This means that an EPFI who chooses to endure public criticism is still free to selectively implement the EPs in whichever projects it sees fit, with no real method of recourse available to affected populations.
An EPFI is defined as "a financial institution that adopts the Equator Principles (EPs) and is active in Project Finance or Project Finance Advisory Services.
Principle 5 of EP II states that projects with significant social or environmental impacts should be accompanied by "free, prior and informed consultation" which the borrower will communicate back to the EPFI.
Principle 8 of EP III states that where "a borrower is not in compliance with its environmental and social covenants, the EPFI will work with the borrower on remedial measures.
While these covenants seemed to create a method of enforcement, the nature of the project loans (where the lender was paid back by the proceeds of the completed project) meant that EPFIs were more likely to bring the project up to minimum standards than to cancel the venture altogether.
58) These limitations meant that there was no way for observers to determine how thoroughly or honestly EPFIs were adopting the EP I standards.
In particular, Credit Suisse First Bank, an EPFI, has received a great deal of criticism for its role as an advisor to the consortium of businesses involved in the funding of the Sakhalin II project.
One issue that has not been tested in court is whether an EPFI can be sued in either U.
210) Therefore, if an EPFI fails to establish policies and procedures to ensure environmentally and socially responsible investing, such a failure may expose the bank to liability to socially responsible investors.
These changes broaden the scope of the Equator Principles, increase the number of responsibilities for the borrowers and EPFIs, and require more covenants between the borrower and the EPFI.
220) Thus, when an EPFI acts as a financial advisor, it must: (1) make the client aware of the Principles, (2) inform the client of the potential benefit of applying the Principles to the proposed project, and (3) request that client adhere to the Principles when seeking financing.
235) At a minimum, these reports must include: "the number of transactions screened by each EPFI, including the categorisation accorded to transactions (and may include a breakdown by sector or region), and information regarding implementation.