The Equator Principles
Do They Make Banks More Sustainable?

Working Paper

Authors: Emmanuel Acheta    Olaf Weber   

Published By: UNEP Inquiry   

Date: Feb 2016

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The Equator Principles

The Equator Principles are a voluntary code of conduct and a risk management framework for determining, assessing and managing environmental and social risks in projects, such as energy or infrastructure projects. Since their foundation in 2003, they were lauded for integrating social and environmental assessment practices into project assessments. Critics reason, however, that without fundamental implementation efforts and enforcement, the Equator Principles will not contribute to any change with respect to effects of projects on sustainable development. To analyse their effects, a literature analysis, interviews with project financiers and stakeholders, and an analysis of Equator Principles signatories’ reports were conducted. The results suggest that the Equator Principles are mainly adopted because of reputational benefits and risk management and that they do not create significant changes in project financing institutions. Our conclusions are that criteria should be implemented that define sustainability thresholds for projects to be financed and that enforcement mechanisms are needed to guarantee the compliance of the signatories with the principles.

[This paper was presented at the UNEP Inquiry/Centre for International Governance Innovation Academic Symposium on the Design of a Sustainable Financial System, held in Waterloo (Canada) in December 2014]

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