As currently written, EP4 does not set forth a strong risk management framework to provide a dynamic starting place from which [financial institutions] can build better and more responsive social and environmental screening processes… the Equator Principles – if not further revised – can no longer be relied upon as a proxy for responsible and sustainable project finance.
In continuing efforts to strengthen proposed revisions to the Equator Principles – the global financial industry's only social risk assessment and management framework – First Peoples Worldwide delivered extensive feedback and guidance to bolster EP4 on the August 23 deadline for public response. These included:
• A compressive redline of the EP4 draft to better incorporate and reflect social risk to the financial industry as it relates to the rights and welfare of Indigenous Peoples (plus explanatory summary of our recommended revisions);
• An Outcomes Document (excerpted below) detailing First Peoples' participation and role in the Equator Principles consultation process, as well as major themes and recommendations to Strengthen EP4; and
• Background materials and several resources referenced in the above documents, including those that help industry and governments navigate their responsibilities to operationalize free, prior and informed consent as a right of Indigenous Peoples (e.g. First Peoples' Free, Prior and Informed Consent Due Diligence Questionnaire).
First Peoples also submitted a letter of support signed by over 40 organizations worldwide calling for a stronger EP4 for Indigenous Peoples. In addition, First Peoples took part in public stakeholder consultations in Toronto and London, and contributed essays in advance of the consultation in Tokyo and in response to the crucial role policy plays in social risk management.
First Peoples Worldwide has closely monitored the Equator Principles revision process because project finance represents a unique opportunity to begin projects with long-term impacts in Indigenous communities in a rights-based manner that is protective of people and planet. The Equator Principles is also a distinct instrument to standardize a global approach that respects the self-determination and the rights of Indigenous Peoples globally.
Unfortunately, the draft text of EP4 and the ensuing consultation process does not take advantage of the opportunity for global leadership. The consultation process facilitated by BSR – the not-for-profit that the Equator Principles Association (EPA) engaged to conduct the stakeholder consultation process – was not adequately designed for meaningful non-industry stakeholder engagement. As such, First Peoples is concerned that the feedback provided by BSR to the EPA and the Equator Principles Secretariat overseeing the process will not accurately reflect the vital concerns submitted by non-industry stakeholders. First Peoples again calls upon BSR and the EPA to provide non-industry stakeholders with the revised draft for comment within an appropriate timeline before a vote by Equator Principles Financial Institutions (EPFIs).
Financial institutions globally are already recognizing the importance of early respect for human rights. For instance, the Royal Bank of Scotland announced on August 7, 2019 that it will not provide financial backing for energy developers in Alaska’s Arctic National Wildlife Refuge. This is in direct response to the devastating, permanent damage that would occur due to oil and gas drilling, the forced relocation of more than 5,000 people for the project, and the detrimental effects to the livelihoods and culture of the Gwich’in people who reside near the refuge. Banks, alone, are leading best practices as to sustainable finance.
Indigenous Peoples around the world are actively resisting the imposition of finance and investment that does not proceed in line with their rights as enumerated in the UN Declaration on the Rights of Indigenous Peoples. When investment does not do so, Indigenous Peoples are the first to experience violence and are the first to experience the negative impacts of imposed development. Accordingly, the risks of investment without a social license to operate have grown precipitously since 2016. First Peoples urges the EP Association Steering Committee and all EPFIs to acknowledge their responsibility to respect the human rights of Indigenous Peoples by seriously considering all non-industry stakeholder feedback and the recommendations in this document by voting on a stronger EP4 that reflects our shared reality in 2019 and beyond.
As currently written, EP4 does not set forth a strong risk management framework to provide a dynamic starting place from which EPFIs can build better and more responsive social and environmental screening processes. In fact, by setting a subterranean minimum expectation of clients and EPFIs, the Equator Principles – if not further revised – can no longer be relied upon as a proxy for responsible and sustainable project finance.
Related Articles & Resources
Social Cost and Material Loss: The Dakota Access Pipeline
"New Equator Principles Draft Falls Short of Adequately Assessing Social Risk and Protecting the Rights of Indigenous Peoples"
"EP4 Toronto Consultation Report: Banks Must Improve Social Risk Standards and Rethink “Consultation” Process"
"EP4 London Consultation Report: Banks Can Improve Social Risk Assessment to Minimize Material Loss and Protect Lives and the Planet"
"With Tokyo Launch of Equator Principles Review, Japan Can Lead the Financial Industry to more Sustainable, Human Rights-based Business Policy and Practices"
"Without a Policy Position, EP4 Fails as a Minimum for Social Risk Assessment"