CHAPTER 2 WORLD BANK REQUIREMENTS AND THE EQUATOR PRINCIPLES: COMPLIANCE AND ITS CHALLENGES

• Jurisdiction: Derecho Internacional

International Mining Law and Investment in Latin America and the Caribbean
(Apr 2005)
CHAPTER 2
WORLD BANK REQUIREMENTS AND THE EQUATOR PRINCIPLES: COMPLIANCE AND ITS CHALLENGES
Susan Joyce
On Common Ground Consultants Inc.
Vancouver, British Columbia, Canada
Lima, Peru

Susan Joyce is a Sociologist with 20 years' experience working with communities and organizations on resource development issues. For the last decade, Susan has specialized in issues related to mining and mineral exploration, doing social impact assessments, conflict evaluations, community relations programs, compliance audits, capacity building, management strategies, corporate organization and policy development. She is deeply committed to the principles of sustainable development and to assuring that thorough social assessment is undertaken as part of project design and decision-making. Susan participated extensively in the Mining, Minerals and Sustainable Development Project and led the study 'Social Impact Assessment in the Mining Industry. She is a strong advocate of the importance of social responsibility and cultural awareness throughout the lifecycle of a project and is a frequent writer and speaker on these matters.

Susan has lived and worked in France, New Zealand, Canada, and Bolivia where she first become involved with the mining industry and where she pioneered the application of a number of sociological techniques in the minerals sector. Susan is currently resident in Lima, Peru. She is a member of the Rural Sociological Society and the International Association for Impact Assessment.

Education:	M.Sc. Development Sociology (Cornell University, 1994)
Post-Graduate Diploma of Agricultural Science (Lincoln College of Agriculture,
New Zealand, 1986)
B.A. Sociology and Anthropology (Swarthmore College, 1983)

1 INTRODUCTION

In June, 2003 a group of 10 commercial banks first made public their adherence to a set of social and environmental commitments known as the Equator Principles. This announcement signified a new level of consistency and increased coherency in the operating procedures and requirement, between the multilateral and bilateral lending institutions, and the major sources of private sector financing for the mining sector.

Many of the banks assert that these standards are simply public commitments to what were already internal bank standards, and that their assessments, and decisions on loans, are not substantially changed by the development of these principles. Yet the principles represent a further move along a trajectory well-established in the business world today, of corporate social responsibility and increasing pressure towards a common set of standards. And most significantly, the public nature of the Equator Principles breaks - to some degree-with a long tradition of privacy in the banking industry and exposes the banks and potentially their clients, to the review and vigilance of other stakeholders.

This paper will review the importance and relevance of the Equator Principles, and how they relate to the World Bank standards. It will look at the context driving their development and touch on some key considerations for achieving Equator Principle compliance. It will close by looking at what we believe to be their further evolution.

This paper is also to look at how to achieve compliance with the Equator Principles, a challenge for which many companies will be looking for assistance, often from their lawyers - the specialists in regulatory compliance. How to achieve this, and what and where are the challenges going to be?

2 BACKGROUND TO THE EQUATOR PRINCIPLES

The Equator Principles have developed as a next step in a progressive development of standards which apply to the mining and other industries since the development of environmental regulations 35 years ago. The development of NEPA in the United States was the start, and 5 years later the Berger Commission led to the requirement for social impact assessments. Eighteen years ago, in 1987 the World Bank developed its environmental and social safeguard policies, and the Bruntland Commission published 'Our Common Future' and articulated some of the concepts of sustainable development that are most frequently cited today. Over the next decade, an increasing momentum developed behind the concepts of social justice and sustainable development and finally even the mining industry got on board, with the Global Mining Initiative and the Mining Minerals and Sustainable Development Project which it generated, and which came to completion three years ago. Finally, in June 2003, the commercial banks, with help from the multilaterals and the World Bank, developed and signed on to the Equator Principles.

If we look at the evolution of environmentalism as a social movement which changed not only the attitudes of society but also the legal and regulatory systems, it began as a marginal or fringe issue in the 1960's and slowly grew in importance, while the mining industry (and others) resisted the imposition of the new environmental regulations and standards. Over time, and it took several decades and to some extent a generational change within the industry, environmental management became accepted as part of how business was done, and finally became an integrated part of modern management systems. Today few mining professionals would consider operating a mine without effective environmental management. But it is fair to ask how much that acceptance and finally integration of the management imperative for environmental management was driven by the clear legal and financial responsibility that environmental laws assigned to corporate managers and Boards of Directors?

Social justice issues in mining, such as redistribution of benefit streams, royalty demands, equity participation, and the demand that social impacts be mitigated for local populations, have come into prominence much later than environmental issues, but when they did start, they gathered force and steam very quickly. In only 8 years, since the first World Bank conference on Mining and the Community, in Quito Ecuador in 1997, social issues and their management have gone from a fringe issue to that of a highly visible, potentially 'fatal flaw' concern. Perhaps as a result of the experience resisting the environmental movement, the mining industry does seem to be moving more quickly and assertively to accepting, and integrating social and community issues into management systems - in this case without the clear legal liability behind it.

3 THE EQUATOR PRINCIPLES AND WORLD BANK STANDARDS

The Drivers Behind the Development of the Equator Principles

The Equator Principles (EP) constitute a voluntary set of agreements, which commit the signatories to uphold a specific set of environmental and social standards for project financing in low and middle income countries, and are intended to bring the banks into alignment with the multilateral and bilateral lenders, as well as the Export Credits Agencies (ECAs). Launched with 10 leading commercial banks as signatories, today 29 have signed, representing over 75%...