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Equator Principles: a financial management tool for sustainable projects

The Equator Principles contain a voluntary credit risk management framework and a set of guidelines for assessing environmental and social risks in project financial management activities. More because this demand?

During practically all human history the problem of scarcity was solved through the exploration of the environment, sometimes devastatingly, as in China today. As a result of this, some natural resources around the world have become scarce in quantity and quality, compromising the perpetuation of life on Earth.

Nonetheless, the action of man on nature is necessary for its survival, because man is also part of it, remembering that all human activities generate waste and interfere, one way or another, in the middle conditions.

Environmental pollution was only treated as an economic problem in the second half of the 20th century., weakening the theory of growth for development, triggering the reasoning that this growth model needed to be sustainable.

The essence of the concept of sustainable development lies in the acceptance of the fundamental interdependence between economic and social advancement and respect for the management of natural resources.. Without the conservation and efficient use of natural heritage, there is no lasting improvement in living standards..

The financial sector as a tool for sustainable development

Within this context of relating the activity of the financial system, combined with its ability to influence the sustainable development of society, irrespective of the role the borrower plays. With this bias within the nature of your business, is that the environmental financial approach becomes indispensable mainly from the ethical business point of view.

The financial sector has become aware of the existence of a fertile field for its judicial accountability, especially in the case of damages generated by your credit operations. The trend towards accountability of financial institutions (IFs) as indirect polluters or through joint liability has been growing

Another relevant legal field is related to the Precautionary Principle, where FIs can be held jointly responsible for environmental damage, even those difficult to predict, as defined in the Biosafety Law. Within a context of financial market integration, in a highly competitive environment, it is also important to analyze whether the motivation of financial institutions to consider environmental issues is limited to the fact that they represent an effective financial risk, or whether banks are driven to adhere to competitive behavior, for the purpose of mitigating reputational risk, and even use the commitment to environmental issues as a signal to the market that the institution is reliable and, thus, get competitive advantage.

The option of approaching the Equator Principles arose from the idea of ​​emphasizing the impacts on the environmental conduct of the Brazilian signatory banks, including highlighting its participation in the sustainability of the activities of its signatories.

What are the advantages of applying the equator principles? And what are your goals?

By adopting these principles, the financial sector obtains a series of environmental and social benchmarks to manage the risks of developing project financial management globally. The intention is to make all financial institutions adopt an Equator Principles management system that includes a minimum internal standard of due diligence and responsible assessment of the financial management of projects.

The goal is to ensure that the projects you fund are able to meet specific social and environmental requirements.

Nowadays, more than ever, financial institutions and project financers live under pressure from a perceived lack of transparency and risk management in terms of social and environmental responsibility. By adopting and auditing the Equator Principles in relation to your projects, you can show the banks, financiers, investors, government bodies and other interested parties the commitment to social and environmental responsibility.

An assessment against the Equator Principles examines and verifies how its operation addresses the ten principles included in the document.:

  • Project review and classification;
  • Social and environmental assessment;
  • Applicable social and environmental standards;
  • Action plan and management system;
  • Consultation and dissemination;
  • grievance mechanism;
  • Independent review;
  • Covenants;
  • Independent monitoring and reporting;
  • Reports.

You Equator Principles have become the financial industry benchmark for environmental and social risk management. We, to biO3, We have highly qualified professionals to advise your company to meet these requirements, contact us, agent a meeting.