Investors Urge Global Banks to Strengthen Equator Principles to Avoid Community Conflicts

BOSTON//August 27, 2019 – An investor coalition representing over $2.9 trillion led by Boston Common Asset Management urges global banks to strengthen the Equator Principles – to respect the rights of Indigenous Peoples. Presently, the Equator Principles, a voluntary global environmental and social risk management framework for financial decision-making, fall short of providing an adequate effective mechanism to avoid the kind of reputational, financial, and litigation risks —  issues that were highlighted by the mass protests that riveted world attention over the US Dakota Access Pipeline. Since 2017, Boston Common has coordinated investor input to help update and keep the Equator Principles relevant in all countries, so that the rights of Indigenous Peoples are upheld, while banks have the necessary standards to avoid future situations like the Dakota Access Pipeline.

Boston Common Asset Management is joined by 50 investors and organizations including CalPERS, the New York State Comptroller, the Comptroller of the City of New York, NEI Investments, SHARE, and investor organizations representing Indigenous Peoples such as National Aboriginal Trust Officers Association of Canada and the Oneida Trust Committee of the Oneida Nation of Wisconsin and others. Investors issued a statement today, calling for the Equator Principles to be strengthened to recognize that Indigenous Peoples have a fundamental right to provide or withhold their Free, Prior, and Informed Consent (FPIC). In written comments to the Equator Principles Association, the investors note that 13 of the 17 banks that financed the Dakota Access Pipeline project were also signatories to the Equator Principles. The Equator Principles Association is now considering stakeholder feedback on their draft Equator Principles “EP4” released on June 24, 2019.

The investor group cites concerns about reputational and potential financial risks for banks if the Equator Principles are not strengthened, noting that  “Corporate projects can experience costly delays and disruptions when proper consultations with Indigenous communities have not been undertaken, and their valid consent has not been obtained.” While supporting the Equator Principles’ increased attention to human rights, investors also welcome the introduction of a Climate Change Risk assessment to address physical and transition risks. The investor group further recommends that “EP4 be strengthened to recognize the right of Indigenous Peoples to FPIC regardless of jurisdiction and to fully align with the UNGPs (UN Guiding Principles on Business and Human Rights).”

The statement will be open for new signatories through October 11, 2019.

Boston Common Asset Management – Steven Heim, Managing Director

Global banks face a critical decision: to strengthen the Equator Principles or otherwise fail to respect the rights of Indigenous Peoples, thereby increasing risks for banks and investors. In line with the United Nations Declaration on the Rights of Indigenous Peoples, Indigenous Peoples have the right to withhold consent from projects. The current iteration of the Equator Principles falls short of protecting these rights post Dakota Access Pipeline.

California Public Employees’ Retirement System (CalPERS) – Beth Richtman, Managing Investment Director

CalPERS supports the improvements to the Equator Principles, particularly the enhancements around Climate Change Risk assessment. However, the distinction between Countries that remain in the Principles means that the human rights issues surrounding the Dakota Access Pipeline, which prompted us to push for revisions to the Principles in the first place, remain unresolved. We encourage the Equator Principles Association to sharpen their pencils and consider the recommendations of the investors on Human Rights.

New York State Common Retirement Fund – Patrick Doherty, Director of Corporate Governance

The Equator Principles should be made stronger. One step would be to enshrine the rights of indigenous people to proper consultation on business plans. As we’ve seen with the Dakota Access Pipeline, failure to seek and obtain free, prior and informed consent can have severe consequences for lenders. Stakeholder consultation on projects should be a standard course of business.

National Aboriginal Trust Officers Association – Mark Sevestre, President

The National Aboriginal Trust Officers Association (NATOA) is committed to help ensure the rights, traditions and cultures of Indigenous nations both in Canada and internationally are respected and engaged in mutually respectful free and prior informed communications with corporations and governments.  It is our expectation that the Equator Principles EP4 revision will include language that exists in other international agreements that strengthen these Indigenous rights and concerns.

Oneida Trust Enrollment Committee – Oneida Nation of Wisconsin – Keith Doxtator, Trust Enrollment Director

The Oneida Trust Enrollment Committee maintains the responsibility to invest in a manner that does not enable harm to the environment or the spiritual and cultural values of Native Americans. We are happy to see the Equator Principles Association recognizing the need to review the Equator Principles. We hope the final draft of the EP4 is broadened to apply worldwide so all signatories obtain free, prior and informed consent before financing a project that may impact Indigenous Peoples.

NEI Investments – Jamie Bonham, Manager, Corporate Engagements

The EPs should ideally provide assurance to investors that a bank’s financing deals aren’t going to blow up in their faces due to avoidable ESG-related risks. It is imperative for the association to get this iteration of the principles right to avoid losing its relevance as a risk framework.

Shareholder Association for Research & Education (SHARE) – Kevin Thomas, Executive Director

The proposed changes to the Principles fail to address the very problem that banks and investors identified with the previous framework: inadequate due diligence on respect for Indigenous Peoples’ rights in project finance. Half-measures won’t do. We need to see the changes investors have recommended incorporated into EP4 to restore confidence in the effectiveness of the Equator Principles.

Media Contact:

Mike Weber
ESG Communications
t: +44 (0)7932 577 755

About Boston Common Asset Management

Boston Common Asset Management is an experienced investment manager and a leader in global impact initiatives dedicated to the pursuit of financial return and social change. We serve endowments, foundations, mission-driven organizations, religious groups, family groups, and pension funds across the United States. Our clients share a common conviction in sustainable enterprise and a commitment to ethical standards that carry from their missions to their investments. Boston Common is women-led and majority employee-owned. As of June 30, 2019, we managed approximately $2.7 billion in assets, including sub-advised assets.

Published On: August 27, 2019Categories: In the News