Issues in Social and Environmental AccountingVol. 1, No. 1 June 2007Pp. 40-53    The Equator Principles, Project Finance a...
J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53                     41are attempting to respond t...
42                 J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53       nancing of an existing i...
J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53      43   review the assessment, action plan     ...
44                J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53It is well documented there has ...
J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53          45Principles into the banks practices. I...
46                J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53tions in their CSR Report, and t...
J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53       47commitment to responsible lending. For   ...
48                J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53the Equator Principles change.  ...
J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53      49ing asset. Equator Principles applied to  ...
50                J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53     Principles.”(http://       ...
J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53      51       parent?”, Interdisciplinary Envi-  ...
52               J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53        tural Studies, New York: ...
J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53   53        64, pp. 17-29.                       ...
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  1. 1. Issues in Social and Environmental AccountingVol. 1, No. 1 June 2007Pp. 40-53 The Equator Principles, Project Finance and the Challenge of Social and Environmental Responsibility Jane Andrew School of Accounting and Finance, The University of Wollongong, AustraliaAbstractThe Equator Principles, launched in 2003 and revamped in 2006, are a set of voluntary princi-ples designed to help private lenders make socially and environmentally responsible projectfinancing decisions. This paper explores the impact of these principles on the disclosures oftwo signatory banks, focusing on type of information disclosures that have resulted and thesubstance of these disclosures. The work considers whether it is possible to ascertain from pub-licly available information how the practices of the banks may have changed in order to focuson their stated social and environmental responsibilities. It is concluded that although the Equa-tor Principles have marked the beginning of the banking sectors acknowledgement of their rolein social and environmental responsibility, at this stage insufficient information is being dis-closed to determine the impact these principles are having on actual banking practices.Key Words: Ethical Banking, Responsible Finance, Corporate Social Responsibility, EquatorPrinciples, Environmental Responsibility, Corporate Codes of Conduct.Introduction complicated and the notion of a passive identifiable audience is insufficientCorporations are under increasing pres- (Macdonell, 1986; Agger, 1992). Notsure to represent themselves to multiple only is the very notion of transparency aaudiences, using complex, contested and matter for much public debateoften competing criteria to assess the (evidenced by the public discussion gen-performance of the firm (Cooper & erated by the collapse of private corpora-Sherer, 1984; Cousins & Sikka, 1993; tions such as Enron, WorldCom, HIH;Gray, 1992). No longer is it presumed Baker and Hayes, 2004), but the identitythat corporate performance can be made of the potential user can not be pre-transparent through the provision of fi- sumed (Young, 2006), much less thenancial information to interested users purpose of the reporting process(Andrew, 2001). The firm itself is more (Adams, 2004). As a result, many firmsJane Andrew is Lecturer of Accounting at School of Accounting and Finance, the University of Wollongong, Austra-lia, email:
  2. 2. J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53 41are attempting to respond to these com- for determining, assessing andplex expectations, not only to satisfy the managing social & environmentalrequirements of the audiences for which risk in project financingthe information is produced, but also to ( and constitute an audience forthe information that the firm dissemi- In 2003, the Equator Principles werenates (Belkaoui & Karpick, 1989; Cova- developed by private lending institutionsleski & Dirsmith, 1995; Hall, 1997; as a way to encourage private lenders toHusted & Allen, 2006). consider social and environmental issues before funding projectsi. These princi-Cultural practices that respond to, pro- ples have focused mainly on issues thatduce and reproduce social expectations arise as a result of project financing inhave been considered within the field of developing countries and are defined ascultural and media studies (Agger, 1992; “a financial industry benchmark for de-Hall, 1997), and this work is beginning termining, assessing and managing so-to inform research in emerging fields cial risk in project financ-such as corporate social responsibility, ing” ( reporting, environmental They focus specifically on ‘project fi-accounting and ethical finance. This pa- nance’ and although the definition ofper utilizes Agger’s (1992) work on me- this may be contested within the bankingdia, culture and representation. I assume and finance literature, for the purposesfrom the outset that information pro- of the Equator Principles it is defined asduced by corporations is framed discur-sively by the institutional and cultural a method of funding in which thestructures that allow its emergence; it is lender looks primarily to the reve-constructed and constructing, productive nues generated by a single project,and reproductive, constituted and consti- both as the source of repaymenttutive. Accordingly, representations of and as security for the exposure…and by the firm that fall into the category Project finance may take the formof corporate social responsibility are part of financing of the construction ofof a process and are not an end in them- a new capital installation, or refi-selves as these can never be controlledentirely by the producer or the audience. i Over 40 banks across the globe have adopted the Equa-This interactive process will be consid- tor Principles including ABN AMRO Bank, N.V., ANZ,ered in more detail throughout the paper. Branco Bradesco, Banco do Brasil, Banco Galicia,It is hoped that this theoretical framing Banco Itaύ, Bank of America, BMO Financial Group, BTMU, Barclays plc, BBVA, BES Group, Calyon, Cajaof voluntary corporate codes of conduct, Navarra, CIBC, CIFI, Citigroup Inc., Credit Suissespecifically the Equator Principles, can Group, Dexia Group, Dresdner Bank, E+Co, EKF, FMO, Fortis, HBOS, HSBC Group, HypoVereinsbank,help develop our understanding of the ING Group, Intesa Sanpaolo, JPMorgan Chase, KBC lapurpose, process and possible outcomes Caixa, Manulife, MCC, Mizuho Corporate Bank, Mil-of these codes. lennium bcp, Nordea, Nedbank Group, Rabobank Group, Royal Bank of Canada, Scotiabank, SEB, Stan- dard Chartered Bank, SMBC, TD Bank Financial Group, The Royal Bank of Scotland, Unibanco, Wacho- via, Wells Fargo, WestLB AG, Westpac Banking Cor-The Equator Principles poration. Many of these have only recently associated themselves with the principles, so it will be interesting A financial industry benchmark to see how these banks illustrate their commitment in the future.
  3. 3. 42 J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53 nancing of an existing installation, largely reversible and readily with or without improvements. In addressed through mitigation such transactions, the lender is measures; usually paid solely or almost ex- Category C: Projects with minimal clusively out of the money gener- or no social or environmental ated by the contracts for the facil- impacts. ity’s output, such as the electricity 2. S oc i a l a n d E n vi r on me nt a l sold by a power plant Assessment: This does not have to ( be done by an independent expert unless it is a Category A project,Once a bank became a signatory, the social impacts assessed under thelender is able to advertise that they asso- International Covenant of Civil andciated themselves with projects with Political Rights, the Internationalminimal social and environmental im- Covenant on Economic, Social andpact and correspondingly, these projects Cultural Rights ICESCR and thewould be less likely to threaten the secu- UN Convention on Human Rights.rity of the lender (Kass & McCarroll, 3. Applicable Social and2006). The principles acknowledge the Environmental Standards must besubstantial social and environmental followed (this includes host countryimpact that financiers can have as they laws, IFC Performance Standards)often determine the types of projects that 4. Action Plan and Managementwill progress to development stage. It is System: This must address anyargued that they have the power to en- finding in the assessment; it willcourage “responsible environmental describe any actions needed tostewardship and socially responsible implement mitigation measures,development” (www.equator- corrective actions and Signatory institutions measures necessary to manage thehave become known as Equator Princi- impacts and risks. Borrowers mustples Financial Institutions (EPFIs) and in design a Social and Environmental2003 they agreed to adhere to the fol- Management System that addresseslowing principles: the management of these impacts, risks and corrective regulations.1. Review and Categorisation: Con- 5. Consultation and Disclosure: duct a social and environmental re- Consult with communities affected view of a proposed project and cate- by the project. gorize it in terms of its impact. 6. Grievance Mechanism: Categorisation of Projects: Communities will have the right to Category A: Projects with potential have their grievances heard and significant adverse social or addressed by the borrower (this is environmental impacts that are not independent of the lender and diverse, irreversible or does not make provisions for an unprecedented; independent third party to oversee Category B: Projects with potential the process). limite d adverse social or 7. Independent Review: A social or environmental impacts that are few environmental expert not directly in number, generally site specific, associated with the borrower will
  4. 4. J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53 43 review the assessment, action plan 10th principle on EPFI Reporting stating and consultation process. that8. Covenants: covenants linked compliance. 10. Each EPFI adopting the Equator9. Independent Monitoring and Principles commits to report Reporting: Independent publicly at least annually about its environmental or social expert Equator Principles implementation monitor and report on compliance processes and experience, taking over the course of the loan. into account appropriate confidentiality considerationsIn 2003, this provided a starting point ( the Equator project, but there weresome significant problems. Specifically, Although this principle acknowledgesthese principles did not include a review the importance of transparency, thebody and there were no formally identi- statement also implies that the businessfied disclosure or transparency require- case for non-disclosure can legitimatelyments. This meant that financial institu- outweigh the social or environmentaltions could become signatories without imperatives for disclosure. It doesn’tthere being any formal mechanism to suggest how the information should bescrutinize the way the institutions had presented or the level of detail that isintegrated the principles. Wright and appropriate. In many ways the 10th prin-Rwabizambuga (2006, p.91) argue that ciple allows banks to assert they are be-this meant “that all Equator banks gain ing transparent, without any pressure forsome reputational benefits irrespective substance. Some banks may choose toof their actual practices”. In order to ad- disclose information in a substantialdress these concerns, a revised version way, but this is not an essential commit-of the Equator Principles were issued in ment. Although corporate disclosures2006. A number of other changes were are vital to an ongoing, informed dia-incorporated in these revised principles. logue between the community and theSpecifically, the applicability of the corporation about acceptable practices, itprinciples expanded to include projects is important to acknowledge that claimsmore than $10 million whereas previ- of transparency can be problematic. Asously the principle affected projects Hall (1997) has argued, everything in itscosting more than $50million; the prin- communication is a representation. Allciples now apply to the expansion and information is mediated through lan-upgrade of existing projects that result in guage, discourse and institutional im-new social and environmental impacts; peratives it can never be wholly reveal-EPFI’s need to report on the progress ing in the way that the word transpar-and implementation of the Equator Prin- ency implies (Andrew, 2001). If corpo-ciples at least annually (as outlined be- rations are allowed to claim they are be-low); there are tighter rules regarding ing transparent through their disclosures,public consultation and the handling of it may assist in the constitution of a pas-grievances; and there are stronger cove- sive, uncritical audience adding to thenants to ensure compliance with the challenges faced by those seeking topolicies. Perhaps the most significant transform banking practices.change has been the inclusions of the
  5. 5. 44 J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53It is well documented there has been a foundation on which to consider thatsignificant increase in the number of changes that may occur as a result of thefirms seeking to demonstrate their ethi- revisions and this can be the focus ofcal credentials (Neimark, 1995; Kap- future research.stein, 2001; Sethi, 2002). Although thereis little doubt corporations are adoptingvoluntary codes as a strategy, the pur- The Equator Principles andpose and impact of that strategy cannot Project Financing Disclosures:be presumed (Husted & Allen, 2006). Any News?The World Bank, the InternationalMonetary Fund and the International Cultural studies lays bare the de-Finance Corporation all assess the social ception encoded in these domi-and environmental risks of their lending nant cultural artifacts, It criticizesdecisions before funding projects. These the needs these cultural practicesassessments have been controversial, but purvey through the guileful repre-there is no doubt that this approach to sentations of a frozen second na-lending is fundamental to the legitimacy ture – reality as it “must” be – andand identity of these multilateral institu- instead suggests alternative for-tions (Saravanamuthu, 2004; Annisette, mations of both human needs and2004). In some cases, private financial social reality (Agger, 1992,institutions play a role in development p.145)projects. They may fund projects that theWorld Bank had decided not to finance, In order to explore the impact of theor they may supplement the funds pro- Equator Principles on the practices ofvided by the World Bank. Either way, signatory banks, I have examined thethe lending practices of private institu- public disclosures of HSBC and West-tions are increasingly scrutinized by non pac. These banks have been chosen as agovernment organizations (NGO’s) starting point for this analysis because(Missbach, 2004). both HSBC and Westpac were actively involved in the design of the principlesAs Branco & Rodrigues (2006, p. 234) and have been associated with the prin-have noted “studies focusing on social ciples since their inception in 2003. Itresponsibility disclosure practices by should be acknowledged that this is anfinancial institutions are scarce” and this initial investigation and needs to be ex-work will assist in the development of tended beyond these two banks in theresearch in this area. It will focus on the future.impact of the Equator Principles beforethe release of the June 2006 revisions as This examination is understood throughbanks have yet to release information the theoretical lens of works by Hallusing these guidelines. This work will (1997) and Agger (1992). In order toconsider the information that has been consider the impact of the Equator Prin-available in the public domain up to the ciples on the banks, the banksrelease of the revised principles and will ‘responsibility report’ from 2003 (thenot extend beyond this as there has not year the Equator Principles began) untilbeen sufficient time for banks to respond 2006 and publicly released informationto the changes. This study will form a regarding the integration of the Equator
  6. 6. J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53 45Principles into the banks practices. It ples commitment, in general the level ofbecame apparent that very little informa- substance supporting their claims wastion of any substance was available, all lacking. The bank used innumerable op-banks made references to the principles portunities to refer to the Equator Princi-and talked about what they were doing ples without providing anything moreto integrate the principles but this re- than a stated commitment. In so doingsearch revealed that the information was they position themselves as committed,shallow and did not enable a knowledge- without having to produce evidence ofable reader to work out just how the such commitment. In this context, it isprinciples were impacting on the banks difficult to assess the way the principlespractices in any substantial way. The are impacting on HSBC’s practices, letfollowing section considers each bank in alone the impact these may have on thedetail. actual social and environmental conse- quences of these practices.HSBC However, we can see that the representa- tional performance is vital to HSBC’sAccording to (Agger, 1992, p.184) identity as they refer to the Equator Prin-“representation is a political practice ciples whenever an opportunity arises.where it encodes its content in the illu- For instance, HSBC claim that “we dosion of authorless stancelessness”. And not see this as an "add-on" to our busi-banks disclosures under the Equator ness, but a key part of a much wider ap-Principles are a study in such representa- proach to managing the sustainability oftion. These disclosures are not apolitical, our lending” ( are deliberate representations of the hsbc/csr/our-sustainable-approach-to-firm, but are presented and represented banking/equator-principles, Accessed:as benign, transparent statements about 9th February, 2007). However, a detailedposition and policies. However, as Ag- search of the banks publicly availableger argues they are not neutral, far from information revealed little to substantiateit they position the politics of the firm this claim. HSBC also states that theywithin the appearance of authorless rep- have “established internal proceduresresentation. HSBC is the third largest that require all relevant project relatedbank in the world by market capitaliza- loans to be categorised in accordancetion and they signed on to the Equator with the Equator Principles” (http://Principles in 2003, taking on more high roles as the chair of the Equator s us t ai na bl e -a ppr oa c h-t o-ba n ki ng/Principles Working Group in 2005 and equator-principles Accessed: 9th Febru-as a participant in the redrafting of the ary, 2007) but, again there is no way toEquator Principles in 2006. As such, externally verify this stated commitmentthey have positioned themselves as an and there is no legal obligation onauthor, but when reporting on practices HSBC to do so as the principles are notrelating to the principles their authorship all but invisible. In an attempt to substantiate their com-Having reviewed the information avail- mitment they claim that they report an-able regarding HSBC’s Equator Princi- nually on the equator principles transac-
  7. 7. 46 J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53tions in their CSR Report, and they pro- again, these are statements and there isvide aggregate information but this in- little evidence to support these claims orformation lacks substance, it reveals information in order to understand hownothing about the nature of the projects the training is being conducted and whatthey are engaging, or the internal proc- aspects of the principles are being imple-esses in place to assess them against the mented, at what level and for what pur-Equator Principles. There is little con- pose. The intention is delimited, and thecern about the ways the banks decisions focus is created – irrespective of howmay have changed the social and envi- this can be traced to improved social andronmental outcomes experienced at the environmental performance.project site. This kind of detail wouldenable a user to understand how the To a large extent the Equator Principlesbank is creating a ‘better world’, rather are self referential in that the banks canthan just internal procedures to meet the employ “independent experts” orprinciples with little external verifica- “independent consultants” to advisetion. them. This advice is not made public, and the level of independence is not en-On closer inspection of HSBC CSR Re- sured, they purely make the statementports they are disclosing some informa- that they “retain a panel of consultantstion in relation to the principles. In covering various industry sectors, envi-HSBC’s 2003 CSR Report they are com- ronmental and social risk capabilities,mitted to report summary numbers for and geographic locations, which ourthe total value and volume of project Project Finance teams can draw deals booked. In their discussion The selection of consultants is managedon the implementation of the Equator centrally by Project Finance, with guid-Principles they say they’ll update their ance from the Environmental Risk Unitprocedures manual and train staff in- as appropriate.” ( in the project finance and that hsbc/csr/our-sustainable-approach-to-demonstration that they are adhering to banking/equator-principles Accessed: 9ththe Equator Principles will be provided February, 2007). There is no way of ex-through the previously mentioned sum- ternally verifying the quality of this ad-mary report. This is their commitment to vice, or the level of bias that may ensuepublic information. This is a cultural from the commercial arrangementspractice that can “situate the creation of agreed to when providing the advice andcultural artifacts in complex and eco- so on. However, the firm is able to rep-nomic spaces within which creative ac- resent itself as legitimate, with externaltivity is conditioned, even deter- experts verifying their internal proce-mined” (Agger, 1992, p.13). The asser- dures seamlessly creating a discourse oftion of the corporate agenda on the proc- legitimacy to which they can fulfil andesses possible through the Equator Prin- control.ciples can be revealed in the limits, theinvisible spaces that are not represented HSBC also reveals they are focused onby the firm. Following on from this, the reputational benefits the EquatorHSBC’s CSR reports also focus consid- Principles provide, as opposed to theerably on their commitment to training social and environmental contributionstaff on the Equator Principles, but that banks can make through improved
  8. 8. J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53 47commitment to responsible lending. For December 2004), in so doing, theyinstance, they state that they want “to readvertise their commitment to thehelp mitigate environmental credit risk principles although there is no directand adverse impacts on our reputation” link between the they “have developed guidelines and 3. The release of HSBC’s chemicalhave adopted internationally recognised industry sector guidelines is an op-codes of conduct, such as the Equator portunity for them to note that itPrinciples, to help us in our decision- reinforces the “the Group’s adoptionmaking.” (HSBC, Key CSR issues 30, in 2003 of the Equator Principles - aJune 2006, The banks set of voluntary guidelines appliedperception that an association with the to project finance activi-principles has positive reputational bene- ties.” (HSBC launches chemicalsfits is evident in the way they refer to the industry sector guideline, 03 AugustEquator Principles every time they re- 2005).lease information about any project that 4. They also claim that their freshwateris associated with responsible behaviour. infrastructure guidelines “reinforceAgain, the self referential nature of the HSBC’s commitment to the EquatorEquator Principles is evident upon any Principles, a set of voluntary guide-detailed consideration of the banks state- lines providing a common frame-ments regarding the principles. It be- work for major banks to addresscame apparent that everything HSBC environmental and social issuesdid that linked to the community or the arising from financing pro-environment presented an opportunity to jects.” (HSBC launches freshwaterpromote the Equator Principles. For ex- infrastructure guideline, 27 Mayample: 2005). 5. The launch of a climate change part-1. The release of their forest sector nership with Newcastle University guidelines allows them to say “the and the University of East Anglia guideline announced today demon- enabled them to say that “in 2003, strates our commitment to the Equa- HSBC adopted the Equator Princi- tor Principles in relation to the for- ples” (HSBC launches climate est land and forest products sec- change partnership, 08 December tor” (HSBC launches forest sector 2004) even though there is no direct guideline, 28 May 2004), even link between these two projects. though there is no direct relation- ship. Obviously, HSBC is representing their2. When discussing their effort to be a bank as a socially and environmentally ‘carbon neutral’ bank they say “this responsible lender. The strategies out- complements the actions it is al- lined above would suggest they are us- ready taking to address the indirect ing any given opportunity to use the impact it has on environmental and Equator Principles to reposition the firm social issues arising when financing in this light. Unfortunately, at the stage projects for customers. For example, it is impossible to tell if these are having in 2003, HSBC adopted the Equator a positive impact on the internal prac- Principles.” (HSBC world’s first tices of the bank, a situation that may major bank to go carbon neutral, 6 change as the disclosure requirements of
  9. 9. 48 J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53the Equator Principles change. on by the Equator Principles. They state that 13 projects were financed in the year (all in Australia and the Pacific Is-Westpac lands), 6 new projects, 1 to buy an exist- ing asset and six were for the refinanc- “A radical cultural studies inter- ing of an existing asset. They state that 4 venes politically where it chal- had capital costs below $50million, but lenges representation to theorize they do not say if these underwent the itself, understanding how the rep- same assessment process or not. The ertoire of interpretive activities in summary information is very ambigu- which we habitually and thought- ous, giving detail but not substantial lessly engage is, in fact, a careful enough to consider how the Equator political construction – call it ide- Principles are working. They declined “a ology” (Agger, 1992, p.183) number of transactions” but claim this was not because of breaches of theWestpac is the only Australian bank to Equator Principles offering no insightadopt the Equator Principles, having into the internal processes used for as-become a signatory in 2003. Westpac’s sessment, whether any projects under-2004 Stakeholder Impact Report, ac- went additional investigation based onknowledges the banks commitment to the Equator Principles, whether theythe Equator Principles but provides no hired external advises to assist in thematerial evidence of the incorporation of assessment of the projects, or whetherthese into their practices. They state the the projects needed to undergo any“we felt it was important to support this changes to meet the banks standards. Ininitiative so that standards such as these essence, very little information was pro-are adopted by all banks in the market- and the likelihood of competitionbetween banks on environmental and In Westpac’s 2006 Stakeholder Impactsocial grounds is minimised” (SIR 2004, Report, they congratulate themselves onp.35). In this statement, the bank clearly making their commitment to thearticulated a strategic interest in the de- “Actually quite stunning” (their wordsvelopment of the Equator Principles, but 2006, p.7) Equator Principles and thatsuch an interest would leave any inter- they had successfully marketed them-ested party to wonder whether such this selves as an environmentally responsibleinterest was to further development, in- bank through their 2006 advertisingnovation, commitment. The emergent campaign. They claim this has led torepresentations are political (Agger, request for more information and that it1992) has been met “with an astounding re- sponse” (2006, p.27), but they do notIn Westpac’s 2005 Stakeholder Impact disclose whether they are providing thisReport, they reaffirm their commitment additional information and in what the Equator Principles, again they use The aggregate information proves nothis opportunity to emphasise that they more substantial than the previous year,are the sole Australian signatory. Like with them claiming that they closed 14HSBC, Westpac offers some aggregate deals, 6 new, 1 an expansion of an exist-information outlining projects impacted ing asset, and 7 refinancing of an exist-
  10. 10. J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53 49ing asset. Equator Principles applied to 2006, Westpac report finds risks andall except one as it was below opportunities in climate change);$10million. Again they state that “a 2. When discussing corporate environ-number of transactions were declined mental policy and governance onduring the past year, several for reasons their website Westpac highlightsi nc l udi ng e nvi r on me nt a l c on- their commitment to the Equatorcerns” (p.31) but do not elaborate on Principles stating thatthis. Interestingly, unlike HSBC, they “environmental considerations aredon’t tell the audience how much the factored into our investment andprojects are worth to them. We have no lending decisions and we also ad-idea of the size of this section of West- here to the Equator Principles inpac’s business and how substantially it managing environmental and socialwill impact on the firm. We are to be- risk in project finance” (http://lieve they are doing a good job as the audit report stated that “as a publish.nsf/content/wicrevpg%result of testing Equator Principles im- 20our%20commitment);plementation we concluded that the 3. Westpac promotes its receipt of theoverall approach and process is robust. award for the “Best Project FinanceIn addition, we identified a small num- Bank in Australasia for 2006” byber of improvement opportuni- Global Finance magazine, with ref-ties” (p.91). erence to their commitment to the Equator Principles’s. This referenceAs outlined in the case of HSBC, West- has little to do with the award, butpac also uses any mention of anything allows the bank to state that they arerelated to corporate social or environ- signatories to them and that they aremental responsibility provides them with committed to promoting responsiblean opportunity to mention the Equator project finance. (http://Principles. These references provide lit- opportunity for external verification publish.nsf/content/wicrln%20cr%of internal change or commitment to the 20archived%20news%2023%substance of the Equator Principles. In- 20october%202006, 23 Octoberstead their lack of substance reinforces 2006, Westpac wins project financethe impression that these principles are award);being exploited for their marketing po- 4. They also received a AAAtential. For example: (outstanding) rating from RepuTex Social Responsibility Rating,1. Westpac acknowledges the impor- wherein along with other factors, tance of carbon neutral business Westpac was noted for the only practices and then outlines the banks Australian bank to sign the Equator commitment to all environmental Principles; policies including its commitment 5. When discussing the opening of an “to the revised Equator Principles, a educational residential eco-village framework for assessing social and funded by the bank in South East environmental risk in project fi- Queensland, the state “Westpac re- nance - the only Australian bank to mains the only Australian bank to do so” (Westpac, 13 December become a signatory of the Equator
  11. 11. 50 J. Andrew / Issues in Social and Environmental Accounting 1 (2007) 40-53 Principles.”(http:// this voluntary code and the representa- tional performance through which they publish.nsf/content/wimcmr06% operate, it has been revealed that banks 20archive%20media%20release% are saying little of substance about their 2024%20july%20200b, 24 July impact on the social and environmental 2006, Westpac finances Australias practices of the bank. Instead they form first educational residential eco- part of a greater dialogue about how to village). This reference to the Equa- represent the bank that is not devoid of tor Principles has nothing to do with real world consequences, some of which the project, but reinforces the image may have positive social and environ- of a globally responsible lender. mental outcomes. However, as Agger (1992) has pointed out the cultural logicThis research shows that Westpac is de- of late capitalism pits the expansionistploying very similar strategies to that agenda of corporate strategy against theadopted by HSBC, using the Equator social and environmental responsibilitiesPrinciples to reposition the firm as so- of the modern corporation. Codes suchcially and environmentally responsible. as the Equator Principles are not author-Just as HSBC may well be undergoing less, stanceless offerings in a politicallyinternal changes that can substantiate neutral world. Instead, they are sophisti-such a claim, Westpac may be engaging cated attempts to position the firmin similar internal transformations re- within the contemporary pressures of thequired to live up to these claims – but modern socio-political environment andthey are not making these clear to the they are inescapably political. They are apublic, so a reader could be forgiven for deliberate act of representation, but theythinking that the Equator P are participatory and through an audi-rinciples lack substance. Time will tell, ences critical readings of the disclosuresand more research will be required in of banks new representations will form,order to assess the impact of the Equator that may lead to changes that have posi-Principles on banking practices. tive social and environmental conse- quences.Conclusions References We can phrase the political agenda of this cultural studies Adams, C. (2004) "The ethical, social negatively: it wants to help people and environmental reporting- avoid domination – self defeating, performance portrayal gap", Ac- self-reproducing practices that counting, Auditing and Account- violate their own best interests ability Journal, Vol. 17, No 5, (Agger, 1992, p.196) pp. 731-757. Agger, B. (1992) Cultural Studies asThe Equator Principles mark the begin- Critical Theory. London: The-ning of the financial industries recogni- Falmer Press.tion of their social and environmental Andrew, J. (2001) “Environmental Ac-impact. When the disclosure practices of counting and Accountability:two banks were considered in light of Can The Opaque Become Trans-
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