The equator principles: The voluntary approach to environmentally sustainable finance

This article considers the Equator Principles, a voluntary code for environmentally responsible project financing by commercial and investment banks. The value of voluntary environmental approaches is increasingly recognised in the European Union, and in its Sixth Environment Action Programme, the European Commission advocated a voluntary initiative with the financial sector to promote harmonised standards for green lending and investing. The article begins by explaining the broader relevance of financial institutions to sustainable development. The nature and effectiveness of voluntary environmental measures to engage the private sector is canvassed before looking at the Equator Principles in detail. The article explains what the Principles demand of lenders, assesses their implementation, and makes some observations on their adequacy for the promotion of environmentally sustainable finance.