The Equator Principles III

The Equator Principles III are voluntary guidelines adopted by financial institutions when funding major infrastructure and industrial projects. They apply to Project Finance and Project Finance Advisory services valued at or above $10 million, for Bridge Loans, and for Project-Related Corporate Loans valued at or above $100 million. They are used for determining, assessing and managing the social and/or environmental risks in project financing, particularly in emerging markets. EPFIs, or Equator Principle Financial Institutions, are financial institutions who have made a commitment not to lend money towards any project that does not uphold these principles. The principles themselves are non-binding, and financial institutions that refuse to implement them, or choose only to partially implement them, do not suffer recourse of any kind. The third, revised edition of the Equator Principles, (EP III), went into effect on June 4th 2013.

Goal: The goal of the Equator Principles is for financial institutions to have oversight and input in the projects they finance to ensure that they are developed in a socially and environmentally responsible manner.

Relevant Clauses:[i]

Project-Related Corporate Loans must meet all of the following criteria:

i.                      […] the loan is related to a single Project over which the client has Effective Operational Control (either direct or indirect).

ii.                   The total aggregate loan amount is at least US$100 million.

iii.                  The EPFI’s individual commitment […] is at least US$50 million.

iv.                 The loan tenor is at least two years.

However, the above conditions for Project-Related Corporate Loans do not apply to: “Asset Finance, acquisition finance, hedging, leasing, letters of credit, general corporate purposes loans, and general working capital expenditures loans used to maintain a company’s operations.”


Project Finance Advisory Services and Bridge Loans

 […] The EPFI will request that the client communicates to the EPFI its intention to adhere to the […] Equator Principles when subsequently seeking long term financing. The EPFI will guide and support the client […] leading to the[ir] application.

 […] the EPFI will confirm that the client will undertake an Environmental and Social Assessment(Assessment) process […]

Principle 1: Review and Categorisation

Category A – Projects with potential significant adverse environmental and social risks […]

Category B – Projects with potential limited adverse environmental and social risks […]

Category C – Projects with minimal or no adverse environmental and social risks […]  

Principle 2: Environmental and Social Assessment

For all Category A and Category B Projects, the EPFI will require the client to conduct an Assessment process to address […] the relevant environmental and social risks and impacts [and]propose measures to minimise, mitigate, and offset adverse impacts […]  

 [It]…will be an adequate, accurate and objective evaluation […]

Principle 3: Applicable Environmental and Social Standards

1.       For […] Non-Designated Countries, the Assessment process evaluates compliance with […] IFC Performance Standards on Environmental and Social Sustainability (Performance Standards) and the World Bank Group Environmental, Health and Safety Guidelines (EHS Guidelines) […] .[1]

2.       For […] Designated Countries, the Assessment process evaluates compliance with relevant host country laws […]

Principle 4: Environmental and Social Management System and Equator Principles Action Plan

For all Category A and Category B Projects, the EPFI will require the client to develop or maintain an Environmental and Social Management System (ESMS).

Principle 5: Stakeholder Engagement

 […] EPFI will require the client to demonstrate effective Stakeholder Engagement as an ongoing process in a structured and culturally appropriate manner with Affected Communitiesand […] Other Stakeholders

 […] client will conduct an Informed Consultation and Participation process. […] will tailor its consultation process to: the risks and impacts of the Project; the Project’s phase of development; the language preferences of the Affected Communities; their decision-making processes; and the needs of disadvantaged and vulnerable groups. […] free from external manipulation, interference, coercion and intimidation.

 […] make the appropriate Assessment Documentation readily available to the Affected Communities, and where relevant Other Stakeholders, in the local language and in a culturally appropriate manner.

 […] take account of, and document, the results of the Stakeholder Engagement process, including any actions agreed resulting from such process.

 […] Projects affecting indigenous peoples will be subject to a process of Informed Consultation and Participation, and will need to comply with the rights and protections for indigenous peoples contained in relevant national law, including those laws implementing host country obligations under international law.

Projects with adverse impacts on indigenous people will require their Free, Prior and Informed Consent (FPIC)

Principle 6: Grievance Mechanism

The grievance mechanism is required to be scaled to the risks and impacts of the Project and have Affected Communities as its primary user.

Principle 7: Independent Review

Project Finance

For all Category A and, as appropriate, Category B Projects, an Independent Environmental and Social Consultant […] will carry out an Independent Review of the Assessment Documentation

Project-Related Corporate Loans

 An Independent Review by an Independent Environmental and Social Consultant is required for Projects with potential high risk impacts including […]

• Adverse impacts on indigenous peoples

• Critical Habitat impacts

• Significant cultural heritage impacts

• Large-scale resettlement.


Principle 8: Covenants

the client will covenant in the financing documentation to comply with all relevant host country environmental and social laws, regulations and permits […]

Furthermore for all Category A and Category B Projects, the client will covenent […]:

a)      to comply with the  ESMPs  and Equator Principles […] during the construction and operation of the Project  […] ; and

b)       to provide periodic reports […] prepared by in-house staff or third party experts, that i) document compliance […] , and ii) provide representation of compliance with relevant local, state and host country environmental and social laws, regulations and permits; and

c)       to decommission the facilities […]  in accordance with an agreed decommissioning plan.

Principle 9: Independent Monitoring and Reporting

Project Finance/Project-Related Corporate Loans

 […]the EPFI will, for all Category A and […] Category B Projects, require the appointment of an Independent Environmental and Social Consultant, or  […] qualified and experienced external experts […]

Principle 10: Reporting and Transparency

For all Category A and, as appropriate, Category B Projects: 

• The client will ensure that, at a minimum, a summary of the ESIA is accessible and available online. 

• The client will publicly report GHG emission levels  […]  for Projects emitting over 100,000 tonnes of CO2 equivalent annually […]


[1] The Equator Principles defines Non-Designated Countries as countries that are not on the “designated Countries” list. The Equator Principles define Designated Countries as those countries with established environmental and social standards sufficient for regulating project practices: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Israel, Japan, Korea, Rep., Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom, and the United States.


[i] The Equator Principles. (2013, June). The Equator Principles III. Retrieved June 26, 2013, from


Cases affected this norm Companies involved directly or indirectly through subsidiaries in cases, affecting this norm Investors investing indirectly (through shareholding) in cases, affecting this norm

Comments are closed.