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Global Banks, the Environment, and Human Rights: The Impact of the Equator Principles on Lending Policies and Practices

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  • Christopher Wright

    (Christopher Wright is a Senior Analyst at Norges Bank Investment Management. He conducted this research while he was a Senior Researcher at the Center for Development and Environment at the University of Oslo. His recent publications include “Export Credit Agencies and Global Energy: Promoting National Exports in a Changing World,” Global Policy 2 (2011). Views expressed in these publications are his own.)

Abstract

The Equator Principles are a set of operational principles and standards adopted by more than 70 public and private financial institutions to manage environmental and social risks in project financing. This article assesses the impact of the voluntary framework on lending policies and practices, and the environmental and social accountability of financial institutions. It finds that the direct link between the Equator Principles and the International Finance Corporation (IFC), the World Bank Group's private sector financing division, enhances the legitimacy and potential impact of the framework. However, development of lending policies across financial institutions is greatly uneven, and the framework has not stopped lending to projects with significant environmental and social costs. Although the framework has improved relations between financial institutions and stakeholders, a lack of transparency undermines external accountability. The conclusion considers the scope for increased harmonization of environmental and social lending policies in international banking. © 2012 by the Massachusetts Institute of Technology.

Suggested Citation

  • Christopher Wright, 2012. "Global Banks, the Environment, and Human Rights: The Impact of the Equator Principles on Lending Policies and Practices," Global Environmental Politics, MIT Press, vol. 12(1), pages 56-77, February.
    • Handle: RePEc:tpr:glenvp:v:12:y:2012:i:1:p:56-77
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    Cited by:

    1. Rhodante Ahlers, 2020. "Where walls of power meet the wall of money: Hydropower in the age of financialization," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(2), pages 405-412, March.
    2. Contreras, Gabriela & Bos, Jaap W.B. & Kleimeier, Stefanie, 2019. "Self-regulation in sustainable finance: The adoption of the Equator Principles," World Development, Elsevier, vol. 122(C), pages 306-324.
    3. Jennifer Clapp, 2017. "Responsibility to the rescue? Governing private financial investment in global agriculture," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 34(1), pages 223-235, March.
    4. Gaganis, Chrysovalantis & Pasiouras, Fotios & Tasiou, Menelaos & Zopounidis, Constantin, 2021. "CISEF: A composite index of social, environmental and financial performance," European Journal of Operational Research, Elsevier, vol. 291(1), pages 394-409.
    5. Xing Cai & Guoran Chen & Fei Wang, 2023. "How Does Green Finance Policy Affect the Capacity Utilization Rate of Polluting Enterprises?," Sustainability, MDPI, vol. 15(24), pages 1-17, December.
    6. Kishore Kumar & Ajai Prakash, 2020. "Managing sustainability in banking: extent of sustainable banking adaptations of banking sector in India," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(6), pages 5199-5217, August.
    7. Qiaoxin Xie & Yu Zhang & Lei Chen, 2022. "Does green credit policy promote innovation: A case of China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2704-2714, October.
    8. Feng Wang & Siyue Yang & Ann Reisner & Na Liu, 2019. "Does Green Credit Policy Work in China? The Correlation between Green Credit and Corporate Environmental Information Disclosure Quality," Sustainability, MDPI, vol. 11(3), pages 1-15, January.
    9. Xiaoling Song & Xin Deng & Ruixue Wu, 2019. "Comparing the Influence of Green Credit on Commercial Bank Profitability in China and Abroad: Empirical Test Based on a Dynamic Panel System Using GMM," IJFS, MDPI, vol. 7(4), pages 1-16, November.
    10. Rodrigo Zeidan & Claudio Boechat & Angela Fleury, 2015. "Developing a Sustainability Credit Score System," Journal of Business Ethics, Springer, vol. 127(2), pages 283-296, March.
    11. Wettstein, Florian & Giuliani, Elisa & Santangelo, Grazia D. & Stahl, Günter K., 2019. "International business and human rights: A research agenda," Journal of World Business, Elsevier, vol. 54(1), pages 54-65.
    12. Xijia Huang & Yiting Guo & Yuming Lin & Liping Liu & Kai Yan, 2022. "Green Loans and Green Innovations: Evidence from China’s Equator Principles Banks," Sustainability, MDPI, vol. 14(20), pages 1-20, October.
    13. Li, Rui & Chen, Yiwen, 2022. "The influence of a green credit policy on the transformation and upgrading of heavily polluting enterprises: A diversification perspective," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 539-552.
    14. Sebastian Eisenbach & Dirk Schiereck & Julian Trillig & Paschen von Flotow, 2014. "Sustainable Project Finance, the Adoption of the Equator Principles and Shareholder Value Effects," Business Strategy and the Environment, Wiley Blackwell, vol. 23(6), pages 375-394, September.
    15. Huiying Chen & Chuanzhe Liu & Fangming Xie & Tong Zhang & Fangyuan Guan, 2019. "Green Credit and Company R&D Level: Empirical Research Based on Threshold Effects," Sustainability, MDPI, vol. 11(7), pages 1-14, March.
    16. Haiqing Hu & Chun-Ping Chang & Minyi Dong & Wei-Na Meng & Yu Hao, 2018. "Does environmental information disclosure affect the performance of energy-intensive firms’ borrowing ability? Evidence from China," Energy & Environment, , vol. 29(5), pages 685-705, August.

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