Equator Principles (EP4, 2020)

For Category A and B projects the client maintains, or develops, an Environmental and Social Management System (ESMS) addressing the management of impacts, risks and corrective actions, and an Equator Principles Action Plan (ESAP) describing the actions necessary to address any gaps versus the applicable EP requirements identified in the Assessment.

• ESMS documentation
• Equator Principles Action Plan (ESAP) with owners, deadlines and tracking

• No ESMS for a Category A/B project
• ESAP not tracked to closure

For Category A and B projects the client demonstrates effective stakeholder engagement as an ongoing process structured in a culturally appropriate manner. This includes the free, prior and informed consultation/consent (FPIC) of Indigenous Peoples for projects with potential adverse impacts on Indigenous Peoples, and the disclosure of relevant project information to enable informed participation by affected communities and workers.

• Stakeholder engagement plan and records
• FPIC documentation where Indigenous Peoples are affected
• Disclosure of relevant project information

• Engagement initiated late
• No FPIC where required
• Information disclosure inaccessible to affected communities

For Category A and B projects the client establishes a grievance mechanism designed to receive and facilitate resolution of concerns and grievances about the project's environmental and social performance, scaled to the risks and adverse impacts of the project, addressing concerns promptly, transparently and without retribution.

• Grievance mechanism procedure and accessibility evidence
• Log of grievances received, handled and outcomes

• Grievance mechanism not accessible to affected communities
• Retaliation risk for complainants

The client shall publicly report on a project's Environmental and Social impact assessment process, ESMP and grievance mechanism, and the EPFI shall annually report on its Equator Principles implementation, the number and category of transactions, project sectors, regions and information related to the implementation of EP4 (including aggregate greenhouse-gas emission disclosures for Category A and Category B projects subject to climate change risk assessment under Annex A).

• Public project-level E&S reporting
• Annual EPFI EP implementation report
• Aggregate Scope 1/2 GHG emission disclosure for in-scope projects

• No annual EP implementation reporting
• No project-level disclosure of E&S impacts

To assess project compliance with the Equator Principles after Financial Close and over the life of the loan, the EPFI requires Independent Monitoring and Reporting for all Category A projects and, where appropriate, Category B projects, by an Independent Environmental and Social Consultant, with reporting frequency commensurate with the risks.

• Independent monitoring reports across the life of the loan
• Frequency/scope rationale aligned to risk

• Monitoring stopped after Financial Close
• Internal-only monitoring on Category A projects

For all Category A and certain Category B projects the EPFI requires Independent Review of the Assessment Documentation and the ESMP/ESAP by a qualified Independent Environmental and Social Consultant who is not directly associated with the client, to assist the EPFI's due diligence and determine EP compliance.

• Independent Environmental and Social Consultant engagement and report
• EPFI due-diligence record of the review

• Skipping Independent Review on Category A projects
• Consultant not independent of the client

Financing documents include covenants requiring the client to comply with all relevant host-country environmental and social laws, regulations and permits; comply with the ESMP/ESAP during construction and operation; provide periodic compliance reports to the EPFI; and decommission the facilities, where applicable, in accordance with an agreed plan. Failure to comply, where remedy is not achieved within an agreed grace period, is an event of default.

• EP-specific covenants in loan/financing documents
• Default trigger linked to EP non-compliance

• Financing documents without EP covenants
• No event-of-default for EP non-compliance

On receipt of a project finance request, the EPFI categorises the proposed project as Category A (significant adverse environmental and social risks/impacts that are diverse, irreversible or unprecedented), Category B (limited adverse impacts that are few, generally site-specific, largely reversible and readily addressed through mitigation), or Category C (minimal or no adverse impacts). Categorisation drives the depth of the EP requirements applied.

• Categorisation rationale and supporting documentation per project
• Approval records of A/B/C category

• No documented categorisation
• Mis-categorisation underestimating risk

For Category A and B projects the client conducts an Environmental and Social Assessment proportionate to the nature, scale and risks of the project, addressing relevant environmental and social risks/impacts and proposing mitigation, monitoring and management measures. The Assessment includes climate change risk assessment per Annex A (physical and transition risk, with TCFD-aligned reporting and alternatives analysis for projects emitting >= 100,000 tCO2e/year) and human rights due diligence per Annex B (consistent with the UN Guiding Principles on Business and Human Rights).

• E&S Assessment report covering risks, impacts and mitigations
• Climate change risk assessment (Annex A) with alternatives analysis for >=100k tCO2e/yr
• Human rights due diligence (Annex B) records

• No climate risk assessment for high-emission projects
• No human rights due diligence
• Assessment scope not proportionate to risk

The Assessment shall demonstrate compliance with the applicable host country laws and the applicable Environmental and Social Standards: for projects in non-Designated Countries, the IFC Performance Standards on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety Guidelines; for projects in Designated Countries, host-country laws are deemed to meet the EP standards on environmental and social matters.

• Compliance demonstration vs IFC Performance Standards and WBG EHS Guidelines (non-Designated)
• Designated Country status documentation where relied upon

• Defaulting to host-country law only for projects in non-Designated Countries