Submitted by Rainforest Action Network
"The Equator Principles are proof that banks are feeling the heat from environmental groups worldwide," said Ilyse Hogue of Rainforest Action Network, "Unfortunately the Equator Principles won't do anything to prevent banks from bankrolling the oil and logging companies that are kicking people out of their homes to destroy the rainforests in places like Ecuador."
NGOs were quick to point out the irony that the Principles would still have allowed the banks to finance the infamous OCP oil pipeline that destroyed rainforests in the country of Ecuador, which means "equator" in Spanish.
The banks will announce the principles on Wednesday, June 4 at a conference for the International Finance Corporation, the private investment arm of the World Bank Group. The banks leading the effort -- ABN Amro (Netherlands), Barclays (UK), Citigroup (US) and West LB (Germany) -- have all been subjects of successful advocacy campaigns as a result of their investments in environmental destruction.
Pressure campaigns against banks by NGOs and customers have been gaining momentum worldwide in the past few years. Facing strong pressure from customers and NGOs in Europe, the Dutch bank ABN Amro committed to a full phase out of lending to extractive industries that operate in endangered ecosystems. After three years of a pressure campaign, RAN is now in negotiations with Citigroup over the subject of an ongoing campaign that asks them to meet or beat ABN's policy. Germany's West LB came under fire last year for being the lead funder, with Citi, of the OCP oil pipeline that is destroying rainforest "hotspots" in Ecuador.
"The Equator Principles as they stand would not have prevented funding from
moving forward for the OCP pipeline," commented Efraim Toapanta, a resident of Mindo, Ecuador. The pipeline route has threatened Mindo ecotourism industry. "As people most affected by these large scale projects, we are interested in seeing the banks commit to standards that would build local economies and preserve the integrity of the ecosystems we depend on. The Equator Principles as they stand do not offer this protection."
A background statement released by NGOs argues that the Equator Principles are inadequate because they don't require transparency, the protection of human rights, or the conservation of endangered ecosystems like rainforests. Leading NGOs in January released the "Collevechio Declaration" which outlines the steps they see as necessary to promote environmental and social protection. (for Background Statement, please see below)
For more information and in depth analysis, please see www.financeadvocacy.org
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COLLECTIVE NGO ANALYSIS OF THE EQUATOR PRINCIPLES
As representatives of the non-governmental organizations (NGOs) that drafted the Collevechio Declaration calling for environmental and social responsibility from financial institutions, we applaud the efforts of leading banks to grapple with these critical issues. Whether or not the Equator Principles (EPs) represent a significant initiative or a negligible one depends on banks' commitment to strengthen them and be transparent in their implementation of the Principles. The undersigned NGOs believe that the EPs, aptly implemented, can be a helpful springboard from which financial institutions can examine and confront their role in destructive projects. Modeled after guidelines from multilateral lending institutions, the Principles are only as good as the commitment behind them.
Ultimately, financial institutions will be judged by the real world impacts of the projects they support, not the loftiness of the principles they articulate. In particular, NGOs will measure banks' commitment and progress towards sustainability based on a broader vision for the financial sector, which is articulated in the Collevecchio Declaration on Financial Institutions and Sustainability.
Released in January 2003 with the endorsement of over 100 civil society groups, the Collevecchio Declaration is a tangible symbol of NGOs' increasing scrutiny of the financial sector, which has fallen relatively far behind other corporate sectors in understanding its role and responsibilities in advancing sustainability. We are beginning to see banks develop initiatives such as the EPs as a response to society's increasing social and environmental expectations of the financial sector, and notably all the banks that drafted the EPs have been the subject of NGO advocacy.
The following eight points summarize our main reactions to the Equator Principles:
1. EPs in the context of the Collevecchio Declaration. The EPs are consistent with, but fall far short of, the vision elaborated in the Collevecchio Declaration. NGOs are not endorsing the EPs, nor do we think they go far enough. For example, the "Do no harm" Principle in the Collevecchio Declaration would imply no-go zones/ categorical prohibitions, which the EPs do not reference; and the Declaration also emphasizes a precautionary-based approach rather than one based on mitigation.
2. Scope of applicability and effectiveness. NGOs recognize the limitations of the Principles (applies to project finance only, only pertains to direct loans, etc.). We urge the banks to review the environmental and social impacts of different segments of their portfolios and develop appropriate policies. For example, mining and forestry are often very sensitive sectors but are not commonly project financed.
3. Implementation is a key concern. Even with 30 environmental staff, the International Finance Corporation (IFC) itself has a poor track record of implementing its own safeguard policies. Projects that do not meet IFC standards (e.g. Oleoducto Crudos Pesados project in Ecuador) often are financed anyway. Banks must prove that they are serious about implementation by rejecting unsuitable projects, increasing staff resources, disclosing their Environmental Management Systems (how they implement and monitor the EPs and who's responsible), disclosing social and environmental loan covenants, etc.
4. Lack of accountability mechanisms. A fatal flaw of the EPs is that there is no mechanism for ensuring that endorsing banks actually implement them. The lack of transparency requirements prevents endorsing institutions, peer banks and the public to monitor implementation of the Principles. In addition, the EPs should have captured other IFC accountability policies/procedures, such as its procedures on disclosure.
5. The Principles have some critical loopholes. The EPs do not explicitly state that all projects must comply with IFC guidelines, but rather emphasizes the need for Environmental Assessments. It includes language like "generally consistent" (with IFC criteria), "reasonable minimum period" that is vague and can lead to poor implementation.
6. Weak on social issues. IFC standards, compared with those of the World Bank, are relatively weak on social issues. The EPs are even less robust that those of the IFC, and because they are modeled after IFC safeguard policies, continue to inadequately address social concerns. For example the late January version of the EPs referenced "human rights," but was replaced by "socially responsible" in the late February one.
7. NGOs fear that IFC standards will be limiting. Many NGOs are concerned that the EPs will have a limiting effect, preventing or delaying the adoption of best practice sector standards such as the World Commission on Dams guidelines, the forests policies adopted by ABN-Amro or proposed by WWF-Friends of the Earth, and the categorical prohibitions used by some export credit agencies such as the U.S. Overseas Private Investment Corporation.
8. Recourse & responsibility. The Principles put most of the responsibility on the borrower, and there is currently no mechanism for affected communities to have recourse to the bank in cases where standards are not being met or implemented. In contrast, the IFC has a Compliance Advisor Ombudsman, which investigates complaints from affected communities affected on alleged non-compliance with IFC's own policies.
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