The Equator Principles
These principles are an essential methodological guide to the recognition and prevention of social and environmental impacts in the project finance process. They are used to assess the risks associated with environmental and social impacts generated for projects valued at more than $10 million. Crédit Agricole CIB belongs to a group of banks which launched the Equator Principles in June 2003 and it has actively worked on promoting these principles, which in the space of a few years have become the market standard for project finance.
Project classification is based on the International Finance Corporation (IFC) classification, which has three levels:
• A corresponds to a project presenting potentially significant adverse social or environmental impacts that are non-uniform, irreversible or unprecedented;
• B corresponds to a project presenting limited adverse social or environmental impacts, generally to a single site, that are largely reversible and easly dealt with by mitigation measures;
• finally, C corresponds to projects presenting minimal or no adverse social or environmental impacts.
Crédit Agricole CIB classifies projects based on their social and environmental impacts using an evaluation tool developed by the bank in 2008. The relevance of the tool is continually reviewed based on experience. In 2010 it was decided that a few improvements would be made to the tool.
Implementation of equator principles
At Crédit Agricole CIB, the Project Finance business line has taken the initiative in implementing the Equator Principles. The assessment and management of environmental and social risks are carried out initially by business managers, assisted by a network of local correspondents within each regional project finance structuring centre in permanent cooperation with a coordination unit.
The IES department provides assistance and additional clarification by offering its expertise in environmental and technical issues. This helps to refine risk analysis and identification, depending on the business sector. The coordination unit, consisting of operational staff from the Project Finance business line, coordinates the practical aspects of implementing the Equator Principles. The unit coordinates the local correspondent network and organises specific training for those involved in the business.
The Ethics Committee for operations dealing with an Environmental or Social Risk (CERES), which in 2009 replaced the Equator Principles Committee, is consulted on all projects likely to be classified A. It also approves the classification of projects as A, B or C.
A total of 358 projects had been classified at 31 December 2011, 57 of them in 2011:
• 24 projects were classified A, 4 of them in 2011;
• 275 projects were classified B, 40 of them in 2011;
• 59 projects were classified C, 13 of them in 2011,
These projects were given environmental due diligence based on their classification, with special attention paid to class A projects, which are specifically monitored by the CERES Committee.
Crédit Agricole CIB has been actively involved since the start in several working groups set up within the group of banks which have adopted Equator Principles. More specifically, Crédit Agricole CIB has helped to draw up codes of good practice aimed at promoting the use of these principles for other types of finance than project finance.
Based on this, Crédit Agricole CIB examined in 2010 the possibility of applying Equator Principles on a best efforts basis, to the financing of industrial assets not considered as project finance according to the definition of the Basel Committee on Banking Supervision. This approach should allow the assessment and management of environmental and social risks to be extended to all transactions for which major environmental impacts are identified.