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Environmental Finance Magazine NGO efforts to halt environmentally or socially contentious projects has hitherto been directed at public finance institutions such as the World Bank. But, as Jon Sohn explains, they are turning the spotlight on to private sector banks "The Equator Principles are a starting point, but experience at the World Bank demonstrates that implementation and compliance is key for credibility" Bruce Rich, Environmental Defense Concerns about the environmental and social sustainability of large-scale extractive industry and infrastructure projects are not new. Neither are the efforts of non-governmental organizations (NGOs) in challenging such projects, and seeking to improve them where possible, or halt them where not. But whereas NGOs have typically focused their attentions on public finance institutions - such as the multilateral development banks, or export credit agencies (ECAs) - their campaign focus is beginning to shift towards private sector banks. The rationale behind this move is two-fold. First, civil society groups are increasingly aware that, in many cases, success in preventing public financing dollars from underwriting unsustainable projects will not necessarily stop a given project. Instead, such 'success' can often simply bring in a set of financial players less influenced by, and less open to leverage from, public concerns. This fact of life does not excuse the use of public money for unsustainable initiatives, but it does require a broader view and strategy by local communities and their non-governmental partners. Secondly, this shift in focus is occurring out of necessity. Many harmful projects are going forward from their inception without any public financing whatsoever. Private sector bank-focused campaigns have therefore sprouted up, and are putting intense pressure on the likes of Citigroup and ABN Amro. The most dramatic response from private sector financial institutions to the increased heat of NGO campaigns has been the June 2003 announcement of the Equator Principles. Essentially, the Equator Principles, which apply to all project finance deals of more than $50 million, commit signatory banks to follow the environmental and social guidelines set out by the International Finance Corporation (IFC) of the World Bank Group (see pages 18-19). According to the Equator Principles website, the first 18 banks-not counting the latest signatories CIBC and KBC- which have now adopted the Principles arranged at least $43 billion of project loans in 2002, or 74% of the market volume. To the end of last October, the 18 banks accounted for 78% of the project loan market in 2003. On the public side of the market, things are moving in a similar direction. At the end of 2004, ECAs reached an Agreement on Common Approaches for the Environment, negotiated under the auspices of the OECD that aspires to, but does not require, application of IFC standards when ECAs assess the projects they guarantee or underwrite. At the same time, the IFC is itself in the planning stages of a full review and update of its standards and safeguard policies in 2004. Lastly, the World Bank's Extractive Industries Review, initiated by Bank president James Wolfensohn was completed in December 2003. It recommends a number of sweeping reforms, including a call for IFC policy to halt investments in the oil sector by 2008 (see pages see pages 14-15). Collectively, from the viewpoint of NGOs these actions signal significant movement towards the harmonization of international environmental and social standards in project finance. NGOs recognize, however, that intense monitoring will be required, at both the project and policy level, to ensure progress is made in the coming years. Many in the activist community believe that private sector banks need to be aware that the Equator Principles should be seen as the beginning of necessary reform - and not an end. Michelle Chan-Fischel at Friends of the Earth International in
Working towards that agenda, a new network called BankTrack has been set up to monitor the implementation of the Equator Principles and to co-ordinate with public bank campaigners. In 2003, BankTrack launched the Collevechio Declaration, a counter to the Equator Principles which calls on private sector banks to commit to sustainability, the avoidance of harm, financial responsibility for project impacts, accountability, transparency and to increased investment in sustainable markets and governance as guiding principles of all project finance. The networks plans to engage with private sector banks on all levels, and to attend international forums such as the recent World Economic Forum annual meeting in Davos. Critiques of the Equator Principles by NGOs are fast emerging on both a project and policy level. On the project level, they point to two cases that directly involve Equator signatories where there are assertions of non-compliance with IFC standards: the Oleoducto de Crudos Pesados (OCP) Pipeline in
Financed by a $900 million loan from Westdeutsche Landesbank (WestLB), the OCP pipeline will transport heavy crude oil from the
According to California-based Amazon Watch, the damaging impacts of the new pipeline will be felt far beyond its immediate route. To make the OCP economically viable, Ecuador must double current oil production by embarking on an unprecedented wave of new oil exploitation in vast areas of Amazon frontier forest. Plans are already underway for dozens of new oil wells, roads, flow lines, and associated processing plants that will despoil some of the country's last remaining old growth rainforests and territories of isolated indigenous peoples. Complaints of non-compliance with World Bank standards are legion. In an attempt to address these, the banks and companies involved paid for consultants to assess their impacts, and came to the conclusion that Bank standards are being met. However, an independent analysis has been subsequently carried out by Robert Goodland, the original author of many of the World Bank policies. Goodland countered the consultant reports, finding violations of World Bank policies, including unsatisfactory environmental assessments (World Bank OP 4.01), a failure to protect natural habitats (OP 4.04), and involuntary resettlements of impacted communities (OP 4.12). Bruce Rich, director of the International Program at Environmental Defense in
Rich, a long-time advocate of major environmental and social reforms at the World Bank, stresses that implementation may be an issue that needs more work by all stakeholders. "The Equator Principles are a starting point, but experience at the World Bank demonstrates that implementation and compliance is key for credibility, and civil society must play a role in that process," says Rich. The Baku-Tbilisi-Ceyhan (BTC or Baku-Ceyhan ) oil pipeline will cover 1,056 miles between the
A number of concerns have been raised by NGOs, covering both the environmental and human rights implications of the project. UK NGO, The Cornerhouse, and a coalition of other groups, claim that the project violates six key World Bank policies, which are violated on more than 80 counts. One particular environmental issue that has raised the hackles of conservation group WWF, among other NGOs, is the routing of the pipeline through the
Other concerns with respect to the Equator Principles relate to global sustainability issues such as climate change and biodiversity. More specifically, while the IFC standards are considered a positive step forward in terms of mitigation or negative impact avoidance, the Equator Principles do not play a positive role in the fundamental investment shifts that many NGOs see as necessary for a safe and clean global environment. "We'd like to see the Equator Principles lead towards continued strengthening of standards and alternative investments that benefit the environment and local communities. IFC standards are a floor and need to be upgraded," notes Ilyse Hogue, global finance campaign director at Rainforest Action Network in
It is clear that the Principles are being taken seriously by those that counsel the Equator Principle banks and by companies seeking their financing. Prominent law firms are acknowledging the Equator Principles and IFC standards as a necessary area for increased attention going forward. Ken Rivlin, the New York-based head of the environmental law group at Allen & Overy, a leading corporate law firm, says: "The Equator Principles will soon be the prevailing standard for addressing social and environmental issues in project finance transactions. All Banks should be assessing their internal project screening procedures to assure that they take the Principles into account (or will be able to do so) and that their transaction documentation addresses related implementation and noncompliance risks." Sullivan & Cromwell, another leading law firm, released a similar advisory memo recently. Stakeholders on all sides of the issue anticipate that negotiations and transparency of environmental and social loan covenants related to these principles will be a thorny issue attracting considerable attention. Whether the Equator Principles go far enough or not, it is clear that NGO campaigning around private sector banks is on the rise. It remains to be seen if Equator signatory banks recognize the full implications of what they have signed up for, whether implementation will be successful, and whether these Principles actually make a positive difference to local communities impacted by such projects, or the global environment as a whole. Jon Sohn is a Senior Policy Analyst at Friends of the Earth in
The
When bacteria were found in the District's drinking water 11 years ago, the U.S. Environmental Protection Agency did not hesitate to act: It threatened to fine the city $5,000 a day unless officials publicly urged residents to boil their water. But when lead was discovered in the drinking water of thousands of D.C. homes last summer, the EPA's reaction was far more tepid. EPA regulators signed off when the D.C. Water and Sewer Authority chose to inform customers with a vague brochure and ignored an EPA guideline that recommends holding a news conference. They also approved WASA's plan to use a regulatory loophole and replace 385 lead service lines of the 1,600 that were supposed to be removed. "The EPA was there as father figure to look over [WASA's] shoulder and say, 'If you're not doing it, we have the power to step in and take enforcement action,' " said Brent Blackwelder, president of Friends of the Earth, an environmental group. "They utterly failed in that basic responsibility." The Associated Press.
Over the past seven years, 15 companies in
Inspection records from the U.S. Food and Drug Administration show the agency sought an injunction compelling
"It's significant because failure to follow mad-cow-prevention rules in the past could result in the disease occurring today," said Larry Bohlen, a spokesman with the environmental group Friends of the Earth. The group is urging the FDA to re-examine all past violators in
* Shipments of hazardous materials crisscross the country each year, moving almost invisibly -- and accidents are on the rise. First came the early morning rap on the door. Then came the coughing, the burning eyes. In the frantic moments that followed a
Last month, the
"All we are trying to do is reroute the most dangerous targets," Millar said. "Only the top most dangerous shipments." Millar said
"It is very clear that there are no regulations of the routing of hazardous materials by rail, and there is no law or regulation of what the cities or states can do to protect themselves from terrorism," he said. |
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