The proposed draft of the revised Equator Principles, released on August 13, reflects a greater focus on human rights, with explicit mention of the expectation of human rights due diligence as set forth in the U.N. Guiding Principles on Business and Human Rights. The revised Principles also cover a wider range of project financing structures in recognition of the fact that the project finance market has diversified significantly since the Principles were first released in 2003.

The Equator Principles are a voluntary set of standards for determining, assessing, and managing social and environmental risk in project financing. To date, 77 financial institutions have adopted the Equator Principles, covering approximately 70% of international project finance debt in emerging markets. Financial institutions agree not to provide loans to projects where the borrower will not or is unable to comply with the social and environmental policies and procedures that the institution put in place in order to implement the Principles.

Key proposed changes in the revised Principles include:

• Financial institutions now explicitly recognize the “responsibility to respect human rights by undertaking due diligence” to prevent, mitigate and manage adverse human rights impacts.
• The Principles are now applicable to certain project-related corporate loans and bridge loans in addition to project finance and project finance advisory services.
• For projects in non-OECD countries and OECD countries not designated as high-income, the Principles are now aligned with IFC Performance Standard 7 and require free, prior, and informed consent for projects with adverse impacts on indigenous peoples.
• For projects that are expected to emit more than 100,000 tons of carbon dioxide equivalent annually, borrowers must now conduct an alternatives analysis to evaluate less greenhouse gas-intensive alternatives.
• Borrowers must now disclose their Environmental Impact Assessments and Environmental and Social Management Plans online.

Many of these changes were expected as part of an effort to bring the Equator Principles into alignment with the revised IFC Performance Standards, which were released in August 2011. The draft Principles will be open for public comment and consultation for a minimum of 60 days.