Renewed CSR strategy for Canadian Mining and Oil & Gas industry brings new consequences

A renewed CSR strategy for the Canadian mining sector was announced by the Government of Canada on November 14, 2014 that will create consequences for companies who refuse to adhere to endorsed CSR best practices and dispute resolution processes. See Canadian Mining Journal.

Escalating Social Risk for Mining Sector

Canada's CSR Counsellor for the Extractive Sector, Marketa Evans, writes in the Canadian Mining Journal about social risks affecting the mining industry globally.  In the management of social risk, including the risks of community conflicts and social opposition, Ms. Evans states that the industry has so far taken more limited measures than have been taken for environmental risks, even though increasing evidence suggests that social risk constitutes a material risk to mining operations. Full article can be read here.

UN Global Compact: Canadian launch of the Guiding Principles

Janne Duncan writes about the the UN Global Compact (UNGC) Canadian launch this year and how it fits into related sustainability initiatives of the Government of Canada.

Export-Import Bank Sued by Environmental Groups for Coal Export Loan Guarantee

Columbia Law School's Climate Law Blog discusses a recent lawsuit by the NGO Earthjustice against US Ex-Im, regarding the Defendant's alleged failure to conduct an environmental assessment for a coal production related loan.

Increased Risks of Liability for International Human Rights Claims Brought in Canada

On July 22, 2013, the Ontario Superior Court of Justice in Choc v. Hudbay Minerals Inc. 2013 ONSC 1414 (the “Hudbay Decision”) dismissed a preliminary motion of the Defendants, Canadian mining company, Hudbay Minerals (Hudbay), thereby allowing the lawsuit against the company to proceed. The claim, which is yet to be proven, alleges Hudbay is responsible for human rights abuses allegedly committed by mine security personnel at Hudbay’s wholly owned and controlled subsidiary, Compania Guatemala de Niquel (CGN), in eastern Guatemala.

As noted, the matter has yet to proceed to trial and none of the allegations raised have yet been proven. That being so, this case has important implications for Canadian businesses operating abroad. In essence, the finding means that a complaint

New Sustainability Rules Requiring Legal Strategy Rethink

This article considers the legal implications of new rules of the recently revised Equator Principles (EP), whose third iteration (“EP III”) took effect on May 14th, 2013. The Equator Principles is a framework agreed upon by 79 global financial institutions to identify, assess and manage environmental and social risk in certain types of financings around the world.  The goal is to provide an overview of the EP III with discussion of steps that counsel to EP Financial Institutions (EPFI) might consider to minimize potential legal risks and update contractual documentation.

Human Rights Due Diligence in International Finance

Revisions to the Equator Principles (EP) have created new requirements for businesses to conduct human rights due diligence in order to qualify for financing from 79 of the world’s largest financial institutions. The EP apply globally to all project financing with a value of over $10 million and to certain types of corporate loans, bridge loans and project finance advisory services. This development brings the importance of human rights due diligence beyond reputational risk management and ties it directly to access to capital for many companies. It also significantly increases the significance of human rights considerations for the financial industry.

Corporate Criminal Liability for Bribery of Foreign Public Officials by Employees

This article looks at the nature of corporate liability for corrupt acts of employees in international business operations, in the context of the Canadian anti-bribery legislation, the Corruption of Foreign Public Officials Act [CFPOA].

Managing Lender Liability in Equator Principles Implementation - Regulatory Offences

The Equator Principles III ("EP III") states that: "As financiers and advisors, we work in partnership with our clients to identify, assess, and manage environmental and social risks and impacts in a structured way, on an ongoing basis." It is well known that lender liability for environmental and social matters may arise from operational or managerial control by a lender over a project, or where a lender aids and abets regulatory offences of their borrowers. This article considers the risks associated with regulatory prosecutions of an Equator Principles Financial Institution (EPFI), acting as auditors and possibly co-managers of environmental and social risk management of their borrowers. We also consider management strategies, including the role of legal professional privilege. This article is part three of a three part look at managing lender liability in EP implementation.  The first article looked at post-loan legacy liabilities, and the second at third party beneficiary rights in the EP context.

Managing Lender Liability in Equator Principles Implementation - Legacy Liabilities (Post-Loan following Repayment or Default)

This post will consider a rather controversial topic - the possible existence of liabilities linked to Equator Principles (EP) implementation that may extend beyond the life of the underlying loan or activity to which the EP were originally applied.

The purpose will be to consider whether there are plausible legacy liability risks affecting EP implementation and, if so, how such risks could be managed by Equator Principles Financial Institutions (EPFI) before they materialize.

Please note that, as this is a blog post, the analysis is high level and intended to raise points for reflection and thought rather than to be an exhaustive review of the law on these subjects. Hopefully it raises some useful considerations and I am very much open to comment (and criticism) of the topic and ideas put forward. The goal is to generate a dialogue that may help push the boundaries of our understanding of these issues.

New York Times: U.S. Retailers See Big Risk in Safety Plan for Factories in Bangladesh

The New York Times reports that American retailers remain sharply opposed to joining an international plan to improve safety conditions at garment factories in Bangladesh as their European counterparts and consumer and labor groups dismiss the companies’ concerns about legal liability. Full article here.

Final Equator Principles III and the August 2012 Draft - What are the differences?

Some of the main differences are:

1. Elimination of the High Income OECD threshold for application of the IFC Performance Standards in the final version. Now there is a concept of "Designated Countries" which basically has the same effect but is not based on high income status;

2. Only a summary of an ESIA rather than full disclosure of the ESIA and ESMP is required in the final version;

3. In the final version only a "majority" of a corporate loan meeting the appropriate thresholds must be tied to a project, that caveat wasn't in the draft;

4. New emphasis in principle 3 that compliance with relevant host country laws, regulations and permits are to be address "in the first instance" in Assessments;

5. Some changes to Appendix B setting out EPFI reporting requirements;

6. More specific reference to the Guiding Principles on Business and Human Rights due diligence requirement.

Update: Equator Principles III is approved and launched - new trends and a strategy rethink

The Equator Principles (EP) is an agreement amongst 76 global financial institutions (known as EP Financial Institutions or "EPFI") to apply environmental and social standards to certain investment decisions. The third iteration of the EP (EP III) was released on May 14, 2013 and will take effect (with certain transition allowances) on June 4, 2013.

The release of EP III follows a major revision of the IFC Performance Standards on Environmental & Social Sustainability in 2012 (IFC Performance Standards), a set of guidelines that is incorporated by reference into the EP framework. Together, these changes mark an important evolution in best practice in environmental and social risk management of particular importance for both bankers and those seeking access to capital.

This article reviews the new ground rules of environmental and social risk management and considers some new trends that may begin to emerge. We also consider what risks and opportunities arise from these developments that should be considered by both financiers and those seeking finance who must comply with these frameworks to meet their business goals.

Anna Kirkpatrick: Kiobel v Shell - What the decision says and what it left out

Anna Kirkpatrick of Norton Rose in London England discusses the recent US Supreme Court decision in Kiobel v. Shell, and the implications of the decision for business and human rights expectations and litigation in the United States. 

This decision is particularly of interest for Equator Principles (EP) financings in light of the human rights due diligence requirements of the new IFC Performance Standards on Environmental and Social Sustainability, incorporated by reference into the EP.

Read on for Anna's discussion of what the decision says and what remains to be determined in US law.

Addressing Substantial Legal Restrictions on Freedom of Association in Equator Principles Projects

Freedom of Association may be substantially restricted by law in some countries. This reality creates complex challenges for Equator Principles (EP) implementation, since the requirements of the Equator Principles require compliance with host country laws and in some cases addressing the overlapping and interrelating requirements of the IFC Performance Standards on Environmental & Social Sustainability (IFC Performance Standards). 

As we discuss in this article, the IFC Performance Standards establish standards for the protection of Freedom of Association rights, even in circumstances where the law substantially interferes with those rights.

Climate Conversations - Norway’s government pension fund divests from palm oil producers

Norway’s government pension fund – one of the world’s largest – has withdrawn US$314 million in investments from a string of companies that it says produce palm oil “unsustainably”.

As AlertNet reports, in March, the Norwegian Government Pension Fund Global released its 2012 Annual Report announcing that it had sold its stakes in 23 of the world’s largest palm oil companies, reducing its investments in the Indonesian and Malaysian palm oil industry by more than 40 percent.

Listed Magazine: "Shifting The Equator" by Sandra Odendahl

Sandra Odendahl, director of corporate sustainability at RBC writes in Listed Magazine that Equator Principles banks use to assess the social and environmental impact of major resource-based projects they finance might soon look very, very different. 

Article Note, these views are Sandra's own, not necessarily those of RBC.

To Compliance and Beyond: Getting the Most From Global Incident Investigation

Michael Tooma and Michael Torrance write about global incident investigation in this month's Mining People and Environment magazine. For more information on this topic see my earlier blog post here on global incident investigation.

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.