With about 13,000 professionals comprised in more than 50 countries, Crédit Agricole CIB specialises in the businesses of capital markets and investment and corporate banking.
The Equator Principles in project finance
When the Equator Principles were launched in 2003, Crédit Agricole CIB became the first French bank to sign them. In a few short years, the Equator Principles have become the benchmark for responsibility in project finance. This commitment to comply with certain social and environmental requirements is a crucial element of Crédit Agricole Group's corporate responsibility policy. It involves Crédit Agricole CIB's project finance teams on a day-to-day basis, and gives an active role in the decision process to a variety of actors.
What are the Equator Principles?
The Equator Principles represent a voluntary, unilateral commitment to perform a detailed analysis of environmental and social aspects of each new project financing and to link financings to compliance with a number of requirements. Specifically, the projects financed must comply with the environmental and social standards of the International Finance CorporationThe International Finance Corporation (IFC) is a member of the World Bank Group.
IFC provides investments and advisory services to build the private sector in developing countries.
Source: ifc.org (IFC), an institution of the World Bank Group that is responsible for transactions with the private sector.
The principles especially encourage:
- evaluation of impacts and setting up systems for managing these impacts,
- conservation of biodiversity and sustainable management of natural resources,
- consultation with affected populations, creating a process for managing forced relocations, protection of vulnerable indigenous communities, preservation of cultural heritage and grievance management,
- pollution prevention and control,
- fundamental principles and rights of employment, health, safety and security of local communities.
Negative effects on ecosystems and communities affected by the project should be avoided or at least limited to the extent possible, reduced and/or offset appropriately.
Implementation of the Equator Principles at Crédit Agricole CIB
The Equator Principles apply to Crédit Agricole CIB’s entire project finance business line, including for projects that do not reach the USD 10 million threshold. Every project is classified in one of the three categories defined by the IFC, based on its location and its potential impact on the environment and the local social fabric:
- A for projects with maximum potential negative impact,
- B when the impact is significant but more limited, and can be corrected by remediation measures,
- C when the impact is minimal or nonexistent.
A project that may displace a population, affect a vulnerable ethnic minority or have irreversible consequences for a natural habitat will thus be rated A.
An evaluation of the context is also carried out, covering the country, promoters and any problems encountered in similar projects. The goal is to assess the promoters’ ability to manage the identified potential impacts. If there is a need for increased vigilance, the deal is classified for monitoring as sensitive.
In 2009, Crédit Agricole CIB evaluated 70 projects: 6 were classified as A, 53 as B and 11 as C. In all, 329 projects were classified, 21 as A, 267 as B and 41 as C.
The five-year record of the Equator Principles
Crédit Agricole CIB is a founding bank of the Equator Principles (June 2003). In less than five years, these principles have become a market standard, a benchmark of the best social and environmental practices in project finance. Over 60 financial institutions now subscribe to these principles, and compliance with them has become a prerequisite for success in international syndications of the most sizeable deals.
Crédit Agricole CIB has noticed steady improvement in the quality of the projects it has studied, showing that project promoters have been integrating the principles right from the idea stage. The Equator Principles have materially improved analysis and management of environmental and social impacts of projects at the global level, yet without leading to an increase in the number of deals turned down by the Equator Banks.
However, Crédit Agricole CIB is aware of the progress that still can and must be achieved. It participated actively in developing rules for governance in cooperation with the Equator Banks and in setting up various working groups. In particular, Crédit Agricole CIB is involved in the creation of good pratices methods in order to apply the Equator Principles to other types of financings than project financings.
