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.

Consultants to Banking Industry Come Under Scrutiny

The New York Times reports that regulatory scrutiny of the consulting industry is intensifying.  The US Government is investigating the consulting industry which, as one government regulator says, has been infected by an ‘I’ll scratch your back if you scratch mine’ culture and a stunning lack of independence.” A senior federal banking regulator said he was exploring new ways to curb the use of consultants by the banking industry. These developments should give Equator Principles Financial Institutions (EPFI) pause when deciding whether to work with consultants to advise on Equator Principles compliance. As we have discussed, no legal professional privilege attaches to the advice of consultants, which could be very valuable in the event of a regulatory investigation.

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.

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.

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 - Third Party Beneficiary Rights in Contract Law

I read an interesting and provocative journal article by Marissa Marco, published in the Fordham International Law Journal in 2011, entitled "Accountability in International Project Finance: The Equator Principles and the Creation of Third-Party Beneficiary Status for Project-Affected Communities".  The article discusses the law on third party beneficiary rights under US contract law and considers whether the provisions of the Equator Principles (EP) relating to Affected Communities might create enforceable rights for those communities under those principles.

This article will discuss this issue and suggest a risk management strategy for EP Financial Institutions (EPFI - i.e. EP signatories) addressing and managing such risks in Equator Principles implementation.

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.

Equator Principles in Brazilian Transactions

An excellent article by Brazilian lawyers Antonio Mazzuco and Jorge Khauaja published in the International Financial Law Review. The authors see an inevitable trend towards greater adoption of EP-like environmental and social standards, by Brazilian financial institution and government.  The article also touches on the interrelationship between environmental and social standards like the EP and legal obligations on the same topics.