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  • June 2005 (Revised January 2007)
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Equator Principles, The: An Industry Approach to Managing Environmental and Social Risks

By: Benjamin C. Esty, Carin-Isabel Knoop and Aldo Sesia
  • Format:Print
  • | Pages:21
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Abstract

In June 2003, 10 leading international banks adopted new voluntary guidelines, called the Equator Principles, to promote sustainable development in project finance. In recent years, nongovernmental organizations (NGOs) had raised issues about the lenders' responsibilities in projects that could harm the environment and/or society. Although many banks had environmental policies in place, a uniform industry standard did not exist. The principles, borrowed from and with the active support of the World Bank's International Finance Corp. (IFC), established guidelines to ensure that banks financed only projects that were "socially responsible and reflected sound environmental management practices." Some NGOs applauded the banks' efforts, others criticized the principles for reasons related to their scope, implementation procedures, and enforcement mechanisms. The Equator banks had to decide what to do next. They could try to recruit more banks (and export credit agencies), develop implementation procedures, or respond to the criticism directly.

Keywords

Risk and Uncertainty; Competition; Corporate Social Responsibility and Impact; Social Issues; Environmental Sustainability; Policy; Project Finance; Standards; Projects; Commercial Banking; Non-Governmental Organizations

Citation

Esty, Benjamin C., Carin-Isabel Knoop, and Aldo Sesia. "Equator Principles, The: An Industry Approach to Managing Environmental and Social Risks." Harvard Business School Case 205-114, June 2005. (Revised January 2007.)
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About The Author

Benjamin C. Esty

Finance
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