Who and where are the Equator Banks? - IILJ

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= tÜ~í=Çç=kdlë=íÜáåâ=çÑ=íÜÉ=bèì~íçê= mêáåÅáéäÉë\= NGO criticism has focused not only on the Principles but also on the perceived failure to apply the Principles, or inconsistent application by the Equator Banks of the Principles. k~êêçïåÉëë=çÑ=ëÅçéÉ=~åÇ=ÅçåíÉåí= NGOs are critical of the Principles, which they see as selective. Although based on the IFC model, they fail to reproduce some important elements of it. For example, none of the extensive obligations as to disclosure and transparency of IFC decision-making appear in the Principles. In the view of some NGOs, the Equator Banks have merely ‘cherry-picked’ from the model which the international community has adopted, leaving aside important safeguards. The Principles are limited to project finance above a $50m threshold. This is seen by NGOs as potentially ignoring: • the social and environmental impacts of activities funded by the Equator Banks from general or non-project finance lending; and • that the effect of projects under $50m may be much more harmful to society and the environment than the effect of more costly projects. The NGO community also has reservations about the scope of the Principles. It is said, for example, that the Principles ignore climate change. Certainly, there is no express mention of this important issue in the text of the Principles (although it may be subsumed within the concept of sustainable development). However, there are many other important environmental and social issues which the Principles do not specifically draw to the attention of the Equator Banks but which undoubtedly must be addressed as part of the Principles assessment. i~Åâ=çÑ=~ÅÅçìåí~Äáäáíó=~åÇ=íê~åëé~êÉåÅó= Some NGOs are concerned about a lack of transparency of Equator Bank decision-making. They observe that there is no mechanism for monitoring that Equator Banks actually implement the Principles and that the Equator Banks tend not to disclose what decisions they made or the basis of decision-making. There is no mechanism for affected communities to have recourse to the financial institutions, such as the availability of a dispute resolution mechanism for third parties (such as the IFC Compliance Advisory Ombudsman) in cases where standards are allegedly not being met or implemented, as the loan documentation places most of the responsibility in this respect on the borrower. NGOs have criticised the Equator Banks for failure to explain why they have supported or declined to support specific projects, sometimes comparing their decision to support an allegedly unsustainable project NS= bèì~íçê=mêáåÅáéäÉë=pìêîÉó=OMMR=Ó=pìãã~êó=oÉéçêíW=m~êí=f=Ó=qÜÉ=_~åâë= cêÉëÜÑáÉäÇë=_êìÅâÜ~ìë=aÉêáåÖÉêI=cÉÄêì~êó=OMMR=
= tÜ~í=Çç=kdlë=íÜáåâ=çÑ=íÜÉ=bèì~íçê=mêáåÅáéäÉë\=EÅçåíáåìÉÇF unfavourably with that of the banks that declined to do so. Equator Banks may, though, have very good reasons for not explaining their actions publicly: • the Principles are general rules which do not eliminate discretion or the need for interpretation; • a bank may decline to support a project for reasons other than breach of the Principles; • client confidentiality; • it is primarily for the sponsors (who have access to better and more detailed information) and not for the banks to disclose information about sponsors’ projects; and • banks which have intimate knowledge of a sponsor or a greater exposure to an industry will be able to make more informed decisions in a shorter time than banks which have less experience of the sponsor or less exposure to that industry. For legal and practical reasons, it is difficult to see why, except in exceptional circumstances, the banks should make disclosure in respect of specific projects, but we see some merit in general disclosure by the Equator Banks of support for, or failure to support, projects in different industry sectors. In some jurisdictions, however, it is a criminal offence to reveal confidential information. A possible compromise may be for banks to disclose the number of applications approved or rejected, but not to name applicants, although this would not catch cases in which the bank did not tender for the project because of its incompatibility with the Principles. lé~Åáíó=çÑ=íÜÉ=bèì~íçê=mêáåÅáéäÉë= The Principles do not state that all projects must comply with IFC guidelines, but merely emphasise the need for environmental assessment. They refer to projects being ‘generally consistent’ with IFC criteria and to a ‘reasonable minimum period.’ Some NGOs argue such wording is vague and could lead to poor implementation. tÉ~â=çå=ëçÅá~ä=áëëìÉë= The Principles are modelled on IFC Safeguard Policies, which, compared to World Bank standards, inadequately address social concerns in relative terms 3 . This may be addressed in the course of the current consultation on the review of the IFC Safeguard Policies 4 . 3 The IFC’s Compliance Advisor Ombudsman has identified the assessment of social impact as a shortcoming of the operation of the IFC’s Safeguard Policies. See Compliance Advisor Ombudsman: A Review of IFC’s Safeguard Policies published January 2003 available at www.cao-ombudsman.org/html-english/advisor.htm. 4 See ‘Where next for the Equator Principles?’ section on page 23 for further details. NT= bèì~íçê=mêáåÅáéäÉë=pìêîÉó=OMMR=Ó=pìãã~êó=oÉéçêíW=m~êí=f=Ó=qÜÉ=_~åâë= cêÉëÜÑáÉäÇë=_êìÅâÜ~ìë=aÉêáåÖÉêI=cÉÄêì~êó=OMMR=
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Who and where are the Equator Banks? - IILJ

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