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Management and Future Development of the Equator Principles Association

Management of the Equator Principles Association

Organizational Management of the Equator Principles Association

Equator Principles Financial Institutions (EPFIs) adopted the Governance Rules and established the Equator Principles Association (EPA) in July 2010. EPA is unincorporated international association of member EPFIs whose object is the management, administration and development of the EPs. Four entities are responsible for the management of the EPA: the Steering Committee (including the Chair), the Working Groups, the Secretariat, and the Trustee.

  • *Links to the Equator Principles Association Official website

CHAIR OF THE STEERING COMMITTEE

The role of the Chair is to chair the Steering Committee and provide coordination across the Steering Committee, the Working Groups and EPFIs to advance the objects of the Association. Standard Bank of South Africa is appointed as the current Chair of the EPA for June 2015 – present (as of July 2016).

STEERING COMMITTEE

The administration, management, and development of the Equator Principles and of the Association itself is delegated to and managed by the Steering Committee. The Steering Committee consists of 12 banks including MHBK, as of July 2016.

WORKING GROUPS

In order to gain input from a wide number of EPFIs and to share the management workload, Working Groups are formed to progress issues where detailed consideration and input is required. Some Working Groups are permanent, while others based on specific projects are temporary.

The Steering Committee allocates responsibility amongst the individuals representing the EPFIs on the Steering Committee to chair or to co–chair each Working Group, to report to the Steering Committee on the progress of the relevant Working Group and to direct that Working Group in accordance with Steering Committee decisions.

As of July 2016, the key working groups are External Relations, Consistency, Outreach, Biodiversity, Climate Change and Social Risk.

SECRETARIAT

The Secretariat manages the day to day running of the EPA (eg. Operating the official website, arranging conferences and preparing the minutes of meetings) on behalf of the EPFIs and is currently provided by the third party entity.

TRUSTEE

Annual membership fee system was implemented in 2008 among the EPFIs. Therefore, Trustee was appointed by the Steering Committee to oversee its financial and tax affairs and assume responsibility for its physical and intellectual property.

Exchange of Opinions with Environmental NGOs

As a key stakeholder, the environmental NGOs play an important role in the implementation of the Principles. The EPA exchanges opinions, from time to time, on the progress of issues such as climate change, social risks, and reporting and transparency with NGOs.

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Revision of IFC Performance Standards

The IFC revised its Performance Standards (PS) in January 2012.

To reflect changes in the IFC PS, EPFIs revised the EPs to focus on a number of themes, such as Biodiversity, Climate Change, and Social Risks, and launched the third version of Equator Principles (EP III) in June 2013.

EP III became effective on June 4, 2013.

Accomplishments of the Equator Principles

Three Changes to Project Finance

EPs have resulted in three major changes to project finance.

  1. With the EPs, environmental and social risks are now widely recognized by society as significant risk factors, in assessing the projects. In addition, the implementation of risk–responsive measures via an Action Plan, is now embedded in the financing agreement. As a result, consideration of environmental and social risks and the mitigation of risks have been prioritized, benefitting the global environment and local communities.
  2. The application of EPs to a project has become an important competitive factor for private financial institutions in obtaining the position of lead arranger in project syndication. In addition, collaboration in coping with environmental and social risks has been encouraged among syndicate members. The establishment and dissemination of these Principles have given financial institutions focused initiatives when addressing environmental and social risks.
  3. The vigorous exchange of opinions on the environmental and social risks of a project has been encouraged among banks, clients and environmental NGOs through the management of the EPs and their application to project finance.

As described above, EPs have brought a variety of advantages to stakeholders including project–affected communities, banks, clients and environmental NGOs.

Perspective

Expanding the Scope of Application and Adopting Banks

At first, EPs were only applied to Project Finance; however, with the revision of EPs to EP III in June 2013, corporate loans for large scale projects are now under the scope of EPs. Because expansion of scope strengthens mitigation of environmental and social risks, discussion of further scope expansion will be continued.

Moreover, increasing the number of adopting banks enhances the influence and leverage of EPs, which further leads to a decrease in environmental and social risks. Therefore, it is paramount for the EPA to continue outreaching to those financial institutions that have not yet adopted EPs and to increase the number of member banks.