Updated Equator Principles Include Additional ESG Due Diligence Requirements

On October 1, 2020, the fourth version of the Equator Principles (EP4) came into effect. The Equator Principles are global, cross-industry risk management guidelines applicable to project finance advisory services, project-related corporate loans, and bridge loans. Financial institutions adopt the guidelines voluntarily to aid in the determination, assessment, and management of environmental and social risks associated with large-scale development projects. The Equator Principles have been adopted by 111 financial institutions in 37 countries.

There are several key areas of change in EP4. First, EP4 provides additional due diligence measures and protections of human rights. Specifically, EP4 adopts the United Nation's Guiding Principles on Business and Human Rights as the operative due diligence risk management framework, which requires financial institutions to evaluate the impact on human rights and include this impact in every Environmental and Social