Equator Principles
A bright beacon for responsible banking

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Update on current approaches taken by project finance banks 
in assessing social and environmental impacts of new  projects. 
Overview of their application and benefits for the Palm Oil Industry. 
Talk given by David A. Glenister
SGS United Kingdom Ltd

Published in: Business, Economy & Finance
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  • Equator Principles
A bright beacon for responsible banking

    1. 1. Equator Principles A bright beacon for responsible banking Update on current approaches taken by project finance banks in assessing social and environmental impacts of new  projects. Overview of their application and benefits for the Palm Oil Industry.  David A. Glenister SGS United Kingdom Ltd
    2. 2. Agenda <ul><li>Introduction to Equator Principles </li></ul><ul><li>The Equator Principles Financial Institutions (EPFIs) </li></ul><ul><li>The Benefit </li></ul><ul><li>The Factual sheet </li></ul><ul><li>Testimonial </li></ul><ul><li>Application of Equator Principle in Palm Oil Industries </li></ul><ul><li>Conclusion </li></ul>
    3. 3. Introduction to Equator Principles <ul><li>The Equator Principles is a set of environmental and social benchmarks for managing environmental and social issues in development project finance globally. </li></ul><ul><li>The Equator Principles were developed by private sector banks – led by Citigroup, ABN AMRO, Barclays and WestLB and were launched in June 2003. </li></ul><ul><li>The banks chose to model the Equator Principles on the environmental & social standards of the World Bank and International Finance Corporation (IFC). </li></ul>
    4. 4. Introduction to Equator Principles <ul><li>In July 2006, the Equator Principles were revised, increasing their scope and strengthening their processes. </li></ul><ul><li>The principles apply to all new project financings globally with total project capital costs of US$10 million or more , and across all industry sectors. </li></ul><ul><li>the Principles also apply to all project financings covering expansion or upgrade of an existing facility where changes in scale or scope may create significant environmental and/or social impacts, or significantly change the nature or degree of an existing impact. </li></ul>
    5. 5. The Equator Principles Financial Institutions <ul><li>Sixty financial institutions from twenty-three countries have adopted the Equator Principles. These financial institutions operate in over 100 countries. As a result, the Equator Principles have become the project finance industry standard for addressing environmental and social issues in project financing globally. </li></ul><ul><li>Once adopted by banks and other financial institutions, the Equator Principles commit the adoptee not to finance projects that fail to follow the processes defined by the Principles. </li></ul>
    6. 6. The Equator Principles Financial Institutions <ul><li>ABN AMRO Bank, N.V. </li></ul><ul><li>ANZ </li></ul><ul><li>Banco Bradesco </li></ul><ul><li>Banco de la Republica Oriental del Uruguay Banco do Brasil </li></ul><ul><li>Banco Galicia </li></ul><ul><li>Banco Itaú </li></ul><ul><li>BankMuscat </li></ul><ul><li>Bank of America </li></ul><ul><li>BMO Financial Group </li></ul><ul><li>BTMU </li></ul><ul><li>Barclays plc </li></ul><ul><li>BBVA </li></ul><ul><li>BES Group </li></ul><ul><li>Calyon </li></ul><ul><li>Caja Navarra </li></ul><ul><li>CIBC </li></ul><ul><li>CIFI </li></ul><ul><li>Citigroup Inc. </li></ul><ul><li>CORPBANCA </li></ul><ul><li>Credit Suisse Group </li></ul><ul><li>Dexia Group </li></ul><ul><li>Dresdner Bank </li></ul><ul><li>E+Co </li></ul><ul><li>EKF </li></ul><ul><li>Export Development Canada </li></ul><ul><li>Financial Bank </li></ul><ul><li>FMO </li></ul><ul><li>Fortis </li></ul><ul><li>HBOS </li></ul><ul><li>HSBC Group </li></ul><ul><li>HypoVereinsbank </li></ul>Institutions Which Have Adopted the Equator Principles
    7. 7. The Equator Principles Financial Institutions <ul><li>ING Group </li></ul><ul><li>Intesa Sanpaolo </li></ul><ul><li>JPMorgan Chase </li></ul><ul><li>KBC </li></ul><ul><li>KfW </li></ul><ul><li>la Caixa </li></ul><ul><li>Lyod TSB </li></ul><ul><li>Manulife </li></ul><ul><li>MCC </li></ul><ul><li>Mizuho Corporate Bank </li></ul><ul><li>Millennium bcp </li></ul><ul><li>National Australia Bank </li></ul><ul><li>Nordea </li></ul><ul><li>Nedbank Group </li></ul><ul><li>Rabobank Group </li></ul><ul><li>Royal Bank of Canada </li></ul><ul><li>Scotiabank </li></ul><ul><li>SEB </li></ul><ul><li>Societe Generale </li></ul><ul><li>Standard Chartered Bank </li></ul><ul><li>SMBC </li></ul><ul><li>TD Bank Financial Group </li></ul><ul><li>The Royal Bank of Scotland </li></ul><ul><li>Unibanco </li></ul><ul><li>Wachovia </li></ul><ul><li>Wells Fargo </li></ul><ul><li>WestLB AG </li></ul><ul><li>Westpac Banking Corporation </li></ul>Institutions Which Have Adopted the Equator Principles
    8. 8. The Benefit <ul><li>Demonstration of responsible project financing. </li></ul><ul><li>Provide effective project finance risk management, through the incorporation of screening process for projects which are based on IFC’s environmental and social screening process. </li></ul><ul><li>Protect Financial Institutions from the environmental and social liabilities of the project development. This can happen if the borrower disappears from the scene, or if they are held to have been complicit in the risks the development ran and failed to seek preventative measures </li></ul><ul><li>Protect the environment and provide more sustained approach to corporate social responsibility, borrowing money to finance development projects can often be like doing battle with a very different kind of ‘green-eyed monster’. But with the right preparation and advice, it’s a struggle well worth having. </li></ul>
    9. 9. The Factual Sheet Summarized from :EP website at http://www.equator-principles.com/join.shtml
    10. 10. The Factual Sheet Summarized from :EP website at http://www.equator-principles.com/join.shtml
    11. 11. <ul><li>The Royal Bank of Scotland Group (RBS) </li></ul><ul><li>RBS was one of the first ten financial services organizations to adopt </li></ul><ul><li>the Equator Principles when they were launched in June 2003 in </li></ul><ul><li>Washington. We felt they could bring a level of social and </li></ul><ul><li>environmental evaluation, transparency and discipline to projects </li></ul><ul><li>which might otherwise be absent </li></ul><ul><li>(RBS 2006 Corporate Social Responsibility Report) </li></ul><ul><li>CITI Group </li></ul><ul><li>One of the biggest challenges of EPFI’s is demonstrating that </li></ul><ul><li>compliance with the Equator Principles leads to improved </li></ul><ul><li>environmental and social outcomes. CITI has consequently reviewed </li></ul><ul><li>its project finance portfolio for examples of how its environmental </li></ul><ul><li>and social due diligence led to improved outcomes </li></ul><ul><li>(Citizenship Report 2006 ) </li></ul>Testimonial
    12. 12. <ul><li>BARCLAYS </li></ul><ul><li>All financial organizations must act together in ensuring greater </li></ul><ul><li>accountability and sustainable innovation from themselves and the </li></ul><ul><li>companies they finance. Proven adherence to such standard by our </li></ul><ul><li>clients is a positive indicator from a risk management perspective </li></ul><ul><li>(Barclays Corporate Responsibility Report 2006 – Responsible Banking) </li></ul><ul><li>WestLB </li></ul><ul><li>WestLB Actively participated in the amendment of the Equator </li></ul><ul><li>Principles in 2006. In 2007, WestLB and other financial institutions </li></ul><ul><li>received the International Finance Corporation’s “Chairman’s Award </li></ul><ul><li>for Leadership in Sustainable Project Finance” in recognition of their </li></ul><ul><li>leading role in the establishment and refinement of the Principles </li></ul><ul><li>(WestLB 2007 Sustainability Report) </li></ul>Testimonial
    13. 13. Application of Equator Principle in Palm Oil Industries <ul><li>Equator Principles Criteria </li></ul><ul><li>Principle 1 : Review and Categorization (of projects) </li></ul><ul><li>Principle 2 : Social and Environmental Assessment </li></ul><ul><li>Principle 3 : Applicable Social and Environmental Standards </li></ul><ul><li>Principle 4 : Action Plan and Management System </li></ul><ul><li>Principle 5 : Consultation and Disclosure </li></ul><ul><li>Principle 6 : Grievance Mechanism </li></ul><ul><li>Principle 7 : Independent Review </li></ul><ul><li>Principle 8 : Covenants </li></ul><ul><li>Principle 9 : Independent Monitoring and Reporting </li></ul><ul><li>Principle 10 : EPFI Reporting . </li></ul>
    14. 14. Application of Equator Principle in Palm Oil Industries <ul><li>The Equator Principles can bee seen closely mirror the International </li></ul><ul><li>Finance Corporation (IFC) Performance Standards on Social and </li></ul><ul><li>Environmental Sustainability,: </li></ul><ul><li>Performance Standard 1: Social and Environmental Assessment and Management System </li></ul><ul><li>Performance Standard 2: Labor and Working Conditions </li></ul><ul><li>Performance Standard 3: Pollution Prevention and Abatement </li></ul><ul><li>Performance Standard 4: Community Health, Safety and Security </li></ul><ul><li>Performance Standard 5: Land Acquisition and Involuntary Resettlement </li></ul><ul><li>Performance Standard 6:Bio-diversity Conservation and Sustainable Natural Resource Management </li></ul><ul><li>Performance Standard 7: Indigenous Peoples </li></ul><ul><li>Performance Standard 8: Cultural Heritage </li></ul>
    15. 15. Application of Equator Principle in Palm Oil Industries Cross Reference Equator Principles and Roundtable Sustainable Palm Oil
    16. 16. Application of Equator Principle in Palm Oil Industries Cross Reference Equator Principles and Roundtable Sustainable Palm Oil
    17. 17. Application of Equator Principle in Palm Oil Industries Cross Reference IFC Performance Standard and Roundtable Sustainable Palm Oil
    18. 18. Application of Equator Principle in Palm Oil Industries Cross Reference IFC Performance Standard and Roundtable Sustainable Palm Oil
    19. 19. Cross Reference IFC Performance Standard and Roundtable Sustainable Palm Oil Cross Reference IFC Performance Standard and Roundtable Sustainable Palm Oil
    20. 20. Conclusion <ul><li>The Equator Principles is leading recognized approach and can be applied to smaller projects such palm oil processing and plantation. </li></ul><ul><li>This will bring benefit success in strengthening the control on social and environmental impact </li></ul><ul><li>Roundtable Sustainable Palm Oil can be used as baseline to fulfill requirements of International Finance Corporation (IFC) Performance Standard and Equator Principles </li></ul>
    21. 21. Any Question ? <ul><li>David Glenister </li></ul><ul><li>SGS United Kingdom Ltd </li></ul><ul><li>SGS House, 217-221 London Road </li></ul><ul><li>Camberley </li></ul><ul><li>Surrey GU15 3EY </li></ul><ul><li>United Kingdom </li></ul><ul><li>Phone : +44(0) 1276 697 877 </li></ul><ul><li>Fax : +44(0) 1276 697696 </li></ul><ul><li>Web : www.sgs.com </li></ul>

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