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Equator principles

Equator Principles govern our Project Finance business

The Equator Principles provide a framework to help banks determine, assess and manage the impacts on society and the environment from infrastructure and other projects that they finance. We adopted these principles in 2003 and have since applied them to all project finance and advisory transactions, which goes beyond the Equator Principles' guideline of $10 million in capital costs.

As a signatory of the Equator Principles, we are committed to assessing and classifying the environmental and social impacts that a client's operations will have against a common set of criteria.

Risks are classified as low (category C), medium (category B) or high (category A) and this level will determine the appropriate specialist support that our Project Finance business and clients will need to manage the environmental and social risks. The rating will also determine the guidelines and standards that we require of our clients, as well as whether the deal requires escalation to the Wholesale Banking Responsibility and Reputational Risk Committee. If the client's operations fall short of our required standards, we will assess their ability to address and rectify the situation.

The loan documentation for high risk projects will outline the client's environmental and social action plan. Compliance with the required standards and action plan will be monitored for the life of the agreement.

As a signatory to the Equator Principles, we are also required to report the number of advisory and lending mandates executed through the year. Tables 1, 2 and 3 illustrate our commitments under the Equator Principles.

Table 1 - Equator Principles transactions and advisory mandates

Lending mandates 2005 2006 2007 2008 2009
Category A 5 5 8 5 3
  28% 25% 24% 18% 20%
Category B 10 12 22 19 10
  56% 60% 65% 68% 67%
Category C 3 3 4 4 2
  17% 15% 12% 14% 13%
Total 18 20 34 28 15
  100% 100% 100% 100% 100%
Advisory mandates1          
Cat A na na na na 4
Cat B na na na na 0
Cat C na na na na 1

Table 2 - Lending and advisory mandates in 2009 by regions

  Asia Africa Middle East Americas Europe
Cat A 1 3 0 1 0
Cat B 3 3 3 0 1
Cat C 2 1 0 0 0

Category A

Lending and advisory mandates in 2009 by regions Cat A

Category B

Lending and advisory mandates in 2009 by regions Cat B

Table 3 - Lending mandates in 2009 by industrial sectors

  Number of projects per industrial sector Total Project value SCB share of total project value SCB share of total project value in %
Oil & Gas 7 12,724 853.55 7%
Power 2 4,655 159.75 3%
Mining 1 514 101.78 20%
Infrastructure 2 4,233 69.10 2%
Renewables 1 86 45.99 53%
Telecom 2 308 92.50 30%
Other 0 0 0 -
sector breakdown pie
1
Please note that we are now in a position to provide further details in our reporting figures because of refinement of our reporting system

Throughout the year we contributed to the ongoing development of the Equator Principles, participating in working groups focusing on climate change and the principles' applicability beyond project finance. We also reached out to other banks to share our experiences and encourage them to adopt the Principles.

We contributed to the sustainable lending study tour that the World Wildlife Fund (WWF) organised for a Chinese banking delegation. The delegation included representatives from the China Banking Regulatory Commission and financial institutions including China EXIM Bank, Industrial and Commercial Bank of China, Industrial Bank and Sinosure.

During the tour, we shared our experience in applying environmental, social and governance risk management in our financing activities, particularly in the emerging markets of Asia, Africa and the Middle East. We also shared our position statements with the delegation which included an overview of how these are now embedded into our operations and business strategies.

Report tools

Annual Report and Accounts 2009