An Equator Principles Association has been created to more formally draw together the 67 financial institutions that have agreed to apply the principles to project finance deals – and today published its governance rules, setting out “the purpose, operation and management structure of the Equator Principles”.

“We have grown significantly as an organisation, which is a demonstration of our success,” said Shawn Miller, chairman of the Equator Principles Finance Institution’s steering committee, and New York-based director of environmental and social risk management at banking giant Citi. “But up until now we’ve had ad hoc governance procedures. The rules will make us more efficient as we continue to grow, and members will be held accountable to them.”

Under the terms of the rules, signatories can be expelled for failing to report publicly on their implementation of the principles, as required under principle number 10, or for failing to pay their membership fees.

However, while welcoming the introduction of these criteria, NGO Banktrack said that it is “disappointing that the association has decided to choose meeting extremely limited reporting requirements and dutifully paying the membership fee as the only two criteria for such a decision”.

It would have liked to have seen decisions on delisting also based upon “a thorough assessment of the implementation of the principles in concrete transactions and a convincing roll out within the institution itself (capacity, staff, procedures).

“This requires stronger peer-review procedures and a formally established channel through which grievances of communities affected by projects financed ‘under Equator' can reach the association and may trigger such a review.”

Miller told Environmental Finance that such assessment is carried out by partner banks within a project finance syndication, requiring independent review of project documentation and through detailed provisions in loan covenants. 

He added that signatories are unlikely to be out of compliance, either over late payment of fees or reporting, but did not have details at hand. Non-compiling banks have 18 months to return to compliance before being expelled.

The new governance rules also introduce an ‘associate’ category for financial institutions that do not undertake project finance, but who want to use the principles to “inform [their] broader approach to sustainability or potentially use the [principles] as a source of good practice and knowledge for other transaction types beyond project finance”.

Miller added that associates would be expected to report on how they were implementing the principles and their relevance to their business, and pay annual fees. Two banks – Wells Fargo and JPMorgan Chase – have elected to become associate members. 

Mark Nicholls