Published on
IFC Performance Standards and Equator Principles: what lenders expect from industrial projects
Lenders' watch: the eight Performance Standards of the International Finance Corporation and the Equator Principles set the environmental and social expectations of most lenders. Standards 1, 3 and 4 concern industrial risk management directly.
Lenders’ watch. This article presents public frameworks and their relevance for our clients. It does not replace the official texts.
The IFC Performance Standards
The International Finance Corporation, a member of the World Bank Group, published in 2012 the current version of its eight Performance Standards on Environmental and Social Sustainability. They apply to the projects it finances and are adopted by many development banks and export credit agencies.
Three of them concern industrial risk management directly:
- Performance Standard 1 – Assessment and management of environmental and social risks and impacts: management system, risk identification, emergency preparedness and response.
- Performance Standard 3 – Resource efficiency and pollution prevention: hazardous materials management, prevention of accidental releases.
- Performance Standard 4 – Community health, safety and security: infrastructure and equipment design and safety, hazardous materials management, emergency preparedness with neighbouring communities.
The Equator Principles
The Equator Principles are a voluntary framework adopted by commercial banks to assess and manage the environmental and social risks of the projects they finance. Their fourth version (EP4) has been in force since 2020. They draw on the IFC Performance Standards and the World Bank Group Environmental, Health and Safety Guidelines.
Practical consequences for a project
An industrial or energy project financed by a lender applying these frameworks must demonstrate, from the appraisal stage and then throughout operation:
- a structured identification of hazards and an assessment of major accident risks;
- emergency plans coordinated with the authorities and communities;
- an environmental and social action plan (ESAP) tracked over time;
- regular reporting to the lender.
These are precisely the objects of our compliance audits and risk studies.
Sources: IFC, Performance Standards on Environmental and Social Sustainability (1 January 2012); Equator Principles Association, The Equator Principles EP4 (July 2020).
