Ten leading banks from seven countries yesterday announced the adoption of the “equator principles,” a voluntary set of guidelines developed by the banks for managing social and environmental issues related to the financing of development projects.

The banks will apply the principles globally, to project financings in all industry sectors, including mining, oil and gas, and forestry.

The banks adopting the equator principles are ABN AMRO Bank, Barclays, Citigroup, Credit Lyonnais, Credit Suisse Group, HVB Group, Rabobank, Royal Bank of Scotland, WestLB, and Westpac Banking Corporation.

Together, the banks underwrote $14,5-billion of project loans in 2002, representing 30% of the project loan syndication market globally, said Dealogic.

The equator principles are based on the policies and guidelines of the World Bank and International Finance Corporation (IFC).

In implementing principles, banks will put in place internal policies and processes consistent with the principles.

In adopting these, a bank undertakes to provide loans only to those projects whose sponsors can demonstrate to the satisfaction of the bank their ability and willingness to comply with comprehensive processes aimed at ensuring projects are developed in a socially responsible manner and according to environmental management practices.

They will apply the principles to all loans for projects with a capital cost of $50-million or more. Project finance, an important financing method in private-sector global development, refers to the financing of projects where the repayment of the loan is dependent upon the revenues that a project is expected to generate once it is up and running.

The equator principles will use a screening process for projects, which is based on IFC’s environmental and social screening process. Projects will be categorised as A, B or C (high, medium or low environmental or social risk) by the banks, using common terminology.

For A and B projects, the borrower will complete an environmental assessment addressing the issues identified in the categorization process.

After consultation with affected local stakeholders, A and B projects will prepare environmental management plans, which address mitigation and monitoring of various risks. The assessment will address issues like:

-Sustainable development and use of renewable natural resources, -protection of human health, cultural properties, and biodiversity, including endangered species and ecosystems,

-use of dangerous substances,

-occupational health and safety,

-fire prevention and life safety,

-socioeconomic impacts,

-land acquisition and use,

-involuntary resettlement,

-impacts on indigenous peoples and communities,

-impacts of existing projects, the proposed project and future projects,

-participation of affected parties in the design, review an implementation of the project and

-efficient production, delivery and use of energy and pollution prevention, waste minimisation, pollution controls and solid and chemical waste management.

The borrower will be required to demonstrate to the bank that the project complies with host country laws and the World Bank and IFC guidelines for the relevant industry sector.