Who and where are the Equator Banks? - IILJ

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Adoption of the Principles effectively requires the Equator Banks to review
their loan documentation packages in light of the wider social and
environmental assessment, monitoring and enforcement obligations that
apply. The Principles, however, are voluntary guidelines adopted by
Equator Banks. It is therefore inappropriate for lenders to oblige borrowers
to comply with them. It is competent and desirable for lenders to require
borrowers to comply with the EMP and environmental laws (defined as is
appropriate to each case to cover social and environmental laws of the host
country and transnational and international legislation, conventions and
treaties dealing with the environment, employment, health and safety and
human rights) and the policies and guidelines of the World Bank and IFC
that underpin the Principles.
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From the survey and in our experience it is market practice that, to the
extent it is used at all in loan documentation, the definition of the Principles
is fixed by reference to the date of the current published version at financial
close. However, this practice may create a tension between the expectation
of NGOs and stakeholders that the Equator Banks will implement the
Principles as they evolve over time and the need of borrowers for certainty.
Another important issue is whether Equator Banks will entertain borrower
requests for specific derogation from the policies and guidelines of the IFC.
If Equator Banks follow the IFC and allow exceptions to the Principles, this
presents interesting questions of principle, implementation and
transparency.
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Almost without exception, at least in our view, one of the Equator Banks in
the syndicate should be allocated the role of Environment Bank. The loan
documentation should expressly provide that the role of Environment Bank
is not capable of delegation to a non-Equator Bank as the Environment
Bank role entails onerous assessment, monitoring and enforcement
obligations as a means of managing the reputation risk to which each
Equator Bank is exposed.
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Our survey and experience indicate that specific provisions should be
included under which a borrower represents and warrants that:
• it has provided to the lenders all reports and (material) information in
relation to social and environmental matters in its possession or control;
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