1. Indian Financial System and
Adoption of Equator Principles
A Case for Environmental & Social Risk Assessment in Banking &
Financial Services
PART 1
March 2013

2. India’s Performance on
Environment Parameters
Laggard in parameters set under the MDG by UN
Leading the list of countries which will be water-stressed in
the coming decades
Regressing in the matter of consumption of ozone depleting
CFCs
Declining dense forest cover and biodiversity - only 12%
dense forest cover
The per capita CO2 emissions have shown a growth of
100.2% over the period 1990-2009

3. India’s Development Challenge
Noble intentions of 12th Five Year Plan ‘Faster, More Inclusive &
Sustainable Growth’
Environmental Clearances concentrated in the hands of government
During 2007-12, 8734 projects - granted forest clearances including
276 thermal power plants
184 coal mines
203 steel plants
112 cement plants
74 projects rejected for EC since 2009
ECs granted to power projects with installed capacity of 217,794 MW
while target capacity till 2017 only 178,700 MW
No monitoring or follow-up on ECs given, whether conditions being
met by projects or not
Inadequate resources on field level compliance & penalisation
incase of non-compliance

4. What does BFS Globally
Say/Do?
Equator Principles, established in 2003 as a framework
for E&S risk assessment & monitoring in project finance
78 banks across the world voluntary adopters
NO Indian Bank in the list
UNEPFI’s Principles of Responsible Investment
guidelines for investment agencies
900 signatories only IL&FS & Yes Bank from India
Banktrack and other civil societies actively tracking bank
financing to unsustainable projects
3 Indian projects under their scanner

5. Equator Principles
Voluntary Code adopted by FIs globally
Closely aligned to IFC and WB guidelines
Applicable to:
Project capital cost > U$10mn
New projects / expansion & upgrade of existing projects
involving significant environmental impact
Applicable to all industries
Across the world
Project finance advisory is included

6. All is not well with EP-based funding
…..sample controversial projects
Project Country Banks Remarks
Baku-Tbilisi-Ceyhan oil Turkey, Georgia, ABN AMRO, Citigroup, 9 Equator banks involved in USD 3.6bn
pipeline Azerbaijan Mizuho, Société syndication. This was the first acid test for
Générale,
EP which failed. Later some FIs withdrew
Banca Intesa, Dexia, HVB,
ING, KBC, Royal Bank of from the project, e.g. Banca Intesa.
Scotland,
and West LB
Chad-Cameroon Chad, Cameroon ABN AMRO Received heavy criticism from Amnesty
Pipeline International for its effect on
environmental and social issues in both
Chad and Cameroon
Sakhalin II pipeline Northern Pacific Credit Suisse First Boston Criticised for having damaged ecologically
sensitive salmon spawning grounds used
by natives for fisheries and endangered
the grey whale species that lives in the
area
Pulp mill in Tasmania Tasmania ANZ A USD 1.4bn project expected to double
the current rate of clearcutting Tasmania ’s
old-growth forests
Unsustainable logging Malaysia HSBC Ta Ann Holdings, does not have Forest
in Sarawak Stewardship Council (FSC) certification and
has been accused of clear-felling rainforest
that is home to endangered orangutan and
of cutting down conservation forest for
plantations.

7. And yet…..
 78 banks worldwide including developing
nations
 Global banks extending EP application to
other areas of business
 Worst critics admit an improved sensitivity to
E&S issues due to pressure from financiers
 Overall positive impact felt in the area of E&S
responsibility

8. International Environmental
Law
Lender’s liability emerging concept in
environmental regulation globally
Natural pushback from BFS industry
Significant number of cases of successful
penalisation of lenders
More prevelant in the developed economies of US,
Europe, Australia, Canada etc.
‘Somebody watching syndrome’ works for responsible
lending

9. ARE SUSTAINABILITY &
DEVELOPMENT PARALLEL TRACKS?
Contrary to Popular Belief Unsustainable Development will
Adversely Impact the Weaker Sections of Society Under
Whose Name ‘Rapid Development’ is Undertaken

10. END OF PART - I
BASED ON DISSERTATION PAPER OF THE SAME TITLE BY THE
AUTHOR