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MiningNovember2012THE EQUATOR PRINCIPLES -WORTH THE RISKThis article first appeared in the November 2012 issue ofSnowden and is reproduced with their kind permission.www.snowdengroup.comThe finance sector has endorsed corporatesocial responsibility through the EquatorPrinciples (EPs) and project developers must beprepared to provide comprehensive evidenceof the environmental and social impacts of theirproposals when seeking project finance.The EPs ensure socially and environmentallyresponsible financing of large scale (over US$10million) infrastructure, mining and energy projectsthrough a set of standards developed by theInternational Finance Corporation (World Bank)and a group of concerned commercial banks.Equator Principles Financial Institutions (EPFIs)commit to not providing loans to projects wherethe borrower will not or is unable to comply withtheir respective social and environmental policiesand procedures.In 2002 there were nine banks who voluntarilysigned up to the EPs and there are now 74 EPFIsfrom all regions of the globe, including Westpacand ANZ in Australia. In 2011, EPFIs accountedfor about 70 percent of international projectfinance debt in emerging markets (US$213 billion).EPFIs apply the EPs to all new project financetransactions as well as to any significantexpansions of existing facilities. Projectsclassified as having moderate to high risks arerequired to conduct environmental and socialimpact assessments, conduct communityconsultation, prepare appropriate monitoring,mitigation, decommissioning and remediationplans and establish a grievance mechanism.Following financial approval, independentproject monitoring and reporting must beprovided to the EPFI.For a potential project developer, compliancewith the technical and legal requirementsunder the EPs is a significant task andrequires specialised management. The EPsshould be viewed as a business tool to helpmanage risks and identify opportunities. Goodcorporate social responsibility improves thereputation of a business and strengthens trustbetween businesses and the wider community,including investors.

The EPs are currently undergoingtheir second major review and arevised draft of the EPs was releasedfor stakeholder consultation andpublic comment in August. Thechanges, if implemented, will expandthe scope of the EPs to also covercertain project-related corporateloans, certain bridging loans andproject finance advisory services.Where projects emit more than100,000 tonnes of carbon dioxideequivalent per year the revised draftrequires annual public reportingof the projects carbon emissionsand an assessment of alternativefuel sources and technologies.The revised draft requires EPFIs toreport significantly more informationto the public such as publishingenvironmental and social impactassessments and project-specificdata reporting requirements onlineand also places a greater emphasison human rights considerations.The EPs are a framework forsustainable development and offerfinancial institutions the ability toadopt a globally accepted industrystandard for the evaluation andmanagement of environmentaland social risks within projectdevelopments. If the revised EPs areadopted in their current form EPFIsobligations for financing projectswill significantly increase. Projectdevelopers need to be fully aware oftheir technical and legal obligationsto comply with the EPs, however, ifutilised appropriately, the EPs canbecome an additional analytical toolto ensure that a project can operatesuccessfully within its social andenvironmental parameters.For more information, please contactCheryl Edwardes, Partner, on+61 (0)8 9422 4793, or yourusual HFW contact.“Project developers need to be fullyaware of their technical and legalobligations to comply with the EPs,however, if utilised appropriately, theEPs can become an additional analyticaltool to ensure that a project can operatesuccessfully within its social andenvironmental parameters.”Lawyers for international commerce hfw.comHOLMAN FENWICK WILLANLevel 19, Alluvion58 Mounts Bay RoadPerthWA 6000AustraliaT: +61 (0)8 9422 4700F: +61 (0)8 9422 4777© 2012 Holman Fenwick Willan LLP. All rights reservedWhilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not beconsidered as legal advice.Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences pleasecontact Craig Martin on +44 (0)20 7264 8109 or email

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