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Equator News Coverage
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Taking The Earth Into Account Under increasing pressure from environmentalists, big banks are now vetting investments by their ecological and social — as well as their economic — impact TIME Europe, 9 May 2005, Vol. 165, No. 19 BY Matthew Yeomans It's every corporation's night-mare: a throng of rowdy activists gathers outside company buildings to protest alleged environmental and human-rights abuses. That was the scene in New York City and Chicago last month as dozens of people in white haz-mat suits converged on the offices of JPMorgan Chase to decry what they claimed was the bank's underwriting of illegal logging in Indonesia, and human-rights abuses tied to a Chase-funded mining operation in Peru. Oil companies and industrial giants may be accustomed to such treatment, but not JPMorgan Chase, the second largest bank in the U.S. Two weeks after the protests, the firm announced that it would introduce policies to promote sustainable forestry and indigenous peoples' rights, and block funding that could be used for illegal logging. It also promised to reduce its own, and its clients', carbon emissions. Chalk up another victory for environmentally and socially responsible finance. Ten years ago, big private banks didn't feature on environmentalists' hit lists; activists focused on large corporate polluters in the oil and timber industries. Over time, though, green groups have realized that one effective way to halt destructive practices is to take on the institutions that bankroll them. "The private financial sector, more than any other, has the ability to begin the ecological U-turn modern society so desperately needs," says Ilyse Hogue, director of the global finance campaign at Rainforest Action Network (ran), which led the fight against JPMorgan Chase. Yet even as they have publicly confronted big financial institutions, green groups — many of whom belong to a loose collection of nongovernmental organizations known as BankTrack — have also privately collaborated with banks to jointly tackle environmental and social concerns. The direct action and dialogue are paying off as banks begin to set green goals. HSBC has promised to cut carbon emissions, for instance, while Bank of America has pledged to shun investments in logging operations in the world's most sensitive forests. Even more important is the introduction of new industry standards such as the Equator Principles, which "promote responsible environmental stewardship and socially responsible development" by evaluating the threats projects pose to forests, natural habitats and indigenous populations. Thirty major private banks, including U.S. giants Citigroup, JPMorgan Chase and Bank of America, and European powerhouses ABN Amro, Barclays, HSBC and ING, have so far signed up to the principles. According to Jon Williams, head of sustainability risk management at HSBC, the guidelines now cover some 80% of the global project-financing market. "Everyone is interested in the balance between sustainability and economic development," Williams says. "We believe you can do well and do good." In terms of overall lending, project financing is a small part of most banks' operations — between 5% and 10% for HSBC, for example — but environmentally and socially sound lending can have a huge long-term impact. Underwriters such as Citigroup point to the World Bank-backed pipeline running from Chad's oil fields through Cameroon to the Atlantic. Extensive environmental impact assessments were carried out before work got the green light, and oil companies like ExxonMobil have provided compensation and health care to locals whose lives and livelihoods have been disrupted by the development. A trust fund, designed to give all Chadians — and not just a well-connected élite — a share of the profits is another improvement, even if green groups such as Friends of the Earth say the project hurts the environment and exacerbates social problems and human rights abuses. Veteran green campaigners have been surprised by the speed with which banks have embraced change. "I think that many activists may have assumed that bankers were priests of the Church of Greed," says Steve Kretzmann, director of Oil Change, a Washington group that specializes in tracking project finance. "But many bank representatives have a sophisticated and advanced sense of the environmental, social and reputational risks." Just ask Citigroup. In 2000, U.S. environmental activists from ran began campaigning against the bank's funding of old-growth logging projects and a controversial new oil pipeline through an Ecuadorian ecological preserve. ran placed a full-page advertisement in the International Herald Tribune labeling ceo Sandy Weill an environmental villain. Citigroup started meeting with ran, and last year it announced it would apply the Equator Principles to its business. The bank committed to banning investment in firms logging primary tropical forests and pledged to invest in renewable energy projects. Don't expect the campaigning to stop just yet, though. In a scathing report published last year entitled Principles, Profit or Just PR?, BankTrack accused many firms of failing to deliver on their lofty principles. The report highlighted the decision by nine Equator Principles banks — including ABN Amro, Italy's Banca Intesa and Citigroup — to fund BP's controversial Baku-Tbilisi-Ceyhan (BTC) pipeline, which will run through Azerbaijan, Georgia and Turkey to bring Caspian Sea oil to the West. The project, argued BankTrack, violates the Equator Principles in key areas, notably in regard to the protection of indigenous peoples. The ngo suggests the Turkish government may use the new pipeline as an excuse to crack down on ethnic Kurds living along its route. Last December, Banca Intesa withdrew from the project, but both Citigroup and ABN Amro reject BankTrack's criticisms and have stayed on. "BTC is a complex and challenging transaction, but we felt on balance that it did meet the Equator Principles," says Richard Burrett, ABN Amro's managing director for sustainable development. Just last month, another Equator Principles member, Credit Suisse First Boston, found itself the target of new global protests for its decision to underwrite Shell's controversial Sakhalin II pipeline in the northern Pacific, a project environmentalists say threatens the endangered Western gray whale. Without adequate transparency and monitoring of sensitive projects, ngos fear the Equator Principles will become meaningless. "What good is a series of principles like this is if you can't verify that they are being applied on a project-by-project basis?" asks Oil Change's Kretzmann. "Equator banks are saying to people 'Trust us,' but not allowing any independent verification. That's a problem." Despite these differences, banks and ngos are likely to keep working together. The reason is simple: socially and environmentally responsible investment makes good business sense. HSBC, Citigroup and ABN Amro all say that green issues are increasingly important when they consider funding global projects. In the future, "the Equator Principles will be seen as a catalyst for how banks conduct themselves in other areas of their business," says ABN Amro's Burrett. If that happens, activists in haz-mat suits will have to find another target. © Copyright 2005 Time Inc. and Time Warner Publishing B.V. PRINTER-FRIENDLY VERSION | E-MAIL THIS PAGE |
Institutions Which Have Adopted the Equator PrinciplesABN AMRO Bank, N.V.ANZ Banco Bradesco Banco de la República Oriental del Uruguay Banco do Brasil Banco Galicia Banco Itaú BankMuscat Bank of America Bank of Tokyo-Mitsubishi UFJ BMO Financial Group Barclays plc BBVA BES Group Calyon Caja Navarra CIBC CIFI Citigroup Inc. CORPBANCA Credit Suisse Group Dexia Group DnB Nor Dresdner Bank E+Co EKF Export Development Canada Financial Bank FMO Fortis HBOS HSBC Group HypoVereinsbank ING Group Intesa Sanpaolo JPMorgan Chase KBC KfW IPEX-Bank la Caixa Lloyds TSB Manulife MCC Mizuho Corporate Bank Millennium bcp National Australia Bank Nordea Nedbank Group Rabobank Group Royal Bank of Canada Scotiabank SEB Societe Generale Standard Chartered Bank SMBC TD Bank Financial Group The Royal Bank of Scotland Unibanco Wachovia Wells Fargo WestLB AG Westpac Banking Corporation Mailing ListClick here to start receiving press releases and other news about the Equator Principles.World Bank/IFC LinksWorld Bank Guidelines and Criteria Referenced in the Equator PrinciplesDevelopment Indicators Database IFC Guidelines and Policies Referenced in the Equator Principles Sector-Specific EHS Guidelines Performance Standards |
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Banks increase their environmental requirements
Promoting Greater Responsibility in Project Financing by Natasha Cappon, Canada, Spring, 2008
China to bring in green loan benchmark, 25 January, 2008
A Question of Principles, Infrastructure Magazine, by Kimberley Gaskin, June 2007
Citigroup to scale up its green spending,The Financial Times, 8 May 2007.
Leaders challenge 'business as usual', Guardian, 6 November 2006
Polluters Clean Up Act to Attract Lenders, The Moscow Times, 12 October 2005
Mizuho To Adopt Environmental Standards In Project Financing, CNNfn, 26 October 2003
Dexia adhère aux "Equator principles", La Tribune, 22 September 2003 (in French)
Western Banks Set Standards for Eco-Friendly Lending. Japanese Banks Far Behind. NGO Keeping Close Watch, Nikkei, 5 September 2003
Equator Principles — Why Indian Banks Too Should be Guided by Them, The Hindu, 25 July 2003
Project finance — Standards for Lending, Financial Mail, 25 July 2003
Banks' green pledge earns mixed response, swissinfo, 10 June 2003
Zehn Banken werden zu Umweltschützern, Die Tageszeitung, 5 June 2003 (in German)
Major Banks Endorse Equator Principles, The Peninsula, Qatar, 5 June 2003
Loan rules with an eye on nature, International Herald Tribune, 5 June 2003
IFC Head's Remarks at Equator Principles Press Conference, 4 June 2003