Drafk Prinicipios Del Ecuador

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DRAFT OF UPDATED EQUATOR PRINCIPLES (EP III) RELEASED MONDAY 13 AUGUST 2012
This package includes an Introduction, a Summary of Proposed Key Changes and Areas of Development, the draft of EP III (clean), the draft of EP III (marked up in track changes) and a Frequently Asked Questions document.
INTRODUCTION
The Equator Principles (EP) Association released the draft of the updated Equator Principles (EP III) for stakeholder consultation and public comment on 13 August 2012. The formal stakeholder consultation and public comment period will continue for a minimum of 60 days giving all interested parties and stakeholders (including EP Association members, other financial institutions, clients, industry bodies and associations, non-governmental organisations, consultants, law firms and regulatory bodies) an opportunity to review the EP III draft and provide comments. The EP Association is committed to openness, transparency and responsiveness and will consider all stakeholder feedback. You can submit your views and participate in the process in one or more of the following ways: Complete the online submission form. Email comments to ep3@equator-principles.com. Participate in a webinar and/or face-to-face meeting details are published on the EP III web pages. Note that places are limited and by invitation only you can register your interest in attending by emailing ep3meetings@equator-principles.com.
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SUMMARY OF PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

KEY TOPIC Structure and Language RELEVANT SECTION All DESCRIPTION The document has been divided in to 3 distinct sections to enable clear distinction between mandatory requirements in Main Text and Annexes, and supporting information in the Exhibits: 1. Main Text Preamble, Scope and Statement of Principles. 2. Annexes This contains implementation requirements for applying certain aspects of the EP framework. The content of the Annexes are an integral part of the EP and the requirements within them are mandatory. 3. Exhibits This contains supporting information including a new Glossary of Terms. Several footnotes have been incorporated in the main text or added to the Glossary of Terms. Several Principles have been shortened and language has been adjusted or clarified. The document language has been refined to align with new/changed language in the 2012 IFC Performance Standards. The inclusion of Project-Related Corporate Loans (Corporate Loans related to one specific project) subject to a US$100m threshold and a loan tenor of at least 2 years. It should be noted that general corporate purposes loans are excluded from the scope of the EP (refer to the Scope section of the EP III draft for the criteria). The inclusion of Bridge Loans that will be refinanced by Project Finance or a Project-Related Corporate Loan.
Scope
Scope Principles 2, 4, 7, and 9 Exhibit I
__________________________________________________________________________________________ KEY TOPIC Categorisation RELEVANT SECTION Principle 1 Exhibit I in EP II DESCRIPTION Exhibit I has been deleted and Categorisation has been included in the main text. It should be noted that further guidance material on Categorisation will be developed. There is a new requirement for an analysis of alternatives, including less carbon intensive fuel sources and technologies, for projects emitting over 100.000 tonnes CO 2 equivalent. It should be noted that the alternatives analysis is based on the requirements stipulated in the updated IFC Performance Standards. There is a new requirement for borrowers to publicly report on emissions for projects emitting over 100.000 tonnes CO 2 equivalent. It should be noted that further guidance material on implementation of these requirements will be developed. An overarching statement regarding the application of the EP framework in High-Income OECD Countries has been included in the Preamble. Principle 3 now provides clarity to EPFIs and clients on the meaning and intent of the application of standards in different jurisdictions. Where possible, reference to application in High-Income OECD Countries has been deleted from individual Principles. Principle 3 now states that the EPFI, at its sole discretion, may seek to benchmark projects in these countries against these or other internationally recognised environmental and social assessment standards. The definition and purpose of an Action Plan, and related management plans has been clarified.
Climate Change
Principle 2 and 10 Annex A
Applicable Environmental and Social Standards
Preamble Principle 3 Various other Principles
Action Plan and Management systems
Principle 4 Exhibit I
__________________________________________________________________________________________ KEY TOPIC Stakeholder Engagement and Human Rights RELEVANT SECTION Preamble Principles 5, 6 and 10 Exhibit I Exhibit II DESCRIPTION New language in the Preamble and Exhibit II acknowledges the UN "Protect, Respect and Remedy" Framework for Business and Human Rights and Guiding Principles on Business and Human Rights, and the importance of human rights in the due diligence process. Principles 5 and 6 include new language related to Stakeholder Engagement (replacing the current Consultation and Disclosure) to reflect the updated language in the IFC Performance Standards on stakeholder engagement hierarchy. The text referencing Free, Prior and Informed Consent for projects in non-OECD countries and OECD countries not designated as High-Income has been inserted so that it reflects the important changes in the IFC Performance Standards. Principle 6 has been shortened to reduce duplication of the requirements in the IFC Performance Standards. Assessment disclosure requirements have been moved to Principle 10. The requirement for covenants now explicitly refers to all projects. Requirements for Bridge Loans and Project Finance Advisory services have been included in Principle 2 and Principle 4.
Covenants
Principle 8, 2 and 4
__________________________________________________________________________________________ KEY TOPIC Reporting and Transparency RELEVANT SECTION Principles 2, 5 and 10 Annex B DESCRIPTION Principle 10 now includes all reporting and disclosure requirements and is divided in to Project Reporting and EPFI Reporting. Annex B includes detailed requirements for EPFI reporting. In addition to the clients responsibility to disclose the project Environmental Impact Assessment (EIA) locally, the text now includes the requirement to disclose the EIA and Environmental and Social Management Plan (ESMP) (which is normally a component of the EIA), online unless the borrower does not have a company website. Annex B also includes a new requirement to provide, subject to borrower consent, a list of projects for publication on the EP website. It should be noted that a grace period for reporting on Project-Related Corporate Loans will be reflected in EP Association Governance Rules.
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THE EQUATOR PRINCIPLES [DATE TBC]

A financial industry benchmark for determining, assessing and managing environmental and social risk in projects http://www.equator-principles.com
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CONTENTS
PREAMBLE ................................................................................................................................... 2 SCOPE.......................................................................................................................................... 3 STATEMENT OF PRINCIPLES .......................................................................................................... 3 Principle 1: Review and Categorisation .............................................................................................. 4 Principle 2: Environmental and Social Assessment ............................................................................ 4 Principle 3: Applicable Environmental and Social Standards.............................................................. 5 Principle 4: Environmental and Social Management System and Action Plan ................................... 5 Principle 5: Stakeholder Engagement ................................................................................................. 6 Principle 6: Grievance Mechanism...................................................................................................... 6 Principle 7: Independent Review ........................................................................................................ 7 Principle 8: Covenants ........................................................................................................................ 7 Principle 9: Independent Monitoring and Reporting.......................................................................... 8 Principle 10: Reporting and Transparency .......................................................................................... 8 DISCLAIMER ................................................................................................................................. 9 ANNEXES: IMPLEMENTATION REQUIREMENTS ........................................................................... 10 Note: The implementation requirements detailed in these annexes are an integral part of the Equator Principles and are mandatory requirements for Equator Principles Financial Institutions. Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of Greenhouse Gas Emissions .................................................................................................................................... 10 Annex B - Minimum Reporting Requirements .................................................................................. 11 EXHIBITS: SUPPORTING INFORMATION ...................................................................................... 13 Exhibit I - Glossary of Terms.............................................................................................................. 13 Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the Environmental and Social Assessment Documentation ................................................................... 17 Exhibit III: IFC Performance Standards on Environmental and Social Sustainability and Environmental, Health and Safety Guidelines .................................................................................. 18
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PREAMBLE
Large infrastructure and industrial Projects can have adverse impacts on people and on the environment. 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, and on an ongoing basis. Such collaboration promotes sound and sustainable environmental and social performance, and can lead to improved financial, environmental and social outcomes. We, the Equator Principles Financial Institutions (EPFIs), have adopted the Equator Principles in order to ensure that the Projects we finance are developed in a manner that is socially responsible and reflects sound environmental management practices. By doing so, negative impacts on Projectaffected ecosystems, communities, and the climate should be avoided where possible. If these impacts are unavoidable, they should be minimised and compensated for, or offset appropriately. We believe that adoption of and adherence to the Equator Principles offers significant benefits to us, our borrowers, and local stakeholders through our borrowers engagement with locally affected communities. We therefore recognise that our role as financiers affords us opportunities to promote responsible environmental stewardship and socially responsible development, including fulfilling our responsibility to respect human rights by undertaking due diligence in accordance with the Equator Principles. The Equator Principles are intended to serve as a common baseline and framework for the implementation of each EPFIs internal environmental and social policies, procedures and standards related to its financing of Projects. We will not provide Project related loans and Project Finance Advisory services, as described and per the requirements in the Scope, to Projects where the borrower will not, or is unable to comply with, the Equator Principles. The Equator Principles apply globally and to all sectors. In High-Income OECD Countries, relevant host country laws, regulations and permits generally meet or exceed the requirements of the Equator Principles. For Projects located in these countries, host country requirements may be used as a substitute for the requirements in the Equator Principles. EPFIs review the Equator Principles from time-to-time based on implementation experience, and in order to reflect ongoing learning and emerging good practice.
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SCOPE
The Equator Principles apply to the four financial products described below: 1. Project Finance Advisory services where total Project capital costs are US$ 10 million or more. 2. Project Finance with total Project capital costs of US$10 million or more. 3. Project-Related Corporate Loans where all five of the following criteria are met: i. ii. iii. iv. v. the loan is related to a single Project, the total aggregate loan amount is at least US$100 million, the EPFIs individual Initial Exposure is at least US$50 million, the loan tenor is at least two years, and the borrower has Effective Operational Control (either direct or indirect) over the Project.
4. Bridge Loans with a tenor of less than two years that are intended to be refinanced by a Project Finance or Project-Related Corporate Loan. The requirements for Bridge Loans vary depending on the Projects stage of development. While the Equator Principles are not intended to be applied retroactively, EPFIs will apply them to the expansion or upgrade of an existing Project where changes in scale or scope may create significant environmental and/or social impacts, or significantly change the nature or degree of an existing impact.
STATEMENT OF PRINCIPLES
EPFIs will only provide Project related loans and Project Finance Advisory services, as described in the Scope, to Projects that conform to Principles 1-10 below: Recognising business confidentiality and applicable laws and regulations, mandated EPFIs will endeavour to share relevant environmental and social information with other mandated financial institutions with a view to seeking, where appropriate, consistent application of the Equator Principles to Projects financed. Any decision as to whether, or on what terms, to provide ProjectRelated loans and Project Finance Advisory services will be for each EPFI to make in accordance with their own risk management policies. Timing constraints may lead EPFIs considering a transaction to seek authorisation from their clients to start such information sharing before all relevant EPFIs are formally mandated. EPFIs expect clients to provide such authorisation on a best efforts basis.
Principle 1: Review and Categorisation

When a Project is proposed for financing, the EPFI will, as part of its internal environmental and social review and due diligence, categorise such Project based on the magnitude of its potential risks and impacts. Such screening is based on the environmental and social categorisation scheme of the International Finance Corporation (IFC). Using categorisation, the EPFIs environmental and social due diligence is commensurate with the nature, scale and stage of the Project, and with the level of environmental and social risks and impacts. The categorisation scheme is: Category A Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented; Category B Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures; and Category C Projects with minimal or no adverse environmental and social risks and/or impacts.
Principle 2: Environmental and Social Assessment

Where EPFIs are providing Project Finance Advisory services or a Bridge Loan, EPFIs will make the client aware of the content, application and benefits of applying the Equator Principles to the anticipated Project. The EPFI will request that the client communicates to the EPFI its intention to adhere to the requirements of the Equator Principles when subsequently seeking financing. In their advisory capacity the EPFI will guide and support the client through the steps leading to Equator Principles application. For each Project assessed as being either Category A or Category B, the EPFI will require the borrower to conduct an Environmental and Social Assessment (Assessment) process to address, as appropriate and to the EPFIs satisfaction, the relevant environmental and social risks and impacts of the proposed Project (which may include, if relevant, the illustrative list of issues found in Exhibit II). The Assessment should also propose measures to prevent, mitigate and manage adverse impacts in a manner relevant and appropriate to the nature and scale of the proposed Project. The Assessment will be an adequate, accurate and objective evaluation and presentation of the risks, whether prepared by the borrower, consultants or external experts. The Assessment document may comprise a full-scale environmental and social impact assessment, a limited or focused environmental or social assessment (e.g. audit), or straight-forward application of 4
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Principle 3: Applicable Environmental and Social Standards

The EPFI will require that the Assessment process evaluates compliance as follows: 1. For Projects located in non-OECD countries and OECD countries not designated as High-Income, the Assessment process evaluates compliance with the then applicable IFC Performance Standards (Exhibit III), and IFC Environmental, Health and Safety (EHS) Guidelines (Exhibit IV). 2. For Projects located in High-Income OECD Countries, the Assessment process evaluates compliance with relevant host country laws, regulations and permits that pertain to environmental and social matters as they are generally considered to meet or exceed the requirements of the Equator Principles. This substitution may extend to environmental and/or social assessments (Principle 2), management systems and plans (Principle 4), stakeholder engagement (Principle 5) and, disclosure and grievance mechanisms (Principle 6). The Assessment will establish to a participating EPFIs satisfaction the Project's overall compliance with, or justified deviation from, the applicable standards. The applicable standards (as described above) represent the minimum standards adopted by EPFIs and individual EPFIs may, at their sole discretion, apply additional requirements.
Principle 4: Environmental and Social Management System and Action Plan

For all Category A and Category B Projects, the EPFI will require the borrower to develop or maintain an Environmental and Social Management System (ESMS). Further, an Environmental and Social Management Plan (ESMP) will be prepared by the borrower to address issues raised in the Assessment and incorporate actions required to comply with the applicable standards. Where the applicable standards are not met to the EPFIs satisfaction, the borrower and the EPFI will agree an Action Plan (AP). The AP is intended to outline gaps and commitments to meet EPFI requirements in line with the applicable standards. For Bridge Loans where impacts have been identified and Project development is expected to begin during the tenor of the loan, the borrower will identify an Independent Environmental and Social
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Principle 5: Stakeholder Engagement

For all Category A and, as appropriate, Category B Projects, the EPFI will require the borrower to demonstrate effective Stakeholder Engagement as an ongoing process in a structured and culturally appropriate manner with Affected Communities and, where appropriate, Other Stakeholders. For Projects with potentially significant adverse impacts on Affected Communities, the borrowers will conduct an Informed Consultation and Participation process. The borrower will tailor its consultation process to the language preferences of the Affected Communities, their decision-making processes, and the needs of disadvantaged and vulnerable groups. This process should be free from external manipulation, interference, coercion and intimidation. EPFIs recognise that indigenous people are often a vulnerable segment of Project-Affected Communities. Projects affecting indigenous peoples will be subject to a process of Informed Consultation and Participation, and will comply with applicable national law, including those laws implementing host-country obligations under international law. In non-OECD countries and OECD countries not designated as High-Income, consistent with special circumstances described in IFC Performance Standard 7, Projects with adverse impacts on indigenous people will require their free, prior and informed consent. To facilitate Stakeholder Engagement, the borrower will make the Assessment documentation and the ESMP readily available to the public in the relevant local language and in a culturally appropriate manner. Refer to Principle 10 for Project Reporting requirements.
Principle 6: Grievance Mechanism

For all Category A and, as appropriate, Category B Projects, the borrower will, as part of the ESMS, establish a grievance mechanism designed to receive and facilitate resolution of concerns and grievances about the Projects environmental and social performance. The grievance mechanism should be scaled to the risks and impacts of the Project and have Affected Communities as its primary user. It will seek to resolve concerns promptly, using an understandable and transparent consultative process that is culturally appropriate, readily accessible, at no cost, and without retribution to the party that originated the issue or concern. The mechanism should not
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Principle 7: Independent Review

Project Finance For all Category A and, as appropriate, for Category B Projects, an Independent Environmental and Social Consultant, not directly associated with the borrower, will carry out an Independent Review of the Assessment, ESMP, ESMS and consultation process documentation in order to assist the EPFI's due diligence, and assess Equator Principles compliance. The Independent Environmental and Social Consultant will also propose or opine on a suitable AP capable of bringing the Project into compliance with the Equator Principles, or indicate when compliance is not possible. Project-Related Corporate Loans An Independent Review by an Independent Environmental and Social Consultant is required for Projects with high risk impacts including, but not limited to, any of the following: Adverse impacts on indigenous people, Critical habitat impacts, Significant cultural heritage impacts, Large-scale resettlement.
In other Category A, and as appropriate Category B, Project-Related Corporate Loans, the EPFI may determine whether an Independent Review is appropriate or if internal review by the EPFI is sufficient. This may take into account the due diligence performed by an Official Agency, if relevant.
Principle 8: Covenants
An important strength of the Equator Principles is the incorporation of covenants linked to compliance. For all Projects, the borrower will covenant in the financing documentation: a) to comply with all relevant host country environmental and social laws, regulations and permits in all material respects; b) to comply with the ESMPs and AP (where applicable) during the construction and operation of the Project in all material respects; 7
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 c) to provide periodic reports in a format agreed with the EPFIs (with the frequency of these reports proportionate to the severity of impacts, or as required by law, but not less than annually), prepared by in-house staff or third party experts, that i) document compliance with the ESMPs and AP (where applicable), and ii) provide representation of compliance with relevant local, state and host country environmental and social laws, regulations and permits; and d) to decommission the facilities, where applicable and appropriate, in accordance with an agreed decommissioning plan. Where a borrower is not in compliance with its environmental and social covenants, the EPFI will work with the borrower on remedial actions to bring the Project back into compliance to the extent feasible. If the borrower fails to re-establish compliance within an agreed grace period, the EPFI reserves the right to exercise remedies, as considered appropriate.
Principle 9: Independent Monitoring and Reporting

Project Finance To assess Project compliance with the Equator Principles and ensure ongoing monitoring and reporting over the life of the loan, the EPFI will, for all Category A and, as appropriate, Category B Projects, require the appointment of an Independent Environmental and Social Consultant, or require that the borrower retain qualified and experienced external experts to verify its monitoring information which would be shared with the EPFI. Project-Related Corporate Loans For Projects where an Independent Review is required under Principle 7, the EPFI will require the appointment of an Independent Environmental and Social Consultant, or require that the borrower retain qualified and experienced external experts to verify its monitoring information which would be shared with the EPFI.
Principle 10: Reporting and Transparency

Project Reporting Requirements For all Category A and, as appropriate, Category B Projects located in non-OECD countries and OECD countries not designated as High-Income, the EPFI will require the borrower to disclose the
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 Assessment documentation and the ESMP online 1. The borrower will take account of and document the process and results of the stakeholder consultation, including any actions agreed resulting from the consultation process. For Projects with adverse environmental or social impacts, disclosure should occur early in the Assessment process, and in any event before the Project construction commences, and on an ongoing basis. For all Category A and, as appropriate Category B Projects, in all countries, the EPFI will require the borrower to publicly report greenhouse gas emission levels during the operational phase for Projects emitting over 100,000 tonnes of CO 2 equivalent annually. Refer to Annex A for detailed requirements on greenhouse gas emissions reporting. EPFI Reporting Requirements The EPFI will report publicly at least annually on transactions screened and closed, and about its Equator Principles implementation processes and experience, taking into account appropriate confidentiality considerations. The EPFI will report according to the minimum reporting requirements detailed in Annex B.
DISCLAIMER
The EPFIs view the Equator Principles as a financial industry benchmark for developing individual, internal environmental and social policies, procedures and practices. As with all internal policies, the Equator Principles do not create any rights in, or liability to, any person, public or private. Institutions adopt and implement the Equator Principles voluntarily and independently, without reliance on or recourse to the IFC, the World Bank or other EPFIs.
Except in cases where the borrower does not have a company website.
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ANNEXES: IMPLEMENTATION REQUIREMENTS

Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of Greenhouse Gas Emissions
Where an alternatives analysis is required by a regulating permitting process, the analysis will follow the methodology and time frame required by the relevant process. Following completion of an alternatives analysis, the borrower will provide evidence of technically and financially feasible and cost-effective options available to reduce Project-related GHG emissions during the design, construction and operation of the Project. Quantification of GHG emissions will be conducted by the borrower in accordance with internationally recognised methodologies and good practice, for example, the GHG Protocol. For Scope 1 emissions, this analysis will include consideration of alternative fuel or energy sources. Additionally, for Projects in sectors with the highest carbon intensity, the alternatives analysis will include comparisons to other viable technologies used in the same industry in the country or region with the relative energy efficiency of the selected technology. High carbon intensity sectors include the following, as outlined in the IFC EHS Guidelines: thermal power, cement and lime manufacturing, integrated steel mills, base metal smelting and refining, foundries.
The EPFI will require the borrower to publicly report on greenhouse gas emission levels during the operational phase for Projects emitting over 100,000 tonnes of CO 2 -equivalent annually (combined Scope 1 and Scope 2), and they will be encouraged to report publicly on Projects emitting over 25,000 tonnes. Public reporting requirements can be satisfied via regulatory requirements for reporting or environmental impact assessments, or voluntary reporting mechanisms such as the Carbon Disclosure Project where such reporting includes emissions at Project level. The borrower will quantify direct emissions from the facilities owned or controlled within the physical Project boundary (Scope 1 emissions), as well as indirect emissions associated with the offsite production of energy used by the Project (Scope 2 emissions).
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Annex B - Minimum Reporting Requirements

These reporting requirements apply to Project Finance Advisory services, Project Finance and Project-Related Corporate Loans, unless specified otherwise. Reporting data will be published in a single location. If data is displayed in different locations (e.g. website, reports) the EPFI will provide links to facilitate information gathering. The EPFI will report annually at a minimum and will specify the reporting period (e.g. start and end dates). Aggregated Data Reporting 1. The EPFI will report the number of transactions screened for the first time during the reporting period. The EPFI will provide a definition of transactions screened. 2. Data for Project Finance Advisory services and Project Finance will be displayed separately from Project-Related Corporate Loans. 3. The EPFI will display a breakdown of the data as follows: Category (A, B, or C); Category (A, B, or C) and by Sector and Region i.e. (Mining, Infrastructure, Oil and Gas, Power, Others) and (Americas, Europe Middle East and Africa, Asia Pacific); Category (A, B, or C) and by Host Country Classification (e.g. High-Income OECD); Category (A or B) and whether an Independent Review has been carried out.
4. The EPFI will report on the number of Project Finance and Project-Related Corporate Loans that have reached Financial Close during the reporting period and will display a breakdown of the data by Category (A, B, or C). Note this requirement does not apply to Project Finance Advisory services. Implementation Reporting 1. The EPFI will report on their implementation of the Equator Principles, including: The mandate of the Equator Principles Reviewers (e.g. responsibilities and staffing); The respective roles of the Equator Principles Reviewers and business lines involved in the transaction review process;
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2. EPFIs, in their first year of Equator Principles adoption, will provide details of their internal preparation and staff training. Project-Specific Data Reporting Project-Specific Data reporting is: applicable only to Project Finance transactions that have reached Financial Close, subject to obtaining client consent, subject to applicable local laws and regulations, and subject to any reduction in the rights, or increase in the liability, of the EPFI.
The EPFI will seek client consent at a time during the loan documentation process deemed appropriate by the EPFI or at Financial Close. The EPFI will submit data (or a link to the data on their website) to the Equator Principles Secretariat for publication on the Equator Principles website. The data will include: Project name (as per the loan agreement); Sector: Mining, Infrastructure, Oil and Gas, Power, Others; Region: Americas, Europe Middle East and Africa, Asia Pacific; The calendar year in which the loan reached Financial Close.
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EXHIBITS: SUPPORTING INFORMATION

Exhibit I - Glossary of Terms
Action Plan (AP) is prepared, as a result of EPFI due diligence, to describe and prioritise the actions needed to address any gaps in the Assessment or ESMPs to bring the Project in line with applicable standards as defined in the Equator Principles. The AP is typically tabular in form and lists distinct actions from mitigation measures to follow-up studies or plans that complement the Assessment. Affected Communities are local communities, within the Project's area of influence, directly affected by the Project. Bridge Loan is an interim loan given to a business until the longer term stage of financing can be obtained. Effective Operational Control includes both direct control of the Project by the borrower and indirect control, for example where a subsidiary of the borrower operates the Project. Environmental and Social Assessment (Assessment) is a process that determines the environmental and social risks and impacts (including labour, health, and safety) of a proposed Project in its area of influence. Environmental and Social Management Plan (ESMP) is a summary of borrower commitments to mitigate risks and impacts identified in the Assessment. This may range from a brief description of routine mitigation measures to a series of documents (e.g. resettlement action plan, indigenous peoples plan, emergency preparedness and response plan, decommissioning plan). The level of detail and complexity of the ESMP and the priority of the identified measures and actions will be commensurate with the Projects potential risks and impacts. Environmental and Social Management System (ESMS) is the overarching environmental, social, health and safety management system which may be applicable at a corporate or Project level. The system is designed to identify, assess and manage risk in respect to the Project on an ongoing basis. The system consists of manuals and related source documents, including policies, management programs and plans, procedures, requirements, performance indicators, responsibilities, training and periodic audits and inspections with respect to environmental or social matters. It is the overriding framework by which an ESMP and/or AP is implemented. The term may refer to the system for the construction phase or the operational phase of the Project, or to both as the context may require.
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 512 513 514 515 516 517 518 519 520 521 522 523 524 525 526 527 528 529 530 531 532 533 534 535 536 537 538 539 540 541 542 543 544 545 546 547 548 549 Equator Principles Reviewers are EPFI employees responsible for reviewing the environmental and social aspects of loans subject to the Equator Principles. They may be a distinct Equator Principles team or members of banking, credit risk, corporate sustainability (or similar) who are tasked with applying the Equator Principles internally. Financial Close is defined as the date on which all conditions precedent to initial drawing of the debt have been satisfied or waived. High-Income OECD Countries are countries that are members of the Organisation for Economic CoOperation and Development (OECD) and designated High-Income by the World Bank Development Indicators Database. Informed Consultation and Participation is an in-depth exchange of views and information and an organised and iterative consultation that leads the borrower to incorporate the views of Affected Communities, on matters that affect them directly (such as proposed mitigation measures, the sharing of development benefits and opportunities, and implementation issues), into their decisionmaking process. Independent Environmental and Social Consultant is a qualified independent firm or consultant (not directly tied to the borrower) acceptable to the EPFI. Independent Review is a review of the Assessment, ESMP and consultation process documentation carried out by an Independent Environmental and Social Consultant. Initial Exposure is the initial amount (not the amount after sell down or syndication) committed to the loan. Known Use of Proceeds is the information provided by the borrower on how the borrowings will be used. Non-High Income OECD Countries are countries that are members of the OECD that are not designated as High-Income by the World Bank Development Indicators Database. Non-OECD Countries are countries that are not members of the OECD. Official Agency is a multilateral development bank, a multilateral or bilateral financial institution or an OECD Export Credit Agency
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 550 551 552 553 554 555 556 557 558 559 560 561 562 563 564 565 566 567 568 569 570 571 572 573 574 575 576 577 578 579 580 581 582 583 584 585 586 587 588 589 Other Stakeholders are those not directly affected by the Project but that have an interest in it. They could include national and local authorities, neighbouring Projects, and/or non-governmental organisations. A Project is a development (in any sector) at an identified location. It includes an expansion or upgrade of an existing operation that results in a material change in output or function. Examples of Projects that trigger the Equator Principles include, but are not limited to; a power plant, mine, oil and gas Project (including drillships and Floating Production Storage and Offloading (FPSO) vessels), chemical plant, infrastructure development, manufacturing plant, large scale real estate development, or any other Project that creates significant environmental and/or social impacts. Project Finance is a method of financing in which the lender looks primarily to the revenues generated by a single Project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure. Project Finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements. In such transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the Projects output, such as the electricity sold by a power plant. The borrower is usually a Special Purpose Entity that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the Projects cash flow and on the collateral value of the Projects assets. For reference go to Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards ("Basel II"), November 2005. http://www.bis.org/publ/bcbs118.htm. Reserve-Based Financing in extractive sectors that is non-recourse and where the proceeds are used to develop one particular reserve (e.g. an oil field or a mine) is considered to be a Project Finance transaction covered under the Equator Principles. Project Finance Advisory is the provision of advice on the potential financing of a development where one of the options may be Project Finance. Project-Related Corporate Loans are corporate loans, made to business entities (either privately, publicly, or state-owned or controlled) related to a single Project, either a new development, expansion (e.g. where there is an expanded footprint) or upgrade, where the Known Use of Proceeds is related to a single Project in one of the following ways: a. The lender looks primarily to the revenues generated by the Project as the source of repayment (as in Project Finance) and where security exists in the form of a corporate or parent company guarantee;
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 590 591 592 593 594 595 596 597 598 599 600 601 602 603 604 605 606 607 608 609 610 611 b. Documentation for the loan indicates that the majority of the proceeds of the total loan are directed to the Project. Such documentation may include the term sheet, information memorandum, credit agreement, or other representations provided by the borrower into its intended use of proceeds for the loan. In the case of Export Finance, the infrastructure or industrial project to which the export is intended will be considered the Project. Excluded transactions include Asset Finance (such as for cargo ships or airplanes), general working capital facilities, and general capital expenditure facilities used to maintain, enhance and upgrade a company's operations. Loans that are not directed towards a Project, for example general corporate purposes loans, are not in the scope the Equator Principles. Stakeholder Engagement refers to IFC Performance Standards provisions on external communication, environmental and social information disclosure, informed consultation, and grievance mechanisms. For the Equator Principles, Stakeholder Engagement also refers to the overall requirements described under Principle 5.
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Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the Environmental and Social Assessment Documentation
In the context of the business of the Project, the Assessment documentation will address, where applicable, the following issues: a) assessment of the baseline environmental and social conditions b) consideration of feasible environmentally and socially preferable alternatives c) requirements under host country laws and regulations, applicable international treaties and agreements d) protection of human rights by acting with due diligence to prevent, mitigate and manage adverse human rights impacts e) protection of community health, safety and security (including risks, impacts and management of Projects use of security personnel) f) protection of cultural property and heritage g) protection and conservation of biodiversity, including endangered species and sensitive ecosystems in modified, natural and critical habitats, and identification of legally protected areas h) sustainable management and use of renewable natural resources (including sustainable resource management through appropriate independent certification systems) i) use and management of dangerous substances j) major hazards assessment and management k) labour issues (including the four core labour standards), and occupational health and safety l) fire prevention and life safety m) socio-economic impacts n) land acquisition and involuntary resettlement o) impacts on affected communities, and disadvantaged or vulnerable groups p) impacts on indigenous peoples, and their unique cultural systems and values q) cumulative impacts of existing Projects, the proposed Project, and anticipated future Projects r) consultation and participation of affected parties in the design, review and implementation of the Project s) efficient production, delivery and use of energy t) pollution prevention and waste minimisation, pollution controls (liquid effluents and air emissions) and solid and chemical waste management u) viability of Project operations, of reasonable foreseeable changing weather patterns/climatic conditions, together with adaptation opportunities. Note: The above list is for illustrative purposes only. The Assessment process of each Project may or may not identify all issues noted above, or be relevant to every Project.
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Exhibit III: IFC Performance Standards on Environmental and Social Sustainability and Environmental, Health and Safety Guidelines
The Equator Principles refer to two separate parts of the IFC Sustainability Framework as the then applicable environmental and social standards under Principle 3. 1. The IFC Performance Standards on Environmental and Social Sustainability As of January 1, 2012, the following Performance Standards were applicable: 1 - Assessment and Management of Social and Environmental Risks and Impacts 2 - Labor and Working Conditions 3 - Resource Efficiency and Pollution Prevention 4 - Community Health, Safety and Security 5 - Land Acquisition and Involuntary Resettlement 6 - Biodiversity Conservation and Sustainable Management of Living Natural Resources 7 - Indigenous Peoples 8 - Cultural Heritage Guidance Notes accompany each Performance Standard. EPFIs do not formally adopt the Guidance Notes however EPFIs and borrowers may find them useful points of reference when seeking further guidance on or interpreting the Performance Standards. The IFC Performance Standards, Guidance Notes and Industry Specific Guidelines can be found at http://www.ifc.org/ifcext/policyreview.nsf/Content/2012-Edition. 2. The IFC Environmental, Health and Safety (EHS) Guidelines The IFC EHS Guidelines are technical reference documents containing examples of Good International Industry Practice (GIIP), as defined in Performance Standard 3 on Resource Efficiency and Pollution Prevention. They contain the performance levels and measures that are normally considered acceptable for Projects in emerging markets, as well as being achievable in new facilities at reasonable costs by existing technology. Two Guidelines are used: The General EHS Guidelines These Guidelines contain information on cross-cutting environmental, health, and safety issues potentially applicable to all industry sectors. They are divided into sections entitled: Environmental; Occupational Health and Safety; Community Health and Safety; Construction; and Decommissioning. They should be used together with the relevant Industry Sector Guideline(s).
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 691 692 693 694 695 696 The Industry Sector Guidelines These Guidelines contain information on industry-specific impacts and performance indicators, plus a general description of industry activities. They are grouped as follows: Agribusiness/Food Production 730 Forestry 731 Board and Particle-based Products 732 Forest Harvesting Operations 733 Pulp and Paper Mills 734 Sawmilling and Wood-based Products 735 736 General Manufacturing 737 Base Metal Smelting and Refining 738 Cement and Lime Manufacturing 739 Ceramic Tile and Sanitary Ware 740 Manufacturing 741 Construction Materials Extraction 742 Foundries 743 Glass Manufacturing 744 Integrated Steel Mills 745 Metal, Plastic, Rubber Products 746 Manufacturing 747 Printing 748 Semiconductors and Electronics 749 Manufacturing 750 Tanning and Leather Finishing
697 Annual Crop Production 698 Aquaculture 699 Breweries 700 Dairy Processing 701 Fish Processing 702 Food and Beverage Processing 703 Mammalian Livestock Production 704 Meat Processing 705 Plantation Crop Production 706 Poultry Processing 707 Poultry Production 708 Sugar Manufacturing 709 Vegetable Oil Processing 710 711 Chemicals 712 Coal Processing 713 Large Volume Inorganic Compounds 714 Manufacturing and Coal Tar Distillation 715 Large Volume Petroleum-based Organic 716 Chemicals Manufacturing 717 Natural Gas Processing 718 719 720 721 722 723 724 725 726 727 728 729
751 Textiles Manufacturing 752 Nitrogenous Fertilizer Manufacturing 753 Oleochemicals Manufacturing Pesticides Formulation, Manufacturing and 754 755 Packaging Petroleum-based Polymers Manufacturing 756 757 Petroleum Refining 758 Pharmaceuticals and Biotechnology 759 Manufacturing 760 Phosphate Fertilizer Manufacturing 761 762 763 764 19
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 765 Infrastructure 766 Airlines 767 Airports 768 Crude Oil and Petroleum Product 769 Terminals 770 Gas Distribution Systems 771 Health Care Facilities 772 Ports, Harbors and Terminals 773 Railways 774 Retail Petroleum Networks 775 Shipping 776 Telecommunications 777 Toll Roads 778 Tourism and Hospitality Development 779 Waste Management Facilities 780 Water and Sanitation 796 797 781 Mining 782 Mining 783 784 Oil and Gas 785 Offshore Oil and Gas Development 786 Onshore Oil and Gas Development 787 Liquefied Natural Gas (LNG) Facilities 788 789 Power 790 Electric Power Transmission and 791 Distribution 792 Geothermal Power Generation 793 Thermal Power 794 Wind Energy 795
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THE EQUATOR PRINCIPLES [DATE TBC]

A financial industry benchmark for determining, assessing and managing environmental and social and environmental risk in projects financing http://www.equator-principles.com
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CONTENTS
PREAMBLE ................................................................................................................................... 2 SCOPE.......................................................................................................................................... 3 STATEMENT OF PRINCIPLES .......................................................................................................... 4 Principle 1: Review and Categorisation .............................................................................................. 4 Principle 2: Environmental and Social Assessment ............................................................................ 5 Principle 3: Applicable Environmental and Social Standards.............................................................. 6 Principle 4: Environmental and Social Management System and Action Plan ................................... 7 Principle 5: Stakeholder Engagement ................................................................................................. 8 Principle 6: Grievance Mechanism...................................................................................................... 9 Principle 7: Independent Review ........................................................................................................ 9 Principle 8: Covenants ...................................................................................................................... 10 Principle 9: Independent Monitoring and Reporting........................................................................ 11 Principle 10: Reporting and Transparency ........................................................................................ 11 DISCLAIMER ............................................................................................................................... 12 ANNEXES: IMPLEMENTATION REQUIREMENTS ........................................................................... 13 Note: The implementation requirements detailed in these annexes are an integral part of the Equator Principles and are mandatory requirements for Equator Principles Financial Institutions. Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of Greenhouse Gas Emissions .................................................................................................................................... 13 Annex B - Minimum Reporting Requirements .................................................................................. 14 EXHIBITS: SUPPORTING INFORMATION ...................................................................................... 16 Exhibit I - Glossary of Terms.............................................................................................................. 16 Exhibit II: Illustrative List of Potential Environmental and Social Issues to be Addressed in the Environmental and Social Assessment Documentation ................................................................... 20 Exhibit III: IFC Performance Standards on Environmental and Social Sustainability and Environmental, Health and Safety Guidelines .................................................................................. 22
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PREAMBLE
Large infrastructure and industrial Projects can have adverse impacts on people and on the environment. 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, and on an ongoing basis. Such collaboration promotes sound and sustainable environmental and social performance, and can lead to improved financial, environmental and social outcomes. Project financing, a method of funding in which the lender looks primarily to the revenues generated by a single project both as the source of repayment and as security for the exposure, plays an important role in financing development throughout the world1. Project financiers may encounter social and environmental issues that are both complex and challenging, particularly with respect to projects in the emerging markets. We, Tthe Equator Principles Financial Institutions (EPFIs), have consequently adopted these Equator Principles in order to ensure that the pProjects we finance are developed in a manner that is socially responsible and reflects sound environmental management practices. By doing so, negative impacts on pProject-affected ecosystems, and communities, and the climate should be avoided where possible., and iIf these impacts are unavoidable, they should be minimised and reduced, mitigated and/or compensated for, or offset appropriately. We believe that adoption of and adherence to these Equator Principles offers significant benefits to us ourselves, our borrowers, and local stakeholders through our borrowers engagement with locally affected communities. We therefore recognise that our role as financiers affords us opportunities to promote responsible environmental stewardship and socially responsible development, including fulfilling our responsibility to respect human rights by undertaking due diligence in accordance with the Equator Principles. As such, EPFIs will consider reviewing these Principles from time-to-time based on implementation experience, and in order to reflect ongoing learning and emerging good practice.
Project finance is a method of funding in which the lender looks primarily to the revenues generated by a single project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure. Project finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements. In such transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the facilitys output, such as the electricity sold by a power plant. The borrower is usually an SPE (Special Purpose Entity) that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the projects cash flow and on the collateral value of the projects assets. Source: Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards ("Basel II"), November 2005. http://www.bis.org/publ/bcbs118.htm.
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 These Equator Principles are intended to serve as a common baseline and framework for the implementation by of each EPFIs of its own internal environmental and social and environmental policies, procedures and standards related to its financing of Pprojects financing activities. We will not provide Project related loans and Project Finance Advisory services, as described and per the requirements in the Scope, to pProjects where the borrower will not, or is unable to comply with, our respective social and environmental policies and procedures that implement the Equator Principles. The Equator Principles apply globally and to all sectors. In High-Income OECD Countries, relevant host country laws, regulations and permits generally meet or exceed the requirements of the Equator Principles. For Projects located in these countries, host country requirements may be used as a substitute for the requirements in the Equator Principles. EPFIs review the Equator Principles from time-to-time based on implementation experience, and in order to reflect ongoing learning and emerging good practice.
SCOPE
The Equator Principles apply to the four financial products described below: 1. Project Finance Advisory services where total Project capital costs are US$ 10 million or more. 2. Project Finance with total Project capital costs of US$10 million or more. 3. Project-Related Corporate Loans where all five of the following criteria are met: i. ii. iii. iv. v. the loan is related to a single Project, the total aggregate loan amount is at least US$100 million, the EPFIs individual Initial Exposure is at least US$50 million, the loan tenor is at least two years, and the borrower has Effective Operational Control (either direct or indirect) over the Project.
4. Bridge Loans with a tenor of less than two years that are intended to be refinanced by a Project Finance or Project-Related Corporate Loan. The requirements for Bridge Loans vary depending on the Projects stage of development. all new project financings globally with total project capital costs of US$10 million or more, and across all industry sectors. In addition, wWhile the Equator Principles are not intended to be applied retroactively, we EPFIs will apply them to all project financings covering the expansion or upgrade of
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 an existing Projectfacility where changes in scale or scope may create significant environmental and/or social impacts, or significantly change the nature or degree of an existing impact. The Principles also extend to project finance advisory activities. In these cases, EPFIs commit to make the client aware of the content, application and benefits of applying the Principles to the anticipated project, and request that the client communicate to the EPFI its intention to adhere to the requirements of the Principles when subsequently seeking financing.
STATEMENT OF PRINCIPLES
EPFIs will only provide Project related loans and Project Finance Advisory services, as described in the Scope, to pProjects that conform to Principles 1-109 below: Recognising business confidentiality and applicable laws and regulations, mandated EPFIs will endeavour to share relevant environmental and social information with other mandated financial institutions with a view to seeking, where appropriate, consistent application of the Equator Principles to Projects financed. Any decision as to whether, or on what terms, to provide ProjectRelated loans and Project Finance Advisory services will be for each EPFI to make in accordance with their own risk management policies. Timing constraints may lead EPFIs considering a transaction to seek authorisation from their clients to start such information sharing before all relevant EPFIs are formally mandated. EPFIs expect clients to provide such authorisation on a best efforts basis.
Principle 1: Review and Categorisation

When a pProject is proposed for financing, the EPFI will, as part of its internal environmental and social and environmental review and due diligence, categorise such pProject based on the magnitude of its potential risks and impacts. and risks in accordance with Such screening is based on the environmental and social screening criteriacategorisation scheme of the International Finance Corporation (IFC) (Exhibit I). Using categorisation, the EPFIs environmental and social due diligence is commensurate with the nature, scale and stage of the Project, and with the level of environmental and social risks and impacts. The categorisation scheme is: Category A Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented; Category B Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures; and
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 Category C Projects with minimal or no adverse environmental and social risks and/or impacts.
Principle 2: Environmental and Social and Environmental Assessment

Where EPFIs are providing Project Finance Advisory services or a Bridge Loan, EPFIs will make the client aware of the content, application and benefits of applying the Equator Principles to the anticipated Project. The EPFI will request that the client communicates to the EPFI its intention to adhere to the requirements of the Equator Principles when subsequently seeking financing. In their advisory capacity the EPFI will guide and support the client through the steps leading to Equator Principles application. For each pProject assessed as being either Category A or Category B, the EPFI will require the borrower has to conducted an Environmental and Social and Environmental Assessment (Assessment) process 2 to address, as appropriate and to the EPFIs satisfaction, the relevant environmental and social and environmental risks and impacts and risks of the proposed pProject (which may include, if relevant, the illustrative list of issues as found in Exhibit II). The Assessment should also propose mitigation and management measures to prevent, mitigate and manage adverse impacts in a manner relevant and appropriate to the nature and scale of the proposed pProject. The Assessment will be an adequate, accurate and objective evaluation and presentation of the risks, whether prepared by the borrower, consultants or external experts. The Assessment document may comprise a full-scale environmental and social impact assessment, a limited or focused environmental or social assessment (e.g. audit), or straight-forward application of environmental siting, pollution standards, design criteria, or construction standards. One or more specialised studies may also need to be undertaken. Regardless of the location, for all Projects which are expected to emit more than 100,000 tonnes of CO 2 equivalent annually, an alternatives analysis will be conducted to evaluate less GHG intensive alternatives. Refer to Annex A for alternatives analysis requirements.
Social and Environmental Assessment is a process that determines the social and environmental impacts and risks (including labour, health, and safety) of a proposed project in its area of influence. For the purposes of Equator Principles compliance, this will be an adequate, accurate and objective evaluation and presentation of the issues, whether prepared by the borrower, consultants or external experts. Depending on the nature and scale of the project, the assessment document may comprise a full-scale social and environmental impact assessment, a limited or focused environmental or social assessment (e.g. audit), or straight-forward application of environmental siting, pollution standards, design criteria, or construction standards. One or more specialised studies may also need to be undertaken.
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Principle 3: Applicable Environmental and Social and Environmental Standards

The EPFI will require that the Assessment process evaluates compliance as follows: 1. For pProjects located in non-OECD countries, and those located in OECD countries not designated as High-Income, as defined by the World Bank Development Indicators Database, the Assessment process evaluates compliance with will refer to the then applicable IFC Performance Standards (Exhibit III), and the then applicable Industry Specific IFC Environmental, Health and Safety (EHS) Guidelines (EHS Guidelines) (Exhibit IV). 2. For Projects located in High-Income OECD Countries, the Assessment process evaluates compliance with relevant host country laws, regulations and permits that pertain to environmental and social matters as they are generally considered to meet or exceed the requirements of the Equator Principles. This substitution may extend to environmental and/or social assessments (Principle 2), management systems and plans (Principle 4), stakeholder engagement (Principle 5) and, disclosure and grievance mechanisms (Principle 6). The Assessment will establish to a participating EPFIs satisfaction the pProject's overall compliance with, or justified deviation from, the applicable standardsrespective Performance Standards and EHS Guidelines. The applicable standards (as described above) represent the minimum standards adopted by EPFIs and individual EPFIs may, at their sole discretion, apply additional requirements. The regulatory, permitting and public comment process requirements in High-Income OECD Countries, as defined by the World Bank Development Indicators Database, generally meet or exceed the requirements of the IFC Performance Standards (Exhibit III) and EHS Guidelines (Exhibit IV). Consequently, to avoid duplication and streamline EPFI's review of these projects, successful completion of an Assessment (or its equivalent) process under and in compliance with local or national law in High-Income OECD Countries is considered to be an acceptable substitute for the IFC Performance Standards, EHS Guidelines and further requirements as detailed in Principles 4, 5 and 6 below. For these projects, however, the EPFI still categorises and reviews the project in accordance with Principles 1 and 2 above. The Assessment process in both cases should address compliance with relevant host country laws, regulations and permits that pertain to social and environmental matters.
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Principle 4: Environmental and Social Management System and Action Plan and Management System
For all Category A and Category B pProjects, the EPFI will require the borrower to develop or maintain an Environmental and Social Management System (ESMS). Further, an Environmental and Social Management Plan (ESMP) will be prepared by the borrower to address issues raised in the Assessment and incorporate actions required to comply with the applicable standards. Where the applicable standards are not met to the EPFIs satisfaction, the borrower and the EPFI will agree an Action Plan (AP). The AP is intended to outline gaps and commitments to meet EPFI requirements in line with the applicable standards. For Bridge Loans where impacts have been identified and Project development is expected to begin during the tenor of the loan, the borrower will identify an Independent Environmental and Social Consultant and develop a scope of work to conduct an Independent Review. Where the Project is in the feasibility phase and no impacts are expected during the tenor of the loan, the EPFI will include a loan covenant, or a condition precedent to disbursement, requiring confirmation that an Assessment process or other assessment study (if applicable to the stage of development of the Project) has been assigned. located in non-OECD countries, and those located in OECD countries not designated as High-Income, as defined by the World Bank Development Indicators Database, the borrower has prepared an Action Plan (AP) 3 which addresses the relevant findings, and draws on the conclusions of the Assessment. The AP will describe and prioritise the actions needed to implement mitigation measures, corrective actions and monitoring measures necessary to manage the impacts and risks identified in the Assessment. Borrowers will build on, maintain or establish a Social and Environmental Management System that addresses the management of these impacts, risks, and corrective actions required to comply with applicable host country social and environmental laws and regulations, and requirements of the applicable Performance Standards and EHS Guidelines, as defined in the AP. For projects located in High-Income OECD countries, EPFIs may require development of an Action Plan based on relevant permitting and regulatory requirements, and as defined by host-country law.
The Action Plan may range from a brief description of routine mitigation measures to a series of documents (e.g. resettlement action plan, indigenous peoples plan, emergency preparedness and response plan, decommissioning plan, etc). The level of detail and complexity of the Action Plan and the priority of the identified measures and actions will be commensurate with the projects potential impacts and risks. Consistent with Performance Standard 1, the internal Social and Environmental Management System will incorporate the following elements: (i) Social and Environmental Assessment; (ii) management program; (iii) organisational capacity; (iv) training; (v) community engagement; (vi) monitoring; and (vii) reporting.
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Principle 5: Consultation and DisclosureStakeholder Engagement

For all Category A and, as appropriate, Category B pProjects, the EPFI will require the borrower to demonstrate effective Stakeholder Engagement as an ongoing process located in non-OECD countries, and those located in OECD countries not designated as High-Income, as defined by the World Bank Development Indicators Database, the government, borrower or third party expert has consulted with project affected communities in a structured and culturally appropriate manner with Affected Communities and, where appropriate, Other Stakeholders. 4 For pProjects with potentially significant adverse impacts on aAffected cCommunities, the borrowers will conduct an Informed Consultation and Participation process. will ensure their free, prior and informed consultation and facilitate their informed participation as a means to establish, to the satisfaction of the EPFI, whether a project has adequately incorporated affected communities concerns. 5The borrower will tailor its consultation process to the language preferences of the Affected Communities, their decision-making processes, and the needs of disadvantaged and vulnerable groups. This process should be free from external manipulation, interference, coercion and intimidation. EPFIs recognise that indigenous people are often a vulnerable segment of Project-Affected Communities. Projects affecting indigenous peoples will be subject to a process of Informed Consultation and Participation, and will comply with applicable national law, including those laws implementing host-country obligations under international law. In non-OECD countries and OECD countries not designated as High-Income, consistent with special circumstances described in IFC Performance Standard 7, Projects with adverse impacts on indigenous people will require their free, prior and informed consent. To facilitate Stakeholder Engagement, the borrower will make the Assessment documentation and the ESMP readily available to the public in the relevant local language and in a culturally appropriate manner. Refer to Principle 10 for Project Reporting requirements. In order to accomplish this, the Assessment documentation and AP, or non-technical summaries thereof, will be made available to the public by the borrower for a reasonable minimum period in the relevant local language and in a culturally appropriate manner. The borrower will take account
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Affected communities are communities of the local population within the projects area of influence who are likely to be adversely affected by the project. Where such consultation needs to be undertaken in a structured manner, EPFIs may require the preparation of a Public Consultation and Disclosure Plan (PCDP). 5 Consultation should be free (free of external manipulation, interference or coercion, and intimidation), prior (timely disclosure of information) and informed (relevant, understandable and accessible information), and apply to the entire project process and not to the early stages of the project alone. The borrower will tailor its consultation process to the language preferences of the affected communities, their decision-making processes, and the needs of disadvantaged or vulnerable groups. Consultation with Indigenous Peoples must conform to specific and detailed requirements as found in Performance Standard 7. Furthermore, the special rights of Indigenous Peoples as recognised by host-country legislation will need to be addressed.
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Principle 6: Grievance Mechanism

For all Category A and, as appropriate, Category B pProjects, the borrower will, as part of the ESMS, located in non-OECD countries, and those located in OECD countries not designated as High-Income, as defined by the World Bank Development Indicators Database, to ensure that consultation, disclosure and community engagement continues throughout construction and operation of the project, the borrower will, scaled to the risks and adverse impacts of the project, establish a grievance mechanism designed to receive and facilitate resolution of concerns and grievances about the Projects environmental and social performance. as part of the management system. This will allow the borrower to receive and facilitate resolution of concerns and grievances about the projects social and environmental performance raised by individuals or groups from among projectaffected communities. The borrower will inform the affected communities about the mechanism in the course of its community engagement process and ensure that the mechanism addresses concerns promptly and transparently, in a culturally appropriate manner, and is readily accessible to all segments of the affected communities. The grievance mechanism should be scaled to the risks and impacts of the Project and have Affected Communities as its primary user. It will seek to resolve concerns promptly, using an understandable and transparent consultative process that is culturally appropriate, readily accessible, at no cost, and without retribution to the party that originated the issue or concern. The mechanism should not impede access to judicial or administrative remedies. The borrower will inform the Affected Communities about the mechanism in the course of the Stakeholder Engagement process.
Principle 7: Independent Review

Project Finance For all Category A projects and, as appropriate, for Category B pProjects, an iIndependent Environmental and sSocial Consultant, or environmental expert not directly associated with the borrower, will carry outreview an Independent Review of the Assessment, AP ESMP, ESMS and consultation process documentation in order to assist the EPFI's due diligence, and assess Equator Principles compliance.
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 The Independent Environmental and Social Consultant will also propose or opine on a suitable AP capable of bringing the Project into compliance with the Equator Principles, or indicate when compliance is not possible. Project-Related Corporate Loans An Independent Review by an Independent Environmental and Social Consultant is required for Projects with high risk impacts including, but not limited to, any of the following: Adverse impacts on indigenous people, Critical habitat impacts, Significant cultural heritage impacts, Large-scale resettlement.
In other Category A, and as appropriate Category B, Project-Related Corporate Loans, the EPFI may determine whether an Independent Review is appropriate or if internal review by the EPFI is sufficient. This may take into account the due diligence performed by an Official Agency, if relevant.
Principle 8: Covenants
An important strength of the Equator Principles is the incorporation of covenants linked to compliance. For Category A and Ball pProjects, the borrower will covenant in the financing documentation: a) to comply with all relevant host country environmental and social and environmental laws, regulations and permits in all material respects; b) to comply with the ESMPs and AP (where applicable) during the construction and operation of the pProject in all material respects; c) to provide periodic reports in a format agreed with the EPFIs (with the frequency of these reports proportionate to the severity of impacts, or as required by law, but not less than annually), prepared by in-house staff or third party experts, that i) document compliance with the ESMPs and AP (where applicable), and ii) provide representation of compliance with relevant local, state and host country environmental and social and environmental laws, regulations and permits; and d) to decommission the facilities, where applicable and appropriate, in accordance with an agreed decommissioning plan.
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 394 395 396 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 Where a borrower is not in compliance with its environmental and social and environmental covenants, the EPFIs will work with the borrower on remedial actions to bring it the Project back into compliance to the extent feasible, . and iIf the borrower fails to re-establish compliance within an agreed grace period, the EPFIs reserves the right to exercise remedies, as they considered appropriate.
Principle 9: Independent Monitoring and Reporting

Project Finance To assess Project compliance with the Equator Principles and To ensure ongoing monitoring and reporting over the life of the loan, the EPFIs will, for all Category A projects, and, as appropriate, for Category B pProjects, require the appointment of an iIndependent eEnvironmental and/or sSocial Consultantexpert, or require that the borrower retain qualified and experienced external experts to verify its monitoring information which would be shared with the EPFIs. Project-Related Corporate Loans For Projects where an Independent Review is required under Principle 7, the EPFI will require the appointment of an Independent Environmental and Social Consultant, or require that the borrower retain qualified and experienced external experts to verify its monitoring information which would be shared with the EPFI.
Principle 10: EPFI Reporting and Transparency

Project Reporting Requirements For all Category A and, as appropriate, Category B Projects located in non-OECD countries and OECD countries not designated as High-Income, the EPFI will require the borrower to disclose the Assessment documentation and the ESMP online 6. The borrower will take account of and document the process and results of the stakeholder consultation, including any actions agreed resulting from the consultation process. For Projects with adverse environmental or social impacts, disclosure should occur early in the Assessment process, and in any event before the Project construction commences, and on an ongoing basis. For all Category A and, as appropriate Category B Projects, in all countries, the EPFI will require the borrower to publicly report greenhouse gas emission levels during the operational phase for Projects
Except in cases where the borrower does not have a company website.
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 431 432 433 434 435 436 437 438 439 440 441 442 443 444 445 446 447 448 449 450 451 emitting over 100,000 tonnes of CO 2 equivalent annually. Refer to Annex A for detailed requirements on greenhouse gas emissions reporting. EPFI Reporting Requirements The EPFI will report publicly at least annually on transactions screened and closed, and about its Equator Principles implementation processes and experience, taking into account appropriate confidentiality considerations. The EPFI will report according to the minimum reporting requirements detailed in Annex B.Each EPFI adopting the Equator Principles commits to report publicly at least annually about its Equator Principles implementation processes and experience, taking into account appropriate confidentiality considerations. 7
DISCLAIMER
The adopting EPFIs view these Equator Principles as a financial industry benchmark for developing individual, internal environmental and social and environmental policies, procedures and practices. As with all internal policies, these Equator Principles do not create any rights in, or liability to, any person, public or private. Institutions are adopting and implementing these Equator Principles voluntarily and independently, without reliance on or recourse to the IFC, or the World Bank or other EPFIs.
Such reporting should at a minimum 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.
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 452 453 454 455 456 457 458 459 460 461 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488
ANNEXES: IMPLEMENTATION REQUIREMENTS

Annex A - Climate Change: Alternatives Analysis, Quantification and Reporting of Greenhouse Gas Emissions
Where an alternatives analysis is required by a regulating permitting process, the analysis will follow the methodology and time frame required by the relevant process. Following completion of an alternatives analysis, the borrower will provide evidence of technically and financially feasible and cost-effective options available to reduce Project-related GHG emissions during the design, construction and operation of the Project. Quantification of GHG emissions will be conducted by the borrower in accordance with internationally recognised methodologies and good practice, for example, the GHG Protocol. For Scope 1 emissions, this analysis will include consideration of alternative fuel or energy sources. Additionally, for Projects in sectors with the highest carbon intensity, the alternatives analysis will include comparisons to other viable technologies used in the same industry in the country or region with the relative energy efficiency of the selected technology. High carbon intensity sectors include the following, as outlined in the IFC EHS Guidelines: thermal power, cement and lime manufacturing, integrated steel mills, base metal smelting and refining, foundries.
The EPFI will require the borrower to publicly report on greenhouse gas emission levels during the operational phase for Projects emitting over 100,000 tonnes of CO 2 -equivalent annually (combined Scope 1 and Scope 2), and they will be encouraged to report publicly on Projects emitting over 25,000 tonnes. Public reporting requirements can be satisfied via regulatory requirements for reporting or environmental impact assessments, or voluntary reporting mechanisms such as the Carbon Disclosure Project where such reporting includes emissions at Project level. The borrower will quantify direct emissions from the facilities owned or controlled within the physical Project boundary (Scope 1 emissions), as well as indirect emissions associated with the offsite production of energy used by the Project (Scope 2 emissions).
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Annex B - Minimum Reporting Requirements

These reporting requirements apply to Project Finance Advisory services, Project Finance and Project-Related Corporate Loans, unless specified otherwise. Reporting data will be published in a single location. If data is displayed in different locations (e.g. website, reports) the EPFI will provide links to facilitate information gathering. The EPFI will report annually at a minimum and will specify the reporting period (e.g. start and end dates). Aggregated Data Reporting 1. The EPFI will report the number of transactions screened for the first time during the reporting period. The EPFI will provide a definition of transactions screened. 2. Data for Project Finance Advisory services and Project Finance will be displayed separately from Project-Related Corporate Loans. 3. The EPFI will display a breakdown of the data as follows: Category (A, B, or C); Category (A, B, or C) and by Sector and Region i.e. (Mining, Infrastructure, Oil and Gas, Power, Others) and (Americas, Europe Middle East and Africa, Asia Pacific); Category (A, B, or C) and by Host Country Classification (e.g. High-Income OECD); Category (A or B) and whether an Independent Review has been carried out.
4. The EPFI will report on the number of Project Finance and Project-Related Corporate Loans that have reached Financial Close during the reporting period and will display a breakdown of the data by Category (A, B, or C). Note this requirement does not apply to Project Finance Advisory services. Implementation Reporting 1. The EPFI will report on their implementation of the Equator Principles, including: The mandate of the Equator Principles Reviewers (e.g. responsibilities and staffing); The respective roles of the Equator Principles Reviewers and business lines involved in the transaction review process;
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 528 529 530 531 532 533 534 535 536 537 538 539 540 541 542 543 544 545 546 547 548 549 550 551 552 553 554 555 The level of senior management involvement for Category A and, as appropriate, Category B transactions; The incorporation of the Equator Principles in their credit and risk management policies and procedures.
2. EPFIs, in their first year of Equator Principles adoption, will provide details of their internal preparation and staff training. Project-Specific Data Reporting Project-Specific Data reporting is: applicable only to Project Finance transactions that have reached Financial Close, subject to obtaining client consent, subject to applicable local laws and regulations, and subject to any reduction in the rights, or increase in the liability, of the EPFI.
The EPFI will seek client consent at a time during the loan documentation process deemed appropriate by the EPFI or at Financial Close. The EPFI will submit data (or a link to the data on their website) to the Equator Principles Secretariat for publication on the Equator Principles website. The data will include: Project name (as per the loan agreement); Sector: Mining, Infrastructure, Oil and Gas, Power, Others; Region: Americas, Europe Middle East and Africa, Asia Pacific; The calendar year in which the loan reached Financial Close.
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EXHIBITS: SUPPORTING INFORMATION

Exhibit I - Glossary of Terms
Action Plan (AP) is prepared, as a result of EPFI due diligence, to describe and prioritise the actions needed to address any gaps in the Assessment or ESMPs to bring the Project in line with applicable standards as defined in the Equator Principles. The AP is typically tabular in form and lists distinct actions from mitigation measures to follow-up studies or plans that complement the Assessment. Affected Communities are local communities, within the Project's area of influence, directly affected by the Project. Bridge Loan is an interim loan given to a business until the longer term stage of financing can be obtained. Effective Operational Control includes both direct control of the Project by the borrower and indirect control, for example where a subsidiary of the borrower operates the Project. Environmental and Social Assessment (Assessment) is a process that determines the environmental and social risks and impacts (including labour, health, and safety) of a proposed Project in its area of influence. Environmental and Social Management Plan (ESMP) is a summary of borrower commitments to mitigate risks and impacts identified in the Assessment. This may range from a brief description of routine mitigation measures to a series of documents (e.g. resettlement action plan, indigenous peoples plan, emergency preparedness and response plan, decommissioning plan). The level of detail and complexity of the ESMP and the priority of the identified measures and actions will be commensurate with the Projects potential risks and impacts. Environmental and Social Management System (ESMS) is the overarching environmental, social, health and safety management system which may be applicable at a corporate or Project level. The system is designed to identify, assess and manage risk in respect to the Project on an ongoing basis. The system consists of manuals and related source documents, including policies, management programs and plans, procedures, requirements, performance indicators, responsibilities, training and periodic audits and inspections with respect to environmental or social matters. It is the overriding framework by which an ESMP and/or AP is implemented. The term may refer to the system for the construction phase or the operational phase of the Project, or to both as the context may require.
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 595 596 597 598 599 600 601 602 603 604 605 606 607 608 609 610 611 612 613 614 615 616 617 618 619 620 621 622 623 624 625 626 627 628 629 630 631 632 Equator Principles Reviewers are EPFI employees responsible for reviewing the environmental and social aspects of loans subject to the Equator Principles. They may be a distinct Equator Principles team or members of banking, credit risk, corporate sustainability (or similar) who are tasked with applying the Equator Principles internally. Financial Close is defined as the date on which all conditions precedent to initial drawing of the debt have been satisfied or waived. High-Income OECD Countries are countries that are members of the Organisation for Economic CoOperation and Development (OECD) and designated High-Income by the World Bank Development Indicators Database. Informed Consultation and Participation is an in-depth exchange of views and information and an organised and iterative consultation that leads the borrower to incorporate the views of Affected Communities, on matters that affect them directly (such as proposed mitigation measures, the sharing of development benefits and opportunities, and implementation issues), into their decisionmaking process. Independent Environmental and Social Consultant is a qualified independent firm or consultant (not directly tied to the borrower) acceptable to the EPFI. Independent Review is a review of the Assessment, ESMP and consultation process documentation carried out by an Independent Environmental and Social Consultant. Initial Exposure is the initial amount (not the amount after sell down or syndication) committed to the loan. Known Use of Proceeds is the information provided by the borrower on how the borrowings will be used. Non-High Income OECD Countries are countries that are members of the OECD that are not designated as High-Income by the World Bank Development Indicators Database. Non-OECD Countries are countries that are not members of the OECD. Official Agency is a multilateral development bank, a multilateral or bilateral financial institution or an OECD Export Credit Agency
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 633 634 635 636 637 638 639 640 641 642 643 644 645 646 647 648 649 650 651 652 653 654 655 656 657 658 659 660 661 662 663 664 665 666 667 668 669 670 671 672 Other Stakeholders are those not directly affected by the Project but that have an interest in it. They could include national and local authorities, neighbouring Projects, and/or non-governmental organisations. A Project is a development (in any sector) at an identified location. It includes an expansion or upgrade of an existing operation that results in a material change in output or function. Examples of Projects that trigger the Equator Principles include, but are not limited to; a power plant, mine, oil and gas Project (including drillships and Floating Production Storage and Offloading (FPSO) vessels), chemical plant, infrastructure development, manufacturing plant, large scale real estate development, or any other Project that creates significant environmental and/or social impacts. Project Finance is a method of financing in which the lender looks primarily to the revenues generated by a single Project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure. Project Finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements. In such transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the Projects output, such as the electricity sold by a power plant. The borrower is usually a Special Purpose Entity that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the Projects cash flow and on the collateral value of the Projects assets. For reference go to Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards ("Basel II"), November 2005. http://www.bis.org/publ/bcbs118.htm. Reserve-Based Financing in extractive sectors that is non-recourse and where the proceeds are used to develop one particular reserve (e.g. an oil field or a mine) is considered to be a Project Finance transaction covered under the Equator Principles. Project Finance Advisory is the provision of advice on the potential financing of a development where one of the options may be Project Finance. Project-Related Corporate Loans are corporate loans, made to business entities (either privately, publicly, or state-owned or controlled) related to a single Project, either a new development, expansion (e.g. where there is an expanded footprint) or upgrade, where the Known Use of Proceeds is related to a single Project in one of the following ways: a. The lender looks primarily to the revenues generated by the Project as the source of repayment (as in Project Finance) and where security exists in the form of a corporate or parent company guarantee;
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 673 674 675 676 677 678 679 680 681 682 683 684 685 686 687 688 689 690 691 692 693 694 695 696 697 698 699 700 701 702 703 704 705 706 707 708 709 b. Documentation for the loan indicates that the majority of the proceeds of the total loan are directed to the Project. Such documentation may include the term sheet, information memorandum, credit agreement, or other representations provided by the borrower into its intended use of proceeds for the loan. In the case of Export Finance, the infrastructure or industrial project to which the export is intended will be considered the Project. Excluded transactions include Asset Finance (such as for cargo ships or airplanes), general working capital facilities, and general capital expenditure facilities used to maintain, enhance and upgrade a company's operations. Loans that are not directed towards a Project, for example general corporate purposes loans, are not in the scope the Equator Principles. Stakeholder Engagement refers to IFC Performance Standards provisions on external communication, environmental and social information disclosure, informed consultation, and grievance mechanisms. For the Equator Principles, Stakeholder Engagement also refers to the overall requirements described under Principle 5. EXHIBIT I: CATEGORISATION OF PROJECTS As part of their review of a projects expected social and environmental impacts, EPFIs use a system of social and environmental categorisation, based on the IFCs environmental and social screening criteria, to reflect the magnitude of impacts understood as a result of assessment. These categories are: Category A Projects with potential significant adverse social or environmental impacts that are diverse, irreversible or unprecedented; Category B Projects with potential limited adverse social or environmental impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures; and Category C Projects with minimal or no social or environmental impacts.
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Exhibit II: Illustrative List of Potential Environmental and Social and Environmental Issues to be Addressed in the Environmental and Social And Environmental Assessment Documentation
In the context of the business of the pProject, the Assessment documentation will address, where applicable, the following issues: a) assessment of the baseline environmental and social and environmental conditions b) consideration of feasible environmentally and socially preferable alternatives c) requirements under host country laws and regulations, applicable international treaties and agreements d) protection of human rights by acting with due diligence to prevent, mitigate and manage adverse human rights impacts d)e)protection ofand community health, safety and security (including risks, impacts and management of pProjects use of security personnel) e)f) protection of cultural property and heritage f)g) protection and conservation of biodiversity, including endangered species and sensitive ecosystems in modified, natural and critical habitats, and identification of legally protected areas g)h) sustainable management and use of renewable natural resources (including sustainable resource management through appropriate independent certification systems) h)i) use and management of dangerous substances i)j) major hazards assessment and management j)k) labour issues (including the four core labour standards), and occupational health and safety k)l) fire prevention and life safety l)m)socio-economic impacts m)n) land acquisition and involuntary resettlement n)o) impacts on affected communities, and disadvantaged or vulnerable groups o)p) impacts on indigenous peoples, and their unique cultural systems and values p)q) cumulative impacts of existing pProjects, the proposed pProject, and anticipated future pProjects q)r) consultation and participation of affected parties in the design, review and implementation of the pProject r)s) efficient production, delivery and use of energy t) pollution prevention and waste minimisation, pollution controls (liquid effluents and air emissions) and solid and chemical waste management u) viability of Project operations, of reasonable foreseeable changing weather patterns/climatic conditions, together with adaptation opportunities.
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 749 750 751 752 Note: The above list is for illustrative purposes only. The Social and Environmental Assessment process of each pProject may or may not identify all issues noted above, or be relevant to every pProject.
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Exhibit III: IFC Performance Standards on Environmental and Social Sustainability and Environmental, Health and Safety Guidelines
The Equator Principles refer to two separate parts of the IFC Sustainability Framework as the then applicable environmental and social standards under Principle 3. 1. The IFC Performance Standards on Environmental and Social Sustainability As of January 1, 2012, the following list of IFC Performance Standards were applicable: Performance Standard 1 - Assessment and Management of Social and Environmental Risks and Impacts Performance Standard 2 - Labor and Working Conditions Performance Standard 3 - Resource Efficiency and Pollution Prevention Performance Standard 4 - Community Health, Safety and Security Performance Standard 5 - Land Acquisition and Involuntary Resettlement Performance Standard 6 - Biodiversity Conservation and Sustainable Management of Living Natural Resources Performance Standard 7 - Indigenous Peoples Performance Standard 8 - Cultural Heritage The IFC has developed a set of Guidance Notes to accompany each Performance Standard. While EPFIs do not formally adopting the Guidance Notes, however EPFIs or and borrowers may find them use the Guidance Notes as useful points of reference when seeking further guidance on or interpretingation of the Performance Standards. The IFC Performance Standards, Guidance Notes and Industry Specific Sector EHS Guidelines can be found at http://www.ifc.org/ifcext/policyreview.nsf/Content/2012-Edition. Important Note: The EP Association Steering Committee has provided guidance on how members, clients and stakeholders can transition smoothly and consistently from the 2006 to the 2012 IFC Performance http://www.equator-principles.com/index.php/all-epStandards. Please refer to associationnews/254-revised-ps for this guidance.
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 793 794 795 796 797 798 799 800 801 802 803 804 805 806 807 808 809 810 811 812 813 2. The IFC Environmental, Health and Safety (EHS) Guidelines The IFC EHS Guidelines are technical reference documents containing examples of Good International Industry Practice (GIIP), as defined in Performance Standard 3 on Resource Efficiency and Pollution Prevention. They contain the performance levels and measures that are normally considered acceptable for Projects in emerging markets, as well as being achievable in new facilities at reasonable costs by existing technology. Two Guidelines are used: The General EHS Guidelines These Guidelines contain information on cross-cutting environmental, health, and safety issues potentially applicable to all industry sectors. They are divided into sections entitled: Environmental; Occupational Health and Safety; Community Health and Safety; Construction; and Decommissioning. They should be used together with the relevant Industry Sector Guideline(s). The Industry Sector Guidelines These Guidelines contain information on industry-specific impacts and performance indicators, plus a general description of industry activities. They are grouped as follows: Agribusiness/Food Production 833 Chemicals 834 Coal Processing 835 Large Volume Inorganic Compounds 836 Manufacturing and Coal Tar Distillation 837 Large Volume Petroleum-based Organic 838 Chemicals Manufacturing 839 Natural Gas Processing 840 Nitrogenous Fertilizer Manufacturing 841 Oleochemicals Manufacturing 842 Pesticides Formulation, Manufacturing and 843 Packaging 844 Petroleum-based Polymers Manufacturing 845 Petroleum Refining 846 Pharmaceuticals and Biotechnology 847 Manufacturing 848 Phosphate Fertilizer Manufacturing 849 850 851 852
814 Annual Crop Production 815 Aquaculture 816 Breweries 817 Dairy Processing 818 Fish Processing 819 Food and Beverage Processing 820 Mammalian Livestock Production 821 Meat Processing 822 Plantation Crop Production 823 Poultry Processing 824 Poultry Production 825 Sugar Manufacturing 826 Vegetable Oil Processing 827 828 829 830 831 832
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 853 Forestry 854 Board and Particle-based Products 855 Forest Harvesting Operations 856 Pulp and Paper Mills 857 Sawmilling and Wood-based Products 858 859 General Manufacturing 860 Base Metal Smelting and Refining 861 Cement and Lime Manufacturing 862 Ceramic Tile and Sanitary Ware 863 Manufacturing 864 Construction Materials Extraction 865 Foundries 866 Glass Manufacturing 867 Integrated Steel Mills 868 Metal, Plastic, Rubber Products 869 Manufacturing 870 Printing 871 Semiconductors and Electronics 872 Manufacturing 873 Tanning and Leather Finishing 874 Textiles Manufacturing 875 876 Infrastructure 877 Airlines 878 Airports 879 Crude Oil and Petroleum Product 880 Terminals 881 Gas Distribution Systems 882 Health Care Facilities 883 Ports, Harbors and Terminals 884 Railways 885 Retail Petroleum Networks 886 Shipping 887 Telecommunications 888 Toll Roads 889 Tourism and Hospitality Development 890 Waste Management Facilities 891 Water and Sanitation 892 Mining 893 Mining 894 895 Oil and Gas 896 Offshore Oil and Gas Development 897 Onshore Oil and Gas Development 898 Liquefied Natural Gas (LNG) Facilities 899 900 Power 901 Electric Power Transmission and 902 Distribution 903 Geothermal Power Generation 904 Thermal Power 905 Wind Energy 906
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OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ 907 908 909 910 911 912 913 914 915 916 917 918 919 920 921 922 923 924 925 926 927 928 929
EXHIBIT IV: INDUSTRY-SPECIFIC ENVIRONMENTAL, HEALTH AND SAFETY (EHS) GUIDELINES EPFIs will utilise the appropriate environmental, health and safety (EHS) guidelines used by the IFC which are now in place, and as may be amended from time-to-time. The IFC is using two complementary sets of EHS Guidelines available at the IFC website (http://www.ifc.org/ifcext/sustainability.nsf/Content/EHSGuidelines). These sets consist of all the environmental guidelines contained in Part III of the World Banks Pollution Prevention and Abatement Handbook (PPAH) which went into official use on July 1, 1998 and a series of environmental, health and safety guidelines published on the IFC website between 1991 and 2003. Ultimately new guidelines, incorporating the concepts of cleaner production and environmental management systems, will be written to replace this series of industry sector, PPAH and IFC guidelines. Where no sector specific guideline exists for a particular project then the PPAHs General Environmental Guidelines and the IFC Occupational Health and Safety Guidelines (2003) are applied, with modifications as necessary to suit the project.* The table below lists both the World Bank Guidelines and the IFC Guidelines as of March 1, 2006. Industry Specific EHS 930 IFC Guidelines 1. Airports 2. Ceramic Tile Manufacturing 3. Construction Materials Plants 4. Electric Power Transmission and Distribution 5. Fish Processing 6. Food and Beverage Processing 7. Forestry Operations: Logging 8. Gas Terminal Systems 9. Geothermal Projects 10. Hazardous Materials Management 11. Health Care 12. Life & Fire Safety 13. Occupational Health and Safety 14. Office Buildings 15. Offshore Oil & Gas 16. Polychlorinated Biphenyls (PCBs) 25 Guidelines:
World Bank Guidelines (PPAH) 1. Aluminium Manufacturing 2. Base Metal and Iron Ore Mining 3. Breweries 4. Cement Manufacturing 5. Chlor-Alkali Plants 6. Coal Mining and Production 7. Coke Manufacturing 8. Copper Smelting 9. Dairy Industry 10. Dye Manufacturing 11. Electronics Manufacturing 12. Electroplating Industry 13. Foundries 14. Fruit and Vegetable Processing 15. General Environmental Guidelines 16. Glass Manufacturing
OFFICIAL FIRST DRAFT OF EP III FOR PUBLIC CONSULTATION 13 AUGUST 2012 __________________________________________________________________________________ World Bank Guidelines (PPAH) 17. Industrial Estates 18. Iron and Steel Manufacturing 19. Lead and Zinc Smelting 20. Meat Processing and Rendering 21. Mini Steel Mills 22. Mixed Fertilizer Plants 23. Monitoring 24. Nickel Smelting and Refining 25. Nitrogenous Fertilizer Plants 26. Oil and Gas Development (Onshore) 27. Pesticides Formulation 28. Pesticides Manufacturing 29. Petrochemicals Manufacturing 30. Petroleum Refining 31. Pharmaceutical Manufacturing 32. Phosphate Fertilizer Plants 33. Printing Industry 34. Pulp and Paper Mills 35. Sugar Manufacturing 36. Tanning and Leather Finishing 37. Textiles Industry 38. Thermal Power Guidelines for New Plants 39. Thermal Power Rehabilitation of Existing Plants 40. Vegetable Oil Processing 41. Wood Preserving Industry 931 932 933 934 935 936 * Exception (the following are World Bank Guidelines not contained in the PPAH and currently in use) Mining and Milling - Underground Mining and Milling - Open Pit IFC Guidelines 17. Pesticide Handling and Application 18. Plantations 19. Port and Harbor Facilities 20. Rail Transit Systems 21. Roads and Highways 22. Telecommunications 23. Tourism and Hospitality Development 24. Waste Management Facilities 25. Wastewater Reuse 26. Wildland Management 27. Wind Energy Conversion Systems 28. Wood Products Industries
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FREQUENTLY ASKED QUESTIONS ON THE EQUATOR PRINCIPLES (EP III) UPDATE

OVERVIEW AND CONTEXT 1. 2. WHAT ARE THE EQUATOR PRINCIPLES? .................................................................................................... 3 WHAT IS AN EQUATOR PRINCIPLES FINANCIAL INSTITUTION AND WHAT IS THE EQUATOR PRINCIPLES ASSOCIATION?........................................................................................................................ 3 HAS THE PROJECT FINANCE MARKET CHANGED SINCE THE LAUNCH OF EQUATOR PRINCIPLES? ........... 3 WHY ARE THE EQUATOR PRINCIPLES BEING UPDATED AND WHAT DOES EP III MEAN? ...................... 3 WHAT ARE THE KEY AIMS OF THE EP III UPDATE PROCESS? ..................................................................... 4 WHAT ARE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III DRAFT?............ 5 HOW WILL THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES AFFECT INDUSTRY SECTORS AND CLIENTS?............................................................................................................................................. 5 HOW CAN I CONTRIBUTE TO AND PARTICIPATE IN THE EP III UPDATE PROCESS? ................................... 5
3. 4. 5. 6. 7.
8.
PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT 9. CAN YOU SUMMARISE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III DRAFT?.................................................................................................................................7
10. WHY IS THE EQUATOR PRINCIPLES ASSOCIATION EXTENDING THE SCOPE OF THE EQUATOR PRINCIPLES?............................................................................................................................................. 11 11. THE DEFINING CRITERIA FOR PROJECT-RELATED CORPORATE LOANS IS VERY SPECIFIC, WILL THIS MEAN MANY PROJECTS WILL NOT BE ASSESSED UNDER THE EQUATOR PRINCIPLES FRAMEWORK? ......................................................................................................................................... 12 12. WHY DOESNT THE EQUATOR PRINCIPLES FRAMEWORK APPLY TO ALL AREAS OF FINANCE? .............. 12 13. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION WORKING TO IMPROVE CONSISTENCY IN EQUATOR PRINCIPLES IMPLEMENTATION? ............................................................................................ 13 1
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14. WHY HAS THE EQUATOR PRINCIPLES ASSOCIATION FOCUSED ON ENHANCED REPORTING AND TRANSPARENCY? ..................................................................................................................................... 13 15. HOW DO THE ENHANCED REPORTING REQUIREMENTS IMPROVE COMPLIANCE AND TRANSPARENCY? ..................................................................................................................................... 13 16. HOW IS THE EQUATOR PRINCIPLES ASSOCATION WORKING TO IMPROVE THE PROVISION OF GRIEVANCE MECHANISMS AT PROJECT LEVEL? ...................................................................................... 13 17. HOW DO THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES ACKNOWLEDGE THE UNS PROTECT, RESPECT AND REMEDY FRAMEWORK AND GUIDING PRINICPLES ON BUSINESS AND HUMAN RIGHTS? ............................................................................................................................ 14 18. HOW IS THE GAP BETWEEN THE EFFECTIVENESS DATE OF EP III AND THE UPDATED IFC PERFORMANCE STANDARDS BEING MANAGED?.................................................................................... 14 19. WHY DOESNT THE EP III DRAFT ADDRESS ALL THE RECOMMENDATIONS IN THE EQUATOR PRINCIPLES STRATEGIC REVIEW REPORT? ............................................................................................. 15 THE EP III UPDATE PROCESS & STAKEHOLDER ENGAGEMENT 20. WHAT IS THE PROCESS FOR UPDATING THE EQUATOR PRINCIPLES? ..................................................... 16 21. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION ENSURING STAKEHOLDERS ARE CONSULTED? HOW CAN I SUBMIT COMMENTS? .......................................................................................................... 17 22. WHERE WILL MY COMMENTS GO? AND WILL THEY BE PUBLISHED? .................................................... 18 23. WILL I GET A RESPONSE? ........................................................................................................................ 18 24. HOW WILL MY COMMENTS AFFECT THE EP III DRAFT? ......................................................................... 18 25. WHEN WILL THE NEW EQUATOR PRINCIPLES BE LAUNCHED AND IMPLEMENTED? ............................. 19 26. WHO CAN I CONTACT TO ASK A QUESTION ABOUT ANY OF THIS? ........................................................ 19
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OVERVIEW AND CONTEXT

1. WHAT ARE THE EQUATOR PRINCIPLES? The Equator Principles (EP) is a risk framework for identifying, assessing, and managing environmental and social risks in Project Finance transactions. The EP framework is based on the International Finance Corporation (IFC) Performance Standards on environmental and social sustainability and on the World Bank Group Environmental, Health, and Safety Guidelines. There are currently 77 adopting financial institutions (74 Equator Principles Financial Institutions and 3 Associates). 2. WHAT IS AN EQUATOR PRINCIPLES FINANCIAL INSTITUTION AND WHAT IS THE EQUATOR PRINCIPLES ASSOCIATION? Currently, an Equator Principles Financial Institution (EPFI) is a financial institution that adopts the EP and is active in Project Finance or Project Finance Advisory services. EPFIs commit to not providing loans to projects where the borrower will not, or is unable, to comply with their respective social and environmental policies and procedures. The EP Association is the unincorporated association of member EPFIs and Associates whose objective is the management, administration and development of the EP framework. 3. HAS THE PROJECT FINANCE MARKET CHANGED SINCE THE LAUNCH OF EQUATOR PRINCIPLES? There has been significant development in the Project Finance market since the launch of the EP framework in 2003. The market has become more culturally diverse with a variety of global and local financial institutions active in the market. In addition, there are more diverse financing structures for example where the proceeds of a financing are used partly for Project Finance and partly for the other general financing needs of the client, or where financing is for a project and there may be a guarantee from the Parent (which some banks do not view as pure Project Finance). Furthermore, experience managing environmental and social risk within financial institutions and awareness with clients and their advisors has greatly improved. 4. WHY ARE THE EQUATOR PRINCIPLES BEING UPDATED AND WHAT DOES EP III MEAN? As noted in the current EP text, the EP Association is committed to reviewing the EP framework from timeto-time to reflect ongoing learning and emerging good practice. 3
_______________________________________________________________________________________ Since the launch of the EP framework in June 2003 and a subsequent revision in 2006, there has been significant growth in the number of EP adopters from the original 10 to 77 financial institutions from 32 countries across the globe. During this period there has been significant development in environmental and social risk management practices, partly as a result of the greater challenges impacting affected communities and the environment and partly due to the changing financial landscape, particularly the ongoing financial crisis and changing public perception of the role of financial institutions. In 2010, the EP Association initiated a Strategic Review which produced a series of recommendations on key thematic areas, namely: scope, climate change, human rights, reporting and transparency, stakeholder engagement and governance. Parallel to this, the IFC initiated a review and update of their Sustainability Framework, and their Performance Standards, which underpin the EP, were updated and re-launched in January 2012. In this context it was deemed an appropriate time to reflect on the implementation experience of EP Association members, and that of our clients, and update the EP to ensure they remain a relevant and practical risk management tool and supportive of sustainable financing objectives. The result of the EP Update process will, if approved by members, be the third version of the Equator Principles hence the term EP III. 5. WHAT ARE THE KEY AIMS OF THE EP III UPDATE PROCESS? The keys aims of the EP III Update process are: To ensure EP Association members continue to appropriately manage environmental and social risk and impacts for their institutions, clients and relevant stakeholders with regard to the financing of projects, To reflect the recent update of the IFC Performance Standards, and To maintain the level playing field on which international and local financial institutions operate, with regards to sustainable financing objectives.
_______________________________________________________________________________________ 6. WHAT ARE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III DRAFT? In summary, key themes and areas of development proposed in the EP III draft include: An extension in the scope of the EP to Project-Related Corporate Loans and Bridge Loans. Changes reflecting the recent update of the International Finance Corporation (IFC) Performance Standards. New requirements related to managing impacts on climate. Greater emphasis on human rights considerations in due diligence and an acknowledgment of the UN "Protect, Respect and Remedy" Framework for Business and Human Rights and Guiding Principles on Business and Human Rights. A strengthening of reporting and transparency requirements.
The proposed changes are fully detailed in the section - KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III DRAFT. 7. HOW WILL THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES AFFECT INDUSTRY SECTORS AND CLIENTS? The proposed changes to the EP will help improve the identification, assessment and management of environmental and social risks and impacts in projects. This will be achieved through a widening of the scope of application to other financial products, increased transparency and access to information for financial institutions and local communities, and the incorporation of language that reflects the updated IFC Performance Standards. The proposed changes should also enable more consistent implementation of the EPs, thus making it easier for clients to implement the EP on-the-ground and to manage their relationships with EPFIs. 8. HOW CAN I CONTRIBUTE TO AND PARTICIPATE IN THE EP III UPDATE PROCESS? The formal 60 day stakeholder consultation and public comment period will give all interested parties and stakeholders (including EP Association members, other financial institutions, clients, industry bodies and associations, non-governmental organisations, consultants, law firms and regulatory bodies) an opportunity to review the EP III draft and provide comments. The EP Association is committed to openness, transparency and responsiveness and will consider all stakeholder feedback. You can submit your views and participate in the process in one or more of the following ways: Complete the online submission form. Email comments to ep3@equator-principles.com. 5
_______________________________________________________________________________________ Participate in a webinar and/or face-to-face meeting details are published on the EP III web pages. Note that places are limited and by invitation only you can register your interest in attending by emailing ep3meetings@equator-principles.com.
The EP III Update process and timeline is fully detailed in the section THE EP III UPDATE PROCESS.
_______________________________________________________________________________________
PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

9. CAN YOU SUMMARISE THE PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT IN THE EP III DRAFT? KEY TOPIC Structure and Language RELEVANT SECTION All DESCRIPTION The document has been divided in to 3 distinct sections to enable clear distinction between mandatory requirements in Main Text and Annexes, and supporting information in the Exhibits: 1. Main Text Preamble, Scope and Statement of Principles. 2. Annexes This contains implementation requirements for applying certain aspects of the EP framework. The content of the Annexes are an integral part of the EP and the requirements within them are mandatory. 3. Exhibits This contains supporting information including a new Glossary of Terms. Several footnotes have been incorporated in the main text or added to the Glossary of Terms. Several Principles have been shortened and language has been adjusted or clarified. The document language has been refined to align with new/changed language in the 2012 IFC Performance Standards.
_______________________________________________________________________________________ KEY TOPIC Scope RELEVANT SECTION Scope Principles 2, 4, 7, and 9 Exhibit I DESCRIPTION The inclusion of Project-Related Corporate Loans (Corporate Loans related to one specific project) subject to a US$100m threshold and a loan tenor of at least 2 years. It should be noted that general corporate purposes loans are excluded from the scope of the EP (refer to the Scope section of the EP III draft for the criteria). The inclusion of Bridge Loans that will be refinanced by Project Finance or a Project-Related Corporate Loan. Exhibit I has been deleted and Categorisation has been included in the main text. It should be noted that further guidance material on Categorisation will be developed. There is a new requirement for an analysis of alternatives, including less carbon intensive fuel sources and technologies, for projects emitting over 100.000 tonnes CO 2 equivalent. It should be noted that the alternatives analysis is based on the requirements stipulated in the updated IFC Performance Standards. There is a new requirement for borrowers to publicly report on emissions for projects emitting over 100.000 tonnes CO 2 equivalent. It should be noted that further guidance material on implementation of these requirements will be developed.
Categorisation
Principle 1 Exhibit I in EP II
Climate Change
Principle 2 and 10 Annex A
_______________________________________________________________________________________ KEY TOPIC Applicable Environmental and Social Standards RELEVANT SECTION Preamble Principle 3 Various other Principles DESCRIPTION An overarching statement regarding the application of the EP framework in High-Income OECD Countries has been included in the Preamble. Principle 3 now provides clarity to EPFIs and clients on the meaning and intent of the application of standards in different jurisdictions. Where possible, reference to application in High-Income OECD Countries has been deleted from individual Principles. Principle 3 now states that the EPFI, at its sole discretion, may seek to benchmark projects in these countries against these or other internationally recognised environmental and social assessment standards. The definition and purpose of an Action Plan, and related management plans has been clarified.
Action Plan and Management systems
Principle 4 Exhibit I
_______________________________________________________________________________________ KEY TOPIC Stakeholder Engagement and Human Rights RELEVANT SECTION Preamble Principles 5, 6 and 10 Exhibit I Exhibit II DESCRIPTION New language in the Preamble and Exhibit II acknowledges the UN "Protect, Respect and Remedy" Framework for Business and Human Rights and Guiding Principles on Business and Human Rights, and the importance of human rights in the due diligence process. Principles 5 and 6 include new language related to Stakeholder Engagement (replacing the current Consultation and Disclosure) to reflect the updated language in the IFC Performance Standards on stakeholder engagement hierarchy. The text referencing Free, Prior and Informed Consent for projects in non-OECD countries and OECD countries not designated as High-Income has been inserted so that it reflects the important changes in the IFC Performance Standards. Principle 6 has been shortened to reduce duplication of the requirements in the IFC Performance Standards. Assessment disclosure requirements have been moved to Principle 10. The requirement for covenants now explicitly refers to all projects. Requirements for Bridge Loans and Project Finance Advisory services have been included in Principle 2 and Principle 4.
Covenants
Principle 8, 2 and 4
10
_______________________________________________________________________________________ KEY TOPIC Reporting and Transparency RELEVANT SECTION Principles 2, 5 and 10 Annex B DESCRIPTION Principle 10 now includes all reporting and disclosure requirements and is divided in to Project Reporting and EPFI Reporting. Annex B includes detailed requirements for EPFI reporting. In addition to the clients responsibility to disclose the project Environmental Impact Assessment (EIA) locally, the text now includes the requirement to disclose the EIA and Environmental and Social Management Plan (ESMP) (which is normally a component of the EIA), online unless the borrower does not have a company website. Annex B also includes a new requirement to provide, subject to borrower consent, a list of projects for publication on the EP website. It should be noted that a grace period for reporting on Project-Related Corporate Loans will be reflected in EP Association Governance Rules.
10. WHY IS THE EQUATOR PRINCIPLES ASSOCIATION EXTENDING THE SCOPE OF THE EQUATOR PRINCIPLES? The EP Association is responding to trends and practices on how projects are being financed. There has been significant development in the Project Finance market since the launch of the EP framework in 2003. The market has become more culturally diverse with a variety of global and local financial institutions active in the market. In addition, there are more diverse financing structures for example where the proceeds of a financing are used partly for Project Finance and partly for the other general financing needs of the client, or where financing is for a project and there may be a guarantee from the Parent (which some banks do not view as pure Project Finance). While in many of these cases environmental and social risks and impacts are still present, these types of financing fall outside the scope of the current EP framework. Additionally there has been a notable maturation of additional environmental and social risk and mitigation procedures notably with regards to climate change and human rights. Taking all these factors into account, it is proposed that the scope is extended to a defined sub-set of Corporate Loans (Project-Related Corporate Loans) and Bridge Loans. 11
_______________________________________________________________________________________ 11. THE DEFINING CRITERIA FOR PROJECT-RELATED CORPORATE LOANS IS VERY SPECIFIC, WILL THIS MEAN MANY PROJECTS WILL NOT BE ASSESSED UNDER THE EQUATOR PRINCIPLES FRAMEWORK? The proposed extension of scope to Project-Related Corporate Loans is a significant step forward and should capture more transactions for assessment under the EP framework. The definition of ProjectRelated Corporate Loans has been subject to extensive debate within the EP Association and the proposed criteria have been deemed the most appropriate for a number of reasons, including: ensuring the consistent implementation of the EP framework, providing a starting point for capacity building for new adopters, and ensuring that adopters have sufficient leverage to implement the EP framework when nonadopters are present in the syndicate or leading the syndication.
Furthermore it should be noted that financing a project through a Project-Related Corporate Loan is different to Project Finance in two important respects. In general, financial institutions have a lesser degree of influence/leverage over a project financed through a Corporate Loan. There is also a higher degree of competition with financial institutions in certain geographies including those that are not EP adopters. Furthermore loans are often arranged in a shorter timescale meaning that parts of the EP framework would require a different approach. The proposal to extend the scope to Project-Related Corporate Loans has taken these factors in to account to ensure that the EP framework can be implemented by financial institutions. It should be noted that the proposals also aim to ensure there are more stringent requirements for the highest risk Corporate Loan projects. 12. WHY DOESNT THE EQUATOR PRINCIPLES FRAMEWORK APPLY TO ALL AREAS OF FINANCE? The EP framework was originally created for environmental and social risk management in Project Finance transactions. While the proposal is to extend the scope of the EP to Project-Related Corporate Loans and Bridge Loans, the focus will still be on Project Finance and Project Finance Advisory services as it easily follows a projects financing, development and operational cycle. The EP framework does not lend itself readily to other areas of finance. For example, capital markets deals (such as bonds and IPOs) are often general corporate purposes in nature, and in these transactions financial institutions do not have long-term hooks such as Covenants or monitoring requirements. Additionally, the level of due diligence required to apply the EP framework can be significant in terms of timing and resources and many financing products are structured in a way which makes the consistent application of EP impractical or unfeasible. Therefore the scope has been limited to projects in order to ensure that the EP framework can be applied consistently. 12
_______________________________________________________________________________________ The EP Association does acknowledge however that many members use the EP concept and the IFC Performance Standards within their own internal policy frameworks for other finance activities. 13. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION WORKING TO IMPROVE CONSISTENCY IN EQUATOR PRINCIPLES IMPLEMENTATION? The EP III Update process has facilitated extensive discussion within the EP Association on the challenges and possible solutions for better consistency and these discussions will be ongoing. The EP III draft also proposes language on how EPFIs might be able to exchange non-confidential information and communicate with each other during the due diligence phase of a project. Furthermore, the EP Association will be providing more opportunities for members to discuss this topic and it will be discussed at the next EP Association Annual Meeting which takes place during Phase III of the EP III Update process. 14. WHY HAS THE EQUATOR PRINCIPLES ASSOCIATION FOCUSED ON ENHANCED REPORTING AND TRANSPARENCY? It is recognised that transparency is an important part of environmental and social risk management and it contributes to overall accountability. As the EP Association has grown and developed this topic has become an important consideration for members and stakeholders alike. The proposals in EP III draft take important steps to enhance reporting and transparency and the implementation of the proposals will be challenging. It is acknowledged that it will take both time and experience to create a level playing field on this topic. 15. HOW DO THE ENHANCED REPORTING REQUIREMENTS IMPROVE COMPLIANCE AND TRANSPARENCY? The new reporting requirements proposed in the EP III draft allow for greater transparency by: increasing the amount of information disclosed about the projects financed, requesting clients to publicly disclose project related assessment documentation, requesting client consent to publicly disclose project names and, creating structured ways for information sharing between EPFIs.
16. HOW IS THE EQUATOR PRINCIPLES ASSOCATION WORKING TO IMPROVE THE PROVISION OF GRIEVANCE MECHANISMS AT PROJECT LEVEL? The provision of grievance mechanisms is a very important component of the EP framework and the requirements enable Project Sponsors to proactively address grievances and concerns at project level. The proposals in the EP III draft aim to reflect the IFCs current thinking on the subject (as detailed in the updated Performance Standards and Guidance Notes).
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_______________________________________________________________________________________ 17. HOW DO THE PROPOSED CHANGES TO THE EQUATOR PRINCIPLES ACKNOWLEDGE THE UNS PROTECT, RESPECT AND REMEDY FRAMEWORK AND GUIDING PRINICPLES ON BUSINESS AND HUMAN RIGHTS? The EP Association has discussed the UN "Protect, Respect and Remedy" Framework for Business and Human Rights and Guiding Principles on Business and Human Rights as part the EP III Update process and it was agreed that the updated EP should acknowledge the framework. The second pillar of the "Protect, Respect and Remedy" framework sets out the corporate responsibility to respect human rights as follows: business enterprises should act with due diligence to avoid infringing on the rights of others and to address adverse impacts with which they are involved. The EP provides financial institutions the required due diligence framework to identify, assess and manage project impacts by defining the processes and standards for stakeholder engagement with affected communities (including for Indigenous Peoples), labour rights, and occupational and community health and safety. The important requirement for project-level grievance mechanisms also allows affected communities to address grievances proactively with Project Sponsors which is an important component in driving greater accountability at project level. It should also be noted that the EP III draft introduces the term human rights in the EP framework for the first time. 18. HOW IS THE GAP BETWEEN THE EFFECTIVENESS DATE OF EP III AND THE UPDATED IFC PERFORMANCE STANDARDS BEING MANAGED? Consistent with the current EP framework, the EP Association Steering Committee agreed that the revised IFC Performance Standards would take effect for EP Association Members on 1 January 2012 (the official implementation date for the IFC). Accordingly Exhibit III of the current EP, which previously referred to the 2006 IFC Performance Standards, was updated on 1 January 2012. The EP Association Steering Committee also made a recommendation to members, clients and stakeholders on how to transition smoothly and consistently to the updated IFC Performance Standards and provided the following guidance. As such EP Association members will already be applying the updated IFC Performance Standards when EP III is officially adopted and launched.
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_______________________________________________________________________________________ 19. WHY DOESNT THE EP III DRAFT ADDRESS ALL THE RECOMMENDATIONS IN THE EQUATOR PRINCIPLES STRATEGIC REVIEW REPORT? The Strategic Review was intended to be the first step in a longer term process to determine the future of the EP framework. It was also intended to support the EP Association in developing a road map for improved implementation, action and engagement, and communication with members and stakeholders alike. As such, the EP III Update process has focused on many of the short and medium term priorities identified in the Strategic Review. Additionally, it should be notes that the Strategic Review recommendations that were not deemed as immediate priorities will be considered following the EP III Update process.
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_______________________________________________________________________________________
THE EP III UPATE PROCESS & STAKEHOLDER ENGAGEMENT

20. WHAT IS THE PROCESS FOR UPDATING THE EQUATOR PRINCIPLES?
Phase I Internal Consultation and Initial Drafting of EP III July 2011 August 2012 Phase II Stakeholder Consultation and Public Comment Process August 2012 - October 2012 Phase III Finalisation and Launch of EP III October 2012 January 2013
PHASE I: Internal Consultation and Initial Drafting of EP III (July 2011 - August 2012) Existing Working Groups and new Task Forces initiated discussions and detailed analysis for each topic area and shared proposals with the EP Association Steering Committee on how the EP framework might be updated to reflect changes to the IFC Performance Standards and current best practice. All members were invited to join the discussion groups to ensure full participation. The Working Groups and Task Force proposals were discussed more widely with EP Association members at their Annual Meeting in October 2011 and the Working Groups and Task Forces were subsequently commissioned to provide final proposals and updated/new language for incorporation in to the EP. The final proposals and updated/new language were examined and discussed at length by the EP Association Steering Committee and members and the first draft of EP III was approved for public release for the formal Stakeholder Consultation and Public Comment period. PHASE II: Formal 60 day Stakeholder Consultation and Public Comment Period (August - October 2012) The EP Association is committed to carrying out a robust and consultative process. The formal 60 day stakeholder consultation and public comment period will give all interested parties and stakeholders (including EP Association members, other financial institutions, clients, industry bodies and associations, non-governmental organisations, consultants, law firms and regulatory bodies) an opportunity to review the EP III draft and provide comments. The EP Association is committed to openness, transparency and responsiveness and will consider all stakeholder feedback. The EP Association Working Groups are working with specific stakeholder groups (e.g. Industry/clients, NGOs) however the EP Association welcomes feedback and comments from any interested party on both process and substance. You can submit your views and participate in the process in one or more of the following ways: Complete the online submission form. 16
_______________________________________________________________________________________ Email comments to ep3@equator-principles.com. Participate in a webinar and/or face-to-face meeting details are published on the EP III web pages. Note that places are limited and by invitation only you can register your interest in attending by emailing ep3meetings@equator-principles.com.
PHASE III - Finalisation and Launch of EP III (October 2012 January 2013) The EP Association will review comments received from members and stakeholders during this period and will consult with members on amending the EP III draft. The EP Association will not publish every comment received on the EP website however it will publish a summary (unattributed) of the key topics/issues raised during the Stakeholder Consultation and Public Comment period. The summary will include statements on how and why issues/comments have or have not been incorporated in to the EP III draft. The EP Association will also agree a plan for the formal adoption and launch of EP III (including setting an official launch date and implementation transition period, training and communications) and will finalise all the relevant guidance notes during this period. It should be noted that the EP Association will carry out a final voting process with members, in line with the EP Association Governance Rules, to approve and readopt EP III. Note that the timeline for the EP III Update process, described above, is tentative and may be extended by the EP Association as appropriate. The EP website is updated on a regular basis to ensure members and stakeholders are fully aware of all the relevant details and you can keep up to date with activities at http://www.equator-principles.com/index.php/ep3 21. HOW IS THE EQUATOR PRINCIPLES ASSOCIATION ENSURING STAKEHOLDERS ARE CONSULTED? HOW CAN I SUBMIT COMMENTS? The EP Association is committed to carrying out a robust and consultative process. The formal 60 day stakeholder consultation and public comment period will give all interested parties and stakeholders (including EP Association members, other financial institutions, clients, industry bodies and associations, non-governmental organisations, consultants, law firms and regulatory bodies) an opportunity to review the EP III draft and provide comments. The EP Association is committed to openness, transparency and responsiveness and will consider all stakeholder feedback. The EP Association Working Groups are working with specific stakeholder groups (e.g. Industry/clients, NGOs) however the EP Association welcomes feedback and comments from any interested party on both process and substance.
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_______________________________________________________________________________________ You can submit your views and participate in the process in one or more of the following ways: Complete the online submission form. Email comments to ep3@equator-principles.com. Participate in a webinar and/or face-to-face meeting details are published on the EP III web pages. Note that places are limited and by invitation only you can register your interest in attending by emailing ep3meetings@equator-principles.com.
The EP Association will review comments received from members and stakeholders during this period and will consult with members on amending the EP III draft. The EP Association will not publish every comment received on the EP website however it will publish a summary (unattributed) of the key topics/issues raised during the Stakeholder Consultation and Public Comment period. The summary will include statements on how and why issues/comments have or have not been incorporated in to the EP III draft. 22. WHERE WILL MY COMMENTS GO? AND WILL THEY BE PUBLISHED? Comments from stakeholders are an integral part of the EP III Update process and the EP Association will be considering them during Phase III (Finalisation and Launch of EP III, October 2012 January 2013) of the EP III Update process. On submission comments go to the EP Secretariat for collation and distribution internally and the submitter will receive an automated message to confirm receipt. The EP Association will not publish every comment received on the EP website however it will publish a summary (unattributed) of the key topics/issues raised during the Stakeholder Consultation and Public Comment process. The summary will include statements on how and why issues/comments have or have not been incorporated in to the EP III draft. 23. WILL I GET A RESPONSE? You will receive an e-mail thanking you for your comments and, where a question has been submitted, we will endeavour to respond within 5 working days. 24. HOW WILL MY COMMENTS AFFECT THE EP III DRAFT? The EP Association is committed to considering all comments received however no guarantee can be given that your comment will have direct impact on the EP III draft. Furthermore, it should be noted that the EP 18
_______________________________________________________________________________________ Association is required to carry out a final voting process with members, in line with the EP Association Governance Rules, to approve any changes to the content of the EP. 25. WHEN WILL THE NEW EQUATOR PRINCIPLES BE LAUNCHED AND IMPLEMENTED? After full consideration of stakeholder feedback by members and an internal revision process, the EP Association will agree a plan for the formal adoption and launch of EP III including setting an official launch date and implementation transition period, training and communications. It should be noted that the EP Association will carry out a final voting process with members, in line with the EP Association Governance Rules, to approve and re-adopt EP III. 26. WHO CAN I CONTACT TO ASK A QUESTION ABOUT ANY OF THIS? All questions and comments can be sent directly to the EP Association Secretariat at secretariat@equator-principles.com.
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__________________________________________________________________________________________

SUMMARY OF PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

Scope Principles 2, 4, 7, and 9 Exhibit I

Principle 2 and 10 Annex A

Applicable Environmental and Social Standards

Preamble Principle 3 Various other Principles

Action Plan and Management systems

THE EQUATOR PRINCIPLES [DATE TBC]

Principle 1: Review and Categorisation

Principle 2: Environmental and Social Assessment

Principle 3: Applicable Environmental and Social Standards

Principle 4: Environmental and Social Management System and Action Plan

Principle 5: Stakeholder Engagement

Principle 6: Grievance Mechanism

Principle 7: Independent Review

Principle 9: Independent Monitoring and Reporting

Principle 10: Reporting and Transparency

ANNEXES: IMPLEMENTATION REQUIREMENTS

Annex B - Minimum Reporting Requirements

EXHIBITS: SUPPORTING INFORMATION

THE EQUATOR PRINCIPLES [DATE TBC]

Principle 1: Review and Categorisation

Principle 2: Environmental and Social and Environmental Assessment

Principle 3: Applicable Environmental and Social and Environmental Standards

Principle 5: Consultation and DisclosureStakeholder Engagement

Principle 6: Grievance Mechanism

Principle 7: Independent Review

Principle 9: Independent Monitoring and Reporting

Principle 10: EPFI Reporting and Transparency

ANNEXES: IMPLEMENTATION REQUIREMENTS

Annex B - Minimum Reporting Requirements

EXHIBITS: SUPPORTING INFORMATION

FREQUENTLY ASKED QUESTIONS ON THE EQUATOR PRINCIPLES (EP III) UPDATE

OVERVIEW AND CONTEXT

PROPOSED KEY CHANGES AND AREAS OF DEVELOPMENT

Principle 2 and 10 Annex A

Action Plan and Management systems

THE EP III UPATE PROCESS & STAKEHOLDER ENGAGEMENT

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