The Equator Principles (EP) were created in 2003 as a set of voluntary self-regulatory standards for financial institutions. The EP establish a general framework for evaluating the environmental and social risks of project finance. These guidelines were designed to align the project finance actives of financial institutions with their commitments to corporate social responsibility.
This paper examines the impact of the EP reporting standards on sustainable development and their relationship to compliance and private enforcement of social and environmental regulations. This facilitates a detailed discussion of the implications for compliance, private enforcement and the capacity of external organizations to effectively supervise the activities of these institutions as an alternative to traditional government regulation. It concludes that EP financial institutions report their financing activities in an inconsistent manner and project finance reports are often difficult to access, appear in various formats, and vary dramatically among countries.
Without standardized reporting, it is not possible to fully evaluate the role of the EP on international project finance. Current minimum reporting requirements allow banks to obscure the nature of their financing activities and do not permit a meaningful evaluation of compliance with the spirit underlying the EP and the advancement of substantive corporate social responsibility reform. Thus, there are serious concerns regarding the effectiveness of the EP for promoting transparency, sustainable development, and social responsibility. Consequently, it may be necessary to consider binding and enforceable agreements or legal regulations may be required to promote meaningful corporate social responsibility reforms.
