The Equator Principles (EP) are a voluntary set of standards adopted by financial institutions for determining, assessing and managing environmental and social risks in project-related transactions. RBS has been a member since 2003.
All transactions that fall within the scope of EP undergo an initial environmental and social risk screening (using a questionnaire) completed by the business. Typically for project finance deals, a suitably qualified technical advisor is engaged, who provides an opinion on potential environmental and social impacts of the project and compliance with the EP.
Additionally, such transactions are subject to enhanced due diligence by the central Reputational Risk & ESE team (comprised of five employees). This includes a review of the project-related transaction for compliance with the EP. The end result is documented and forms part of the credit application pack submitted for approval. The EP use a scale of categorisation – A to C – to determine the scale of environmental and social impacts, with Category A being projects with the highest impacts and Category C the lowest. Depending on the risk category, the prospective financing may be subject to a further and separate review by a Reputational Risk Committee.
The requirements of the EP are embedded in the bank’s Reputational Risk Policy.
Summary of 2018 EP deals
The reporting period for data and implementation is from 1 January 2018 to 31 December 2018 (2017 data is provided for comparison).
During this period, six Project Finance transactions to which we had applied the EP reached financial close. All six deals were located in the UK. In comparison, the total number of project-related transactions financed in 2017 was 8, all were located in the UK or Republic of Ireland.