By Delaney Greig, Manager of Engagement and Policy
Finance is critical to development of major projects around the world. However, through financing large-scale infrastructure and development projects, banks may also cause, contribute to or become linked to large-scale environment and human rights harm as well.
Recognizing these risks, in 2003, banks from around the world came together to agree on a common set of principles to guide their loan practices for major projects. Called the Equator Principles (EP), they are a risk mitigation framework member financial institutions apply as part of their credit risk review process in order to avoid complicity in human rights abuses and environmental harm through their lending, and the associated financial, reputation, and legal risks that can result.
Today 97 financial institutions in 37 countries are signatory to the EP including all of the major Canadian banks.
In 2016, the Dakota Access Pipeline protests captured widespread international attention because of the scale of passionate resistance mounted by Indigenous Peoples and their allies. concerned that the project would put at risk Native American traditional resources and water supply in North and South Dakota. The acts of violence against the protesters by police and private security, and high-profile arrests were widely denounced A study out of the University of Colorado shows the controversy
In the midst of this situation, investors learned that 13 of the 17 banks financing the Dakota Access Pipeline (DAPL) were signatories to the EP, despite concerns being raised. This finding made clear that the EP framework had been ineffective in identifying the significant risks to Indigenous rights associated with DAPL.
In response, SHARE and other investor representatives joined several EP member banks, Indigenous groups, and civil society organizations in calls to reform the EP. By improving the EP, we raise the bar for the minimum standard of practice across the financial industry, rather than one company at a time. This is why SHARE not only engaged with the banks directly lending to the DAPL project, but also to a leading role in investor advocacy to the EP Association as a whole.
A new draft of the Equator Principles (EP4) was released for consultation this summer. Unfortunately, the EP4 draft falls far short on the improvements to risk assessment and protection of Indigenous Peoples’ rights that investors sought in 2017.
SHARE has participated in both written and in person consultation around the draft to express our concern about these specific and significant risks to the rights of Indigenous Peoples around the world.
We called for the EP to be strengthened and aligned with the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). This includes respect for the right of Indigenous peoples to provide or withhold their free, prior and informed consent (FPIC) to development that would impact them or their lands, resources and culture, as a condition of bank finance.
We also called for the same performance standards to be applied across all countries because as DAPL showed, even in wealthy OECD countries regulation can be sufficient to prevent environmental and human rights risks.
SHARE’s recommendations were included in a submission to the EP Association that was signed by institutional investors representing almost $3 billion USD in assets under management.
In addition, SHARE is reaching out to specific Canadian and international banks to seek support for our recommended improvements to the EP4 draft.
The EP members are expected to vote on adoption of EP4 at their November meeting. We hope that additional revisions will be made between now and then to ensure the framework is effective for the realities of project lending in the world today.
Article republished with permission from share.ca