International Financial Law Review: The Sustainability Case Under the Equator Principles

The third iteration of the Equator Principles (EP) framework will be released in the first quarter of 2013. Like its predecessors, the revised framework will have substantial implications for billions of dollars in international financings. It will also reinforce the importance of environmental and social reviews in addressing legal and reputational risks facing Equator Principles Financial Institutions (EPFI). It makes it timely to reconsider the critical role legal counsel have in EP implementation.  This article examines the "sustainbility case" approach to Equator Principles implementation and the role of legal and regulatory oversight of that process. See article link HERE

What's the Goal of the Equator Principles: Managing Credit Risk or Regulating "Do No Harm"? The World Bank CAO Opines

The World Bank's Compliance Advisor Ombudsman (CAO) completed a Compliance Audit of IFC's Financial Sector Investments, releasing a report on October 10, 2012 (CAO Audit). The CAO Audited a Sample of IFC Investments in Third-Party Financial Intermediaries.  One critique of the IFC's own approach to implementation of the IFC Performance Standards on Environmental and Social Sustainability (IFC Performance Standards) was the application by the IFC of two potentially contradictory aims in its environmental and social diligence: "Do No Harm" and "Credit Risk". The same contradictory aims affect the application of the Equator Principles (EP) by EP Financial Institutions (EPFI). 

This article argues that for the sake of clarity and effectiveness, the regulatory nature of the EP and IFC Performance Standards must be fully recognized and permeate the EP implementation process, while credit risk objectives should be considered quite secondary to the real dynamic of EP implementation as a private regulatory process.

Alberta Oil Magazine: Bay Street could be where the next battle over the oil sands is waged

Statoil's Manager of Environment and Climate, Dan Zilnik writes in Alberta Oil magazine: "...the bulk of investment in the oil sands will likely come from large publicly traded companies who can secure the massive financing necessary to make significant oil sands investment. Many of these companies take on debt to finance their activities. It is of little surprise that through their funding of debt, three of the “Big Five” Canadian banks are the largest investors in the oil sands."

The article goes on to say:

"...Advocacy organizations have long recognized the importance of the financial sector in the development of megaprojects which they oppose, traditionally mines and dams. These same organizations have set their sights on the oil sands, which means engaging the Big Five.
The Rainforest Action Network has done extensive advocacy with Canada’s banks, including commissioning reports on the environmental and economic impacts on investing in renewables versus oil sands.

Just as importantly, financial institutions have begun considering the environmental and social impacts of their investments. All of the Big Five have signed onto the Equator Principles, a credit risk framework for managing environmental and social risk in project finance transactions. All of the Big Five report their carbon emissions and have stated ambitions to reduce their greenhouse gases.
As the context for oil sands investment evolves, expect the road to northern Alberta to start on Bay Street. Expect Canada’s Big Five to continue strengthening their understanding of the environmental and social implications of their investments. The oil sands debate has been fraught with mine truck moments, and don’t be surprised if the next one happens on Bay Street."

CAO Compliance Audit of IFC's Financial Sector Investments

On February 5, 2013, the World Bank Compliance Advisor Ombudsman (CAO) released its audit of IFC's financial sector investments, together with IFC's official response.

• The CAO Audit of a Sample of IFC Investments in Third-Party Financial Intermediaries, October 10, 2012 can be found here.
   
• The IFC's Response to the Report on Audit of a Sample of IFC Investments in Third-Party Financial Intermediaries, January 31, 2013 can be found here. 


• The CAO Appraisal of IFC's Investment Projects in the Financial Sector, June 27, 2011 report can be found here.

The key CAO findings summarized in this post are derived from the CAO's press release. 

I will discuss these findings along with the IFC's approach to environmental and social risk management in Financial Intermediary relationships in future posts. Read on for the summary of the report...

World Bank Compliance Advisor Ombudsman 2012 Annual Report

The Compliance Advisor Ombudsman (CAO) of the World Bank, which oversees implementation of the IFC Performance Standards on Environmental and Social Sustainability for the IFC and MIGA, released its 2012 Annual Report. The Report provides an overview of CAO's work in the busiest year for the office since it was established in 1999. CAO has seen a consistent increase in requests for its services, and handled 33 cases during the year through its dispute resolution and compliance functions. This year's report focuses on outcomes delivered by CAO in FY2012, in addition to a summary of outreach activities, M&E findings, and advisory work.

Laws against bribery have global reach

In this article we look at anti-corruption and bribery laws and consider their global reach, with particular focus on the recently updated Corruption of Foreign Public Officials Act (CFPOA) of Canada.

Beefing up Canada’s anti-corruption legislation

On February 5, 2013, broad amendments to the Corruption of Foreign Public Officials Act (CFPOA) were tabled in the Senate through Bill S-14, which will effectively bring Canada’s anti-corruption regime more closely in line with the US Foreign Corrupt Practices Act (FCPA) by creating a “books and record” offence, and the UK Bribery Act by eliminating facilitation payments. Bill S-14 may move quickly through both the Senate and the House of Commons if the bill is given priority by the Senate.

Technical Revision of the World Bank Group Environmental, Health, and Safety Guidelines

The World Bank Group has begun a three-year process to review and update its Environmental, Health and Safety (EHS) Guidelines. More information can be found on the International Finance Corporation (IFC) website HERE.

The EHS Guidelines are technical reference documents with general and industry-specific examples of Good International Industry Practice (GIIP). They contain the performance levels and measures that are normally acceptable to the World Bank Group, and that are generally considered to be achievable in new facilities at reasonable costs by existing technology. They are used by the World Bank, IFC and Multilateral Investment Guarantee Agency (MIGA).

PDAC: Community demands of mining companies to increase

Reporting from the PDAC conference in Toronto, the Mining Journal published the following this week:

Community demands of how mining companies share the economic benefits from natural resources will continue to increase, according to the International Finance Corporation (IFC), the World Bank’s private lender.

The warning came from Tom Butler, the global head of mining at IFC who was speaking at the Prospectors & Developers Association of Canada 2013 convention in Toronto. Butler said the mining sector had done a great deal in managing social risks, but indigenous communities would expect more in the future.

The Equator Principles and Performance Standard 6 on Biodiversity Conservation - An Evolving Concept with Broad Implications

Performance Standard 6 of the IFC Performance Standards on Environmental and Social Sustainability (IFC Performance Standards) deals with the topic of Biodiversity Conservation and Sustainable Management of Living Natural Resources.  Performance Standard 6 has been the focus of a lot of attention and industry research with significant implications for the Equator Principles (EP) and EP Financial Institutions (EPFI) and their clients (Clients). This post discusses some of these developments and their implications, with reference to guidance from a chapter on Performance Standard 6 by Richard King and Lucas Thacker in the book IFC Performance Standards on Environmental and Social Sustainability: A Guidebook, published by Lexis Nexis in 2012.

OHS and Environmental Incident Investigations: Best Practice in Equator Principles Compliance

Industries like mining and energy know all too well that a health and safety disaster can cost shareholders millions and create untold legal and reputational liabilities. What may not be so well known is that disasters are often averted, not through prescient foresight, but by acting on the warning signs that precede most major health and safety incidents. Those warning signs are identified through one of the most potent tools in the occupational health and safety (OHS) arsenal: incident investigation.

This article discusses incident investigation in the context of mining companies operating in emerging markets, possibly seeking to comply with the requirements of the Equator Principles and IFC Performance Standards. To this end, we introduce a new process for investigation pioneered by OHS expert Michael Tooma in Australia, called the Positive Incident Investigation.

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Grievance Mechanisms and the Equator Principles

Principle 6 of the Equator Principles (EP) requires that, for all Category A and B projects, the borrower must create a “grievance mechanism” as part of the Environmental and Social Management System (ESMS). A grievance mechanism must be designed to receive and facilitate resolution of concerns about the project’s environmental and social performance.

This article will discuss the Grievance Mechanism requirement in the EP, including as set out in the IFC Performance Standards on Environmental and Social Sustainability (IFC Performance Standards).

Making the Sustainability Case: The Convergence of Independent Reviews and Legal Risk Management in Equator Principles Implementation

The third iteration of the Equator Principles (EP) framework will be released in the first quarter of 2013. The revised framework will, like its predecessors, have substantial implications for billions of dollars in international project financings. It will also reinforce the importance of environmental and social reviews in addressing legal and reputational risks facing Equator Principles Financial Institutions (EPFI). This article highlights the critical role legal counsel can (and should) play in EP implementation - particularly in the independent review process required by Principle 7.

Independent Review Requirements in Equator Principles III

The requirement for "independent reviews" has been strengthened in the last draft of the EP III.  This means that Equator Principle Financial Institutions (EPFI) will need to be more cognizant of how they conduct such reviews and who they choose to do them.  The final draft of the EP III is set to be released in the first quarter of 2013.

Seminar Invitation: Equator Principles III - The New Benchmark for Sustainable Finance in Emerging Markets

Equator Principles III (EP III) is set to be released in the first Quarter of 2013. EP III is an agreement amongst global financial institutions - including major financial institutions in Australia and Asia - to apply environmental and social standards to project financing. To RSVP CLICK HERE

Based on the practices of the International Finance Corporation of the World Bank, these principles set the industry gold standard for environmental and social sustainability, particularly in emerging markets like Indonesia, Myanmar, Papua New Guinea and the Peoples' Republic of China.

Our seminar examines the new EP III and its implications for companies looking for financing and for their financiers. How can you comply more efficiently? What is expected and how do they affect you?

This seminar features a panel that includes a representative from the Export Finance and Insurance Corporation (EFIC) and the lead author of the first comprehensive book on the IFC Performance Standards. The session will provide an essential guide on these issues, with a practical orientation for bankers and those seeking access to capital.

Venue: Norton Rose Australia Level 18 Grosvenor Place 225 George Street Sydney

Information: 5:15pm registration 5:30pm seminar begins 7:00pm seminar ends with networking drinks to follow
Norton Rose hosts: Tessa Hoser, Partner Chris Redden, Partner Michael Torrance, Senior Associate

Enquiries: Lynette Shelley, 02 9330 8935

To RSVP CLICK HERE

Legal practitioners can claim 1.5 CPD points in the Substantive Law category for attendance

Understanding "Consent" in Free Prior and Informed Consent (FPIC) of Indigenous Peoples - Implications for the IFC Performance Standards and Equator Principles

This article considers the meaning of "consent" in Free Prior and Informed Consent (FPIC) applied to an Equator Principles governed project where the IFC Performance Standards on Environmental and Social Sustainability (the Performance Standards) apply.  The contents are derived from a chapter by Pierre-Christian Labeau in the book IFC Performance Standards on Environmental and Social Sustainability: A Guidebook.

Good Practice Note on Cumulative Impact Assessment and Management for the Private Sector in Emerging Markets

IFC is preparing a Good Practice Note on Cumulative Impact Assessment and Management for the Private Sector in Emerging Markets, with the intention of providing practical guidance to companies investing in emerging markets to improve their understanding, assessment, and tools to manage cumulative environmental and social impacts associated with their projects or business activities.

More information on the external consultation process can be found here.  A link to the draft Good Practice Note can be found here.

Sample Chapter Excerpt - "IFC Performance Standards on Environmental and Social Sustainability: A Guidebook"

Here is a link to a chapter sample for the new Guidebook, "Chapter Two, Performance Standard Two: Labour and Working Conditions".  For more information on the book and to order click here.

IFC Performance Standards Mitigation Hierarchy and the Important Role of "Offsets" in Sustainable Development

A primary focus of the environmental and social management program required by the Equator Principles and Performance Standard One of the IFC Performance Standards on Environmental and Social Sustainability (IFC Performance Standards) is mitigation of identified risks, along with the implementation of performance improvement measures. To this end, Clients are expected to design a mitigation approach that follows a structure — referred to as a “hierarchy” — of avoidance,minimization and compensation or offset.  While offset may be the least desirable mitigation strategy, it has a very important role to play in the implementation of the IFC Performance Standards and the promotion of sustainable development.