Countries are countries that are not members of the OECD.628

629

Official Agency is a multilateral development bank, a multilateral or bilateral financial institution or630

an OECD Export Credit Agency631

632



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18



13 AUGUST 2012

Other Stakeholders are those not directly affected by the Project but that have an interest in it. They633

could include national and local authorities, neighbouring Projects, and/or non-governmental634

organisations.635

636

A Project is a development (in any sector) at an identified location. It includes an expansion or637

upgrade of an existing operation that results in a material change in output or function. Examples of 638

Projects that trigger the Equator Principles include, but are not limited to; a power plant, mine, oil639

and gas Project (including drillships and Floating Production Storage and Offloading (FPSO) vessels),640

chemical plant, infrastructure development, manufacturing plant, large scale real estate641

development, or any other Project that creates significant environmental and/or social impacts. 642

643

Project Finance is a method of financing in which the lender looks primarily to the revenues644

generated by a single Project, both as the source of repayment and as security for the exposure. This645

type of financing is usually for large, complex and expensive installations that might include, for646

example, power plants, chemical processing plants, mines, transportation infrastructure,647

environment, and telecommunications infrastructure. Project Finance may take the form of 648

financing of the construction of a new capital installation, or refinancing of an existing installation,649

with or without improvements. In such transactions, the lender is usually paid solely or almost650

exclusively out of the money generated by the contracts for the Project’s output, such as the651

electricity sold by a power plant. The borrower is usually a Special Purpose Entity that is not652

permitted to perform any function other than developing, owning, and operating the installation.653The consequence is that repayment depends primarily on the Project’s cash flow and on the654

collateral value of the Project’s assets. For reference go to “Basel Committee on Banking Supervision,655

International Convergence of Capital Measurement and Capital Standards ("Basel II")” , November656

2005. http://www.bis.org/publ/bcbs118.htm. Reserve-Based Financing in extractive sectors that is657

non-recourse and where the proceeds are used to develop one particular reserve (e.g. an oil field or658

a mine) is considered to be a Project Finance transaction covered under the Equator Principles.659

660

Project Finance Advisory is the provision of advice on the potential financing of a development661

where one of the options may be Project Finance. 662663

Project-Related Corporate Loans are corporate loans, made to business entities (either privately,664

publicly, or state-owned or controlled) related to a single Project, either a new development,665

expansion (e.g. where there is an expanded footprint) or upgrade, where the Known Use of Proceeds666

is related to a single Project in one of the following ways:667

668

a. The lender looks primarily to the revenues generated by the Project as the source of 669

repayment (as in Project Finance) and where security exists in the form of a corporate or670

parent company guarantee;671

672





__________________________________________________________________________________

19



13 AUGUST 2012

b. Documentation for the loan indicates that the majority of the proceeds of the total loan are673

directed to the Project. Such documentation may include the term sheet, information674

memorandum, credit agreement, or other representations provided by the borrower into its675

intended use of proceeds for the loan.676

677

In the case of Export Finance, the infrastructure or industrial project to which the export is intended678

will be considered the “Project”.679

680

Excluded transactions include Asset Finance (such as for cargo ships or airplanes), general working681

capital facilities, and general capital expenditure facilities used to maintain, enhance and upgrade a682

company's operations.683

684

Loans that are not directed towards a Project, for example general corporate purposes loans, are not685

in the scope the Equator Principles.686

687

Stakeholder Engagement refers to IFC Performance Standards provisions on external688

communication, environmental and social information disclosure, informed consultation, and689

grievance mechanisms. For the Equator Principles, Stakeholder Engagement also refers to the overall690

requirements described under Principle 5.691

692

EXHIBIT I: CATEGORISATION OF PROJECTS 693694

As part of their review of a project’s expected social and environmental impacts, EPFIs use a system695

of social and environmental categorisation, based on the IFC’s environmental and social screening696

criteria, to reflect the magnitude of impacts understood as a result of assessment.697

698

These categories are:699

700

Category A – Projects with potential significant adverse social or environmental impacts that are701

diverse, irreversible or unprecedented;702703

Category B – Projects with potential limited adverse social or environmental impacts that are few in704

number, generally site-specific, largely reversible and readily addressed through mitigation705

measures; and706

707

Category C – Projects with minimal or no social or environmental impacts. 708

709



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20



13 AUGUST 2012

Exhibit II: Illustrative List of Potential Environmental and Social and Environmental710

Issues to be Addressed in the Environmental and Social And Environmental 711Assessment Documentation712

713

In the context of the business of the pProject, the Assessment documentation will address, where714

applicable, the following issues:715

716

a) assessment of the baseline environmental and social and environmental conditions717

b) consideration of feasible environmentally and socially preferable alternatives718

c) requirements under host country laws and regulations, applicable international treaties and719

agreements720d) protection of human rights by acting with due diligence to prevent, mitigate and manage721

adverse human rights impacts722

d)e) protection of and community health, safety and security (including risks, impacts and723

management of pProject’s use of security personnel)724

e)f) protection of cultural property and heritage725

f)g) protection and conservation of biodiversity, including endangered species and sensitive726

ecosystems in modified, natural and critical habitats, and identification of legally protected areas727

g)h) sustainable management and use of renewable natural resources (including sustainable728

resource management through appropriate independent certification systems)729

h)i) use and management of dangerous substances730

i) j) major hazards assessment and management731

j)k) labour issues (including the four core labour standards), and occupational health and safety732

k)l) fire prevention and life safety733

l)m)socio-economic impacts734

m)n) land acquisition and involuntary resettlement735

n)o) impacts on affected communities, and disadvantaged or vulnerable groups736

o)p) impacts on indigenous peoples, and their unique cultural systems and values737

p)q) cumulative impacts of existing pProjects, the proposed pProject, and anticipated future738

pProjects739

q)r) consultation and participation of affected parties in the design, review and implementation of 740

the pProject741

r)s) efficient production, delivery and use of energy742

t) pollution prevention and waste minimisation, pollution controls (liquid effluents and air743

emissions) and solid and chemical waste management 744

u) viability of Project operations, of reasonable foreseeable changing weather patterns/climatic745

conditions, together with adaptation opportunities.746

747

748



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13 AUGUST 2012

Note: The above list is for illustrative purposes only. The Social and Environmental Assessment749

process of each pProject may or may not identify all issues noted above, or be relevant to every750

pProject.751

752



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13 AUGUST 2012

Exhibit III: IFC Performance Standards on Environmental and Social Sustainability 753

and Environmental, Health and Safety Guidelines 754755

The Equator Principles refer to two separate parts of the IFC Sustainability Framework as “the then756

applicable environmental and social standards” under Principle 3.757

758

1. The IFC Performance Standards on Environmental and Social Sustainability759

760

As of January 1, 2012, the following list of IFC Performance Standards were applicable:761

762

Performance Standard 1 - Assessment and Management of Social and Environmental Risks and763

Impacts764

Performance Standard 2 - Labor and Working Conditions765

Performance Standard 3 - Resource Efficiency and Pollution Prevention766

Performance Standard 4 - Community Health, Safety and Security767

Performance Standard 5 - Land Acquisition and Involuntary Resettlement768

Performance Standard 6 - Biodiversity Conservation and Sustainable Management of Living Natural769

Resources770

Performance Standard 7 - Indigenous Peoples771

Performance Standard 8 - Cultural Heritage772

773

The IFC has developed a set of Guidance Notes to accompany each Performance Standard. While774

EPFIs do not formally adopting the Guidance Notes, however EPFIs or and borrowers may find them775

use the Guidance Notes as useful points of reference when seeking further guidance on or776

interpretingation of the Performance Standards.777

778

The IFC Performance Standards, Guidance Notes and Industry Specific Sector EHS Guidelines can be779

found at http://www.ifc.org/ifcext/policyreview.nsf/Content/2012-Edition. 780

781

Important Note:782

783

The EP Association Steering Committee has provided guidance on how members, clients and784

stakeholders can transition smoothly and consistently from the 2006 to the 2012 IFC Performance785

Standards. Please refer to http://www.equator-principles.com/index.php/all-ep-786

associationnews/254-revised-psfor this guidance. 787

788

789

790

791792




http://www.equator-principles.com/index.php/all-ep-associationnews/254-revised-ps







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13 AUGUST 2012

2. The IFC Environmental, Health and Safety (EHS) Guidelines793

794

The IFC EHS Guidelines are technical reference documents containing examples of Good795

International Industry Practice (GIIP), as defined in Performance Standard 3 on Resource Efficiency796

and Pollution Prevention. They contain the performance levels and measures that are normally797

considered acceptable for Projects in emerging markets, as well as being achievable in new facilities798

at reasonable costs by existing technology. Two Guidelines are used:799

800

The General EHS Guidelines801

802

These Guidelines contain information on cross-cutting environmental, health, and safety issues803

potentially applicable to all industry sectors. They are divided into sections entitled: Environmental;804

Occupational Health and Safety; Community Health and Safety; Construction; and Decommissioning.805

They should be used together with the relevant Industry Sector Guideline(s).806

807

The Industry Sector Guidelines808

809

These Guidelines contain information on industry-specific impacts and performance indicators, plus810

a general description of industry activities. They are grouped as follows:811

812

Agribusiness/Food Production813• Annual Crop Production814

• Aquaculture815

• Breweries816

• Dairy Processing817

• Fish Processing818

• Food and Beverage Processing819

• Mammalian Livestock Production820

• Meat Processing821

• Plantation Crop Production822

• Poultry Processing823

• Poultry Production824

• Sugar Manufacturing825

• Vegetable Oil Processing826

827

828

829

830

831832

Chemicals833• Coal Processing834

• Large Volume Inorganic Compounds835

Manufacturing and Coal Tar Distillation836

• Large Volume Petroleum-based Organic837

Chemicals Manufacturing838

• Natural Gas Processing839

• Nitrogenous Fertilizer Manufacturing840

• Oleochemicals Manufacturing841

• Pesticides Formulation, Manufacturing and842Packaging843

• Petroleum-based Polymers Manufacturing844

• Petroleum Refining845

• Pharmaceuticals and Biotechnology846

Manufacturing847

• Phosphate Fertilizer Manufacturing848

849

850

851852





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24



13 AUGUST 2012

Forestry853

• Board and Particle-based Products854

• Forest Harvesting Operations855

• Pulp and Paper Mills856

• Sawmilling and Wood-based Products857

858

General Manufacturing859

• Base Metal Smelting and Refining860

• Cement and Lime Manufacturing861

• Ceramic Tile and Sanitary Ware862

Manufacturing 863

• Construction Materials Extraction864

• Foundries865

• Glass Manufacturing866

• Integrated Steel Mills867

• Metal, Plastic, Rubber Products868

Manufacturing869

• Printing870

• Semiconductors and Electronics871

Manufacturing872

• Tanning and Leather Finishing873

• Textiles Manufacturing874

875

Infrastructure876

• Airlines877

• Airports878

• Crude Oil and Petroleum Product879

Terminals 880

• Gas Distribution Systems881

• Health Care Facilities882

• Ports, Harbors and Terminals883

• Railways884

• Retail Petroleum Networks885

• Shipping886

• Telecommunications887

• Toll Roads888

• Tourism and Hospitality Development889

• Waste Management Facilities890

• Water and Sanitation891

Mining892

• Mining893

894

Oil and Gas895

• Offshore Oil and Gas Development896

• Onshore Oil and Gas Development897

• Liquefied Natural Gas (LNG) Facilities898

899

Power900

• Electric Power Transmission and901

Distribution902

• Geothermal Power Generation903

• Thermal Power904

• Wind Energy905

906



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25



13 AUGUST 2012

907

EXHIBIT IV: INDUSTRY-SPECIFIC ENVIRONMENTAL, HEALTH AND SAFETY (EHS) GUIDELINES908

909

EPFIs will utilise the appropriate environmental, health and safety (EHS) guidelines used by the IFC910

which are now in place, and as may be amended from time-to-time.911

912

The IFC is using two complementary sets of EHS Guidelines available at the IFC website913

(http://www.ifc.org/ifcext/sustainability.nsf/Content/EHSGuidelines). These sets consist of all the914

environmental guidelines contained in Part III of the World Bank’s Pollution Prevention and915

Abatement Handbook (PPAH) which went into official use on July 1, 1998 and a series of 916

environmental, health and safety guidelines published on the IFC website between 1991 and 2003.917

Ultimately new guidelines, incorporating the concepts of cleaner production and environmental918

management systems, will be written to replace this series of industry sector, PPAH and IFC919

guidelines.920

921

Where no sector specific guideline exists for a particular project then the PPAH’s General922

Environmental Guidelines and the IFC Occupational Health and Safety Guidelines (2003) are applied,923

with modifications as necessary to suit the project.*924

925

The table below lists both the World Bank Guidelines and the IFC Guidelines as of March 1, 2006.926

927Industry Specific EHS Guidelines:928

929 930

World Bank Guidelines (PPAH) IFC Guidelines

1. Aluminium Manufacturing 1. Airports

2. Base Metal and Iron Ore Mining 2. Ceramic Tile Manufacturing

3. Breweries 3. Construction Materials Plants

4. Cement Manufacturing 4. Electric Power Transmission and Distribution

5. Chlor-Alkali Plants 5. Fish Processing

6. Coal Mining and Production 6. Food and Beverage Processing7. Coke Manufacturing 7. Forestry Operations: Logging

8. Copper Smelting 8. Gas Terminal Systems

9. Dairy Industry 9. Geothermal Projects

10. Dye Manufacturing 10. Hazardous Materials Management

11. Electronics Manufacturing 11. Health Care

12. Electroplating Industry 12. Life & Fire Safety

13. Foundries 13. Occupational Health and Safety

14. Fruit and Vegetable Processing 14. Office Buildings

15. General Environmental Guidelines 15. Offshore Oil & Gas16. Glass Manufacturing 16. Polychlorinated Biphenyls (PCBs)



__________________________________________________________________________________

26



13 AUGUST 2012

World Bank Guidelines (PPAH) IFC Guidelines

17. Industrial Estates 17. Pesticide Handling and Application

18. Iron and Steel Manufacturing 18. Plantations

19. Lead and Zinc Smelting 19. Port and Harbor Facilities

20. Meat Processing and Rendering 20. Rail Transit Systems

21. Mini Steel Mills 21. Roads and Highways

22. Mixed Fertilizer Plants 22. Telecommunications

23. Monitoring 23. Tourism and Hospitality Development

24. Nickel Smelting and Refining 24. Waste Management Facilities

25. Nitrogenous Fertilizer Plants 25. Wastewater Reuse

26. Oil and Gas Development (Onshore) 26. Wildland Management

27. Pesticides Formulation 27. Wind Energy Conversion Systems

28. Pesticides Manufacturing 28. Wood Products Industries

29. Petrochemicals Manufacturing

30. Petroleum Refining

31. Pharmaceutical Manufacturing

32. Phosphate Fertilizer Plants

33. Printing Industry

34. Pulp and Paper Mills

35. Sugar Manufacturing

36. Tanning and Leather Finishing

37. Textiles Industry

38. Thermal Power Guidelines for New Plants

39. Thermal Power Rehabilitation of Existing

Plants

40. Vegetable Oil Processing

41. Wood Preserving Industry

931

* Exception (the following are World Bank Guidelines not contained in the PPAH and currently in932

use)933

934

Mining and Milling - Underground935

Mining and Milling - Open Pit 936



_______________________________________________________________________________________

1

FREQUENTLY ASKED QUESTIONS

ON THE EQUATOR PRINCIPLES (EP III) UPDATE

OVERVIEW AND CONTEXT

1. WHAT ARE THE EQUATOR PRINCIPLES? .................................................................................................... 3

2. WHAT IS AN EQUATOR PRINCIPLES FINANCIAL INSTITUTION AND WHAT IS THE EQUATOR

PRINCIPLES ASSOCIATION?........................................................................................................................ 3

3. HAS THE PROJECT FINANCE MARKET CHANGED SINCE THE LAUNCH OF EQUATOR PRINCIPLES? ........... 3

4. WHY ARE THE EQUATOR PRINCIPLES BEING UPDATED AND WHAT DOES “EP III” MEAN? ...................... 3

5. WHAT ARE THE KEY AIMS OF THE EP III UPDATE PROCESS? ..................................................................... 4

6. WHAT ARE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III DRAFT?............ 5

7. HOW WILL THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES AFFECT INDUSTRY SECTORSAND CLIENTS? ............................................................................................................................................. 5

8. HOW CAN I CONTRIBUTE TO AND PARTICIPATE IN THE EP III UPDATE PROCESS? ................................... 5

PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

9. CAN YOU SUMMARISE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

IN THE EP III DRAFT?.................................................................................................................................7

10. WHY IS THE EQUATOR PRINCIPLES ASSOCIATION EXTENDING THE SCOPE OF THE EQUATOR

PRINCIPLES? ............................................................................................................................................. 11

11. THE DEFINING CRITERIA FOR PROJECT-RELATED CORPORATE LOANS IS VERY SPECIFIC,

WILL THIS MEAN MANY PROJECTS WILL NOT BE ASSESSED UNDER THE EQUATOR PRINCIPLES

FRAMEWORK? ......................................................................................................................................... 12

12. WHY DOESN’T THE EQUATOR PRINCIPLES FRAMEWORK APPLY TO ALL AREAS OF FINANCE? .............. 12

13. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION WORKING TO IMPROVE CONSISTENCY IN

EQUATOR PRINCIPLES IMPLEMENTATION? ............................................................................................ 13



_______________________________________________________________________________________

2

14. WHY HAS THE EQUATOR PRINCIPLES ASSOCIATION FOCUSED ON ENHANCED REPORTING ANDTRANSPARENCY? ..................................................................................................................................... 13

15. HOW DO THE ENHANCED REPORTING REQUIREMENTS IMPROVE COMPLIANCE AND

TRANSPARENCY? ..................................................................................................................................... 13

16. HOW IS THE EQUATOR PRINCIPLES ASSOCATION WORKING TO IMPROVE THE PROVISION OF

GRIEVANCE MECHANISMS AT PROJECT LEVEL? ...................................................................................... 13

17. HOW DO THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES ACKNOWLEDGE THE UN’S

“PROTECT, RESPECT AND REMEDY” FRAMEWORK AND GUIDING PRINICPLES ON BUSINESS

AND HUMAN RIGHTS? ............................................................................................................................ 14

18. HOW IS THE GAP BETWEEN THE EFFECTIVENESS DATE OF EP III AND THE UPDATED IFC

PERFORMANCE STANDARDS BEING MANAGED? .................................................................................... 14

19. WHY DOESN’T THE EP III DRAFT ADDRESS ALL THE RECOMMENDATIONS IN THE EQUATOR

PRINCIPLES STRATEGIC REVIEW REPORT? ............................................................................................. 15

THE EP III UPDATE PROCESS & STAKEHOLDER ENGAGEMENT

20. WHAT IS THE PROCESS FOR UPDATING THE EQUATOR PRINCIPLES? ..................................................... 16

21. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION ENSURING STAKEHOLDERS ARE CONSULTED?

HOW CAN I SUBMIT COMMENTS? .......................................................................................................... 17

22. WHERE WILL MY COMMENTS GO? AND WILL THEY BE PUBLISHED? .................................................... 18

23. WILL I GET A RESPONSE? ........................................................................................................................ 18

24. HOW WILL MY COMMENTS AFFECT THE EP III DRAFT? ......................................................................... 18

25. WHEN WILL THE NEW EQUATOR PRINCIPLES BE LAUNCHED AND IMPLEMENTED? ............................. 19

26. WHO CAN I CONTACT TO ASK A QUESTION ABOUT ANY OF THIS? ........................................................ 19



_______________________________________________________________________________________

3

OVERVIEW AND CONTEXT

1. WHAT ARE THE EQUATOR PRINCIPLES?

The Equator Principles (EP) is a risk framework for identifying, assessing, and managing environmental and

social risks in Project Finance transactions.

The EP framework is based on the International Finance Corporation (IFC) Performance Standards on

environmental and social sustainability and on the World Bank Group Environmental, Health, and Safety

Guidelines.

There are currently 77 adopting financial institutions (74 Equator Principles Financial Institutions and 3

Associates).

2. WHAT IS AN EQUATOR PRINCIPLES FINANCIAL INSTITUTION AND WHAT IS THE EQUATOR PRINCIPLES

ASSOCIATION?

Currently, an Equator Principles Financial Institution (EPFI) is a financial institution that adopts the EP and is

active in Project Finance or Project Finance Advisory services. EPFIs commit to not providing loans to

projects where the borrower will not, or is unable, to comply with their respective social and environmental

policies and procedures.

The EP Association is the unincorporated association of member EPFIs and Associates whose objective is

the management, administration and development of the EP framework.

3. HAS THE PROJECT FINANCE MARKET CHANGED SINCE THE LAUNCH OF EQUATOR PRINCIPLES?

There has been significant development in the Project Finance market since the launch of the EP

framework in 2003. The market has become more culturally diverse with a variety of global and local

financial institutions active in the market. In addition, there are more diverse financing structures for

example where the proceeds of a financing are used partly for Project Finance and partly for the other

general financing needs of the client, or where financing is for a project and there may be a “guarantee”

from the Parent (which some banks do not view as pure Project Finance). Furthermore, experience

managing environmental and social risk within financial institutions and awareness with clients and their

advisors has greatly improved.

4. WHY ARE THE EQUATOR PRINCIPLES BEING UPDATED AND WHAT DOES “EP III” MEAN?

As noted in the current EP text, the EP Association is committed to reviewing the EP framework from time-

to-time to reflect ongoing learning and emerging good practice.





http://www.ifc.org/ifcext/sustainability.nsf/Content/EHSGuidelines




http://www.equator-principles.com/index.php/members-reporting










_______________________________________________________________________________________

4

Since the launch of the EP framework in June 2003 and a subsequent revision in 2006, there has been

significant growth in the number of EP adopters from the original 10 to 77 financial institutions from 32countries across the globe. During this period there has been significant development in environmental and

social risk management practices, partly as a result of the greater challenges impacting affected

communities and the environment and partly due to the changing financial landscape, particularly the

ongoing financial crisis and changing public perception of the role of financial institutions.

In 2010, the EP Association initiated a Strategic Review which produced a series of recommendations on

key thematic areas, namely: scope, climate change, human rights, reporting and transparency, stakeholder

engagement and governance. Parallel to this, the IFC initiated a review and update of their Sustainability

Framework, and their Performance Standards, which underpin the EP, were updated and re-launched in

January 2012.

In this context it was deemed an appropriate time to reflect on the implementation experience of EP

Association members, and that of our clients, and update the EP to ensure they remain a relevant and

practical risk management tool and supportive of sustainable financing objectives.

The result of the EP Update process will, if approved by members, be the third version of the Equator

Principles – hence the term “EP III”.

5. WHAT ARE THE KEY AIMS OF THE EP III UPDATE PROCESS?

The keys aims of the EP III Update process are:

• To ensure EP Association members continue to appropriately manage environmental and social risk

and impacts for their institutions, clients and relevant stakeholders with regard to the financing of

projects,

• To reflect the recent update of the IFC Performance Standards, and

• To maintain the level playing field on which international and local financial institutions operate,

with regards to sustainable financing objectives.

http://www.equator-principles.com/index.php/ep3/about-ep3/strategic-review-2010-2011










_______________________________________________________________________________________

5

6. WHAT ARE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III DRAFT?

In summary, key themes and areas of development proposed in the EP III draft include:

• An extension in the scope of the EP to Project-Related Corporate Loans and Bridge Loans.

• Changes reflecting the recent update of the International Finance Corporation (IFC) Performance

Standards.

• New requirements related to managing impacts on climate.

• Greater emphasis on human rights considerations in due diligence and an acknowledgment of the

UN "Protect, Respect and Remedy" Framework for Business and Human Rights and Guiding

Principles on Business and Human Rights.

• A strengthening of reporting and transparency requirements.

The proposed changes are fully detailed in the section - KEY CHANGES AND AREAS OF DEVELOPMENT IN

THE EP III DRAFT.

7. HOW WILL THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES AFFECT INDUSTRY SECTORS AND

CLIENTS?

The proposed changes to the EP will help improve the identification, assessment and management of

environmental and social risks and impacts in projects. This will be achieved through a widening of the

scope of application to other financial products, increased transparency and access to information for

financial institutions and local communities, and the incorporation of language that reflects the updated IFC

Performance Standards. The proposed changes should also enable more consistent implementation of the

EPs, thus making it easier for clients to implement the EP on-the-ground and to manage their relationships

with EPFIs.

8. HOW CAN I CONTRIBUTE TO AND PARTICIPATE IN THE EP III UPDATE PROCESS?

The formal 60 day stakeholder consultation and public comment period will give all interested parties and

stakeholders (including EP Association members, other financial institutions, clients, industry bodies and

associations, non-governmental organisations, consultants, law firms and regulatory bodies) an opportunity

to review the EP III draft and provide comments. The EP Association is committed to openness,

transparency and responsiveness and will consider all stakeholder feedback.

You can submit your views and participate in the process in one or more of the following ways:


























_______________________________________________________________________________________

6

• Participate in a webinar and/or face-to-face meeting – details are published on the EP III web

pages. Note that places are limited and by invitation only – you can register your interest inattending by emailing [email protected].

The EP III Update process and timeline is fully detailed in the section – THE EP III UPDATE PROCESS.













_______________________________________________________________________________________

7

PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

9. CAN YOU SUMMARISE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III

DRAFT?


Structure and

Language

All • The document has been divided in to 3 distinct sections to

enable clear distinction between mandatory requirements

in Main Text and Annexes, and supporting information in

the Exhibits:

1. Main Text – Preamble, Scope and Statement of

Principles.

2. Annexes – This contains implementation requirements

for applying certain aspects of the EP framework. The

content of the Annexes are an integral part of the EP

and the requirements within them are mandatory.

3. Exhibits – This contains supporting information

including a new Glossary of Terms.

• Several footnotes have been incorporated in the main text

or added to the Glossary of Terms.

• Several Principles have been shortened and language has

been adjusted or clarified.

• The document language has been refined to align with

new/changed language in the 2012 IFC Performance

Standards.



_______________________________________________________________________________________

8


Scope • Scope

• Principles 2, 4, 7,

and 9

• Exhibit I

• The inclusion of Project-Related Corporate Loans

(Corporate Loans related to one specific project) subject

to a US$100m threshold and a loan tenor of at least 2

years. It should be noted that general corporate purposes

loans are excluded from the scope of the EP (refer to the

Scope section of the EP III draft for the criteria).

• The inclusion of Bridge Loans that will be refinanced by

Project Finance or a Project-Related Corporate Loan.

Categorisation • Principle 1

• Exhibit I in EP II

• Exhibit I has been deleted and Categorisation has been

included in the main text. It should be noted that further

guidance material on Categorisation will be developed.

Climate

Change

• Principle 2 and

10

• Annex A

• There is a new requirement for an analysis of alternatives,

including less carbon intensive fuel sources and

technologies, for projects emitting over 100.000 tonnes

CO2 equivalent. It should be noted that the alternatives

analysis is based on the requirements stipulated in the

updated IFC Performance Standards.

• There is a new requirement for borrowers to publicly

report on emissions for projects emitting over 100.000

tonnes CO2 equivalent.

• It should be noted that further guidance material on

implementation of these requirements will be developed.



_______________________________________________________________________________________

9


Applicable

Environmental

and Social

Standards

• Preamble

• Principle 3

• Various other

Principles

• An overarching statement regarding the application of the

EP framework in High-Income OECD Countries has been

included in the Preamble.

• Principle 3 now provides clarity to EPFIs and clients on the

meaning and intent of the application of standards in

different jurisdictions. Where possible, reference to

application in High-Income OECD Countries has been

deleted from individual Principles.

• Principle 3 now states that the EPFI, at its sole discretion,

may seek to benchmark projects in these countries against

these or other internationally recognised environmental

and social assessment standards.

Action Plan

and

Managementsystems

• Principle 4

• Exhibit I

• The definition and purpose of an Action Plan, and related

management plans has been clarified.



_______________________________________________________________________________________

10


Stakeholder

Engagement

and Human

Rights

• Preamble

• Principles 5, 6

and 10

• Exhibit I

• Exhibit II

• New language in the Preamble and Exhibit II

acknowledges the UN "Protect, Respect and Remedy"

Framework for Business and Human Rights and Guiding

Principles on Business and Human Rights, and the

importance of human rights in the due diligence process.

• Principles 5 and 6 include new language related to

Stakeholder Engagement (replacing the current

Consultation and Disclosure) to reflect the updated

language in the IFC Performance Standards on stakeholder

engagement hierarchy.

• The text referencing Free, Prior and Informed Consent for

projects in non-OECD countries and OECD countries not

designated as High-Income has been inserted so that it

reflects the important changes in the IFC Performance

Standards.

• Principle 6 has been shortened to reduce duplication of

the requirements in the IFC Performance Standards.

• Assessment disclosure requirements have been moved to

Principle 10.

Covenants • Principle 8, 2 and

4

• The requirement for covenants now explicitly refers to all

projects.

• Requirements for Bridge Loans and Project Finance

Advisory services have been included in Principle 2 and

Principle 4.















_______________________________________________________________________________________

11


Reporting and

Transparency

• Principles 2, 5

and 10

• Annex B

• Principle 10 now includes all reporting and disclosure

requirements and is divided in to “Project Reporting” and

“EPFI Reporting”.

• Annex B includes detailed requirements for EPFI reporting.

• In addition to the client’s responsibility to disclose the

project Environmental Impact Assessment (EIA) locally,

the text now includes the requirement to disclose the EIA

and Environmental and Social Management Plan (ESMP)

(which is normally a component of the EIA), online unless

the borrower does not have a company website.

• Annex B also includes a new requirement to provide,

subject to borrower consent, a list of projects for

publication on the EP website.

• It should be noted that a grace period for reporting onProject-Related Corporate Loans will be reflected in EP

Association Governance Rules.

10. WHY IS THE EQUATOR PRINCIPLES ASSOCIATION EXTENDING THE SCOPE OF THE EQUATOR

PRINCIPLES?

The EP Association is responding to trends and practices on how projects are being financed. There has

been significant development in the Project Finance market since the launch of the EP framework in 2003.

The market has become more culturally diverse with a variety of global and local financial institutions active

in the market. In addition, there are more diverse financing structures for example where the proceeds of a

financing are used partly for Project Finance and partly for the other general financing needs of the client,

or where financing is for a project and there may be a “guarantee” from the Parent (which some banks do

not view as pure Project Finance). While in many of these cases environmental and social risks and impacts

are still present, these types of financing fall outside the scope of the current EP framework. Additionally

there has been a notable maturation of additional environmental and social risk and mitigation procedures

notably with regards to climate change and human rights.

Taking all these factors into account, it is proposed that the scope is extended to a defined sub-set of

Corporate Loans (Project-Related Corporate Loans) and Bridge Loans.



_______________________________________________________________________________________

12

11. THE DEFINING CRITERIA FOR PROJECT-RELATED CORPORATE LOANS IS VERY SPECIFIC, WILL THIS

MEAN MANY PROJECTS WILL NOT BE ASSESSED UNDER THE EQUATOR PRINCIPLES FRAMEWORK?

The proposed extension of scope to Project-Related Corporate Loans is a significant step forward and

should capture more transactions for assessment under the EP framework. The definition of Project-

Related Corporate Loans has been subject to extensive debate within the EP Association and the proposed

criteria have been deemed the most appropriate for a number of reasons, including:

• ensuring the consistent implementation of the EP framework,

• providing a starting point for capacity building for new adopters, and

• ensuring that adopters have sufficient leverage to implement the EP framework when non-

adopters are present in the syndicate or leading the syndication.

Furthermore it should be noted that financing a project through a Project-Related Corporate Loan is

different to Project Finance in two important respects.

In general, financial institutions have a lesser degree of influence/leverage over a project financed through

a Corporate Loan. There is also a higher degree of competition with financial institutions in certain

geographies including those that are not EP adopters. Furthermore loans are often arranged in a shorter

timescale meaning that parts of the EP framework would require a different approach.

The proposal to extend the scope to Project-Related Corporate Loans has taken these factors in to account

to ensure that the EP framework can be implemented by financial institutions. It should be noted that the

proposals also aim to ensure there are more stringent requirements for the highest risk Corporate Loan

projects.

12. WHY DOESN’T THE EQUATOR PRINCIPLES FRAMEWORK APPLY TO ALL AREAS OF FINANCE?

The EP framework was originally created for environmental and social risk management in Project Finance

transactions. While the proposal is to extend the scope of the EP to Project-Related Corporate Loans and

Bridge Loans, the focus will still be on Project Finance and Project Finance Advisory services as it easily

follows a project’s financing, development and operational cycle.

The EP framework does not lend itself readily to other areas of finance. For example, capital markets deals

(such as bonds and IPOs) are often general corporate purposes in nature, and in these transactions financial

institutions do not have long-term “hooks” such as Covenants or monitoring requirements.

Additionally, the level of due diligence required to apply the EP framework can be significant in terms of

timing and resources and many financing products are structured in a way which makes the consistentapplication of EP impractical or unfeasible. Therefore the scope has been limited to projects in order to

ensure that the EP framework can be applied consistently.



_______________________________________________________________________________________

13

The EP Association does acknowledge however that many members use the “EP” concept and the IFC

Performance Standards within their own internal policy frameworks for other finance activities.

13. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION WORKING TO IMPROVE CONSISTENCY IN EQUATOR

PRINCIPLES IMPLEMENTATION?

The EP III Update process has facilitated extensive discussion within the EP Association on the challenges

and possible solutions for better consistency and these discussions will be ongoing. The EP III draft also

proposes language on how EPFIs might be able to exchange non-confidential information and communicate

with each other during the due diligence phase of a project. Furthermore, the EP Association will be

providing more opportunities for members to discuss this topic and it will be discussed at the next EP

Association Annual Meeting which takes place during Phase III of the EP III Update process.

14. WHY HAS THE EQUATOR PRINCIPLES ASSOCIATION FOCUSED ON ENHANCED REPORTING AND

TRANSPARENCY?

It is recognised that transparency is an important part of environmental and social risk management and it

contributes to overall accountability. As the EP Association has grown and developed this topic has become

an important consideration for members and stakeholders alike. The proposals in EP III draft take

important steps to enhance reporting and transparency and the implementation of the proposals will be

challenging. It is acknowledged that it will take both time and experience to create a level playing field on

this topic.

15. HOW DO THE ENHANCED REPORTING REQUIREMENTS IMPROVE COMPLIANCE AND TRANSPARENCY?

The new reporting requirements proposed in the EP III draft allow for greater transparency by:

• increasing the amount of information disclosed about the projects financed,

• requesting clients to publicly disclose project related assessment documentation,

• requesting client consent to publicly disclose project names and,

• creating structured ways for information sharing between EPFIs.

16. HOW IS THE EQUATOR PRINCIPLES ASSOCATION WORKING TO IMPROVE THE PROVISION OF

GRIEVANCE MECHANISMS AT PROJECT LEVEL?

The provision of grievance mechanisms is a very important component of the EP framework and the

requirements enable Project Sponsors to proactively address grievances and concerns at project level. The

proposals in the EP III draft aim to reflect the IFC’s current thinking on the subject (as detailed in the

updated Performance Standards and Guidance Notes).



_______________________________________________________________________________________

14

17. HOW DO THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES ACKNOWLEDGE THE UN’S

“PROTECT, RESPECT AND REMEDY” FRAMEWORK AND GUIDING PRINICPLES ON BUSINESS ANDHUMAN RIGHTS?

The EP Association has discussed the UN "Protect, Respect and Remedy" Framework for Business and

Human Rights and Guiding Principles on Business and Human Rights as part the EP III Update process and it

was agreed that the updated EP should acknowledge the framework.

The second pillar of the "Protect, Respect and Remedy" framework sets out the corporate responsibility to

respect human rights as follows:

“business enterprises should act with due diligence to avoid infringing on the rights of others and to

address adverse impacts with which they are involved”.

The EP provides financial institutions the required “due diligence” framework to identify, assess and

manage project impacts by defining the processes and standards for stakeholder engagement with affected

communities (including for Indigenous Peoples), labour rights, and occupational and community health and

safety. The important requirement for project-level grievance mechanisms also allows affected

communities to address grievances proactively with Project Sponsors which is an important component in

driving greater accountability at project level.

It should also be noted that the EP III draft introduces the term “human rights” in the EP framework for the

first time.

18. HOW IS THE GAP BETWEEN THE EFFECTIVENESS DATE OF EP III AND THE UPDATED IFC

PERFORMANCE STANDARDS BEING MANAGED?

Consistent with the current EP framework, the EP Association Steering Committee agreed that the revised

IFC Performance Standards would take effect for EP Association Members on 1 January 2012 (the official

implementation date for the IFC). Accordingly Exhibit III of the current EP, which previously referred to the2006 IFC Performance Standards, was updated on 1 January 2012.

The EP Association Steering Committee also made a recommendation to members, clients and

stakeholders on how to transition smoothly and consistently to the updated IFC Performance Standards

and provided the following guidance. As such EP Association members will already be applying the

updated IFC Performance Standards when EP III is officially adopted and launched.












_______________________________________________________________________________________

15

19. WHY DOESN’T THE EP III DRAFT ADDRESS ALL THE RECOMMENDATIONS IN THE EQUATOR

PRINCIPLES STRATEGIC REVIEW REPORT?

The Strategic Review was intended to be the first step in a longer term process to determine the future of

the EP framework. It was also intended to support the EP Association in developing a road map for

improved implementation, action and engagement, and communication with members and stakeholders

alike. As such, the EP III Update process has focused on many of the short and medium term priorities

identified in the Strategic Review. Additionally, it should be notes that the Strategic Review

recommendations that were not deemed as immediate priorities will be considered following the EP III

Update process.







_______________________________________________________________________________________

16

THE EP III UPATE PROCESS & STAKEHOLDER ENGAGEMENT 20. WHAT IS THE PROCESS FOR UPDATING THE EQUATOR PRINCIPLES?

PHASE I: Internal Consultation and Initial Drafting of EP III (July 2011 - August 2012)

Existing Working Groups and new Task Forces initiated discussions and detailed analysis for each topic area

and shared proposals with the EP Association Steering Committee on how the EP framework might be

updated to reflect changes to the IFC Performance Standards and current best practice. All members were

invited to join the discussion groups to ensure full participation.

The Working Groups and Task Force proposals were discussed more widely with EP Association members at

their Annual Meeting in October 2011 and the Working Groups and Task Forces were subsequently

commissioned to provide final proposals and updated/new language for incorporation in to the EP.

The final proposals and updated/new language were examined and discussed at length by the EP

Association Steering Committee and members and the first draft of EP III was approved for public release

for the formal Stakeholder Consultation and Public Comment period.

PHASE II: Formal 60 day Stakeholder Consultation and Public Comment Period (August - October 2012)

The EP Association is committed to carrying out a robust and consultative process. The formal 60 day

stakeholder consultation and public comment period will give all interested parties and stakeholders

(including EP Association members, other financial institutions, clients, industry bodies and associations,

non-governmental organisations, consultants, law firms and regulatory bodies) an opportunity to

review the EP III draft and provide comments. The EP Association is committed to openness,


The EP Association Working Groups are working with specific stakeholder groups (e.g. Industry/clients,

NGOs) however the EP Association welcomes feedback and comments from any interested party on

both process and substance.



Phase II

Stakeholder Consultation

and Public Comment Process

Phase I

Internal Consultation and

Initial Drafting of EP III

July 2011 – August 2012 August 2012 - October 2012 October 2012 – January 2013

Phase III

Finalisation and

Launch of EP III







_______________________________________________________________________________________

17



pages. Note that places are limited and by invitation only – you can register your interest in

attending by emailing [email protected].

PHASE III - Finalisation and Launch of EP III (October 2012 – January 2013)

The EP Association will review comments received from members and stakeholders during this period

and will consult with members on amending the EP III draft.

The EP Association will not publish every comment received on the EP website however it will publish a

summary (unattributed) of the key topics/issues raised during the Stakeholder Consultation and Public

Comment period. The summary will include statements on how and why issues/comments have or have

not been incorporated in to the EP III draft.

The EP Association will also agree a plan for the formal adoption and launch of EP III (including setting an

official launch date and implementation transition period, training and communications) and will finalise all

the relevant guidance notes during this period. It should be noted that the EP Association will carry out a

final voting process with members, in line with the EP Association Governance Rules, to approve and re-

adopt EP III.

Note that the timeline for the EP III Update process, described above, is tentative and may be extended by

the EP Association as appropriate. The EP website is updated on a regular basis to ensure members and

stakeholders are fully aware of all the relevant details and you can keep up to date with activities at


21. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION ENSURING STAKEHOLDERS ARE CONSULTED? HOW

CAN I SUBMIT COMMENTS?

The EP Association is committed to carrying out a robust and consultative process. The formal 60 day

stakeholder consultation and public comment period will give all interested parties and stakeholders

(including EP Association members, other financial institutions, clients, industry bodies and associations,

non-governmental organisations, consultants, law firms and regulatory bodies) an opportunity to

review the EP III draft and provide comments. The EP Association is committed to openness,


The EP Association Working Groups are working with specific stakeholder groups (e.g. Industry/clients,

NGOs) however the EP Association welcomes feedback and comments from any interested party onboth process and substance.




















_______________________________________________________________________________________

18





pages. Note that places are limited and by invitation only – you can register your interest in

attending by emailing [email protected].

The EP Association will review comments received from members and stakeholders during this period

and will consult with members on amending the EP III draft.



Comment period. The summary will include statements on how and why issues/comments have or have

not been incorporated in to the EP III draft.

22. WHERE WILL MY COMMENTS GO? AND WILL THEY BE PUBLISHED?

Comments from stakeholders are an integral part of the EP III Update process and the EP Association

will be considering them during Phase III (Finalisation and Launch of EP III, October 2012 – January

2013) of the EP III Update process.

On submission comments go to the EP Secretariat for collation and distribution internally and the

submitter will receive an automated message to confirm receipt.



Comment process. The summary will include statements on how and why issues/comments have or

have not been incorporated in to the EP III draft.

23. WILL I GET A RESPONSE?

You will receive an e-mail thanking you for your comments and, where a question has been submitted, we

will endeavour to respond within 5 working days.

24. HOW WILL MY COMMENTS AFFECT THE EP III DRAFT?

The EP Association is committed to considering all comments received however no guarantee can be given

that your comment will have direct impact on the EP III draft. Furthermore, it should be noted that the EP





















_______________________________________________________________________________________

Association is required to carry out a final voting process with members, in line with the EP Association

Governance Rules, to approve any changes to the content of the EP.

25. WHEN WILL THE NEW EQUATOR PRINCIPLES BE LAUNCHED AND IMPLEMENTED?

After full consideration of stakeholder feedback by members and an internal revision process, the EP

Association will agree a plan for the formal adoption and launch of EP III including setting an official launch

date and implementation transition period, training and communications. It should be noted that the EP

Association will carry out a final voting process with members, in line with the EP Association Governance

Rules, to approve and re-adopt EP III.

26. WHO CAN I CONTACT TO ASK A QUESTION ABOUT ANY OF THIS?

All questions and comments can be sent directly to the EP Association Secretariat at

[email protected].




Drafk Prinicipios Del Ecuador

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