Carbon and Equator

Author: | Published: 1 May 2008

Lenders have long considered the environment, and particularly the emission of greenhouse gases, in deciding whether to finance large infrastructure projects. Nearly five years ago a small group of leading financial institutions issued the Equator Principles – a voluntary, collective framework for addressing environmental and social risks in project finance. Sixty financial institutions now apply the Equator Principles to evaluate the social and environmental risks created by international infrastructure projects. Most observers would argue that the Equator Principles have had a positive, if not significant, impact on the treatment of such issues in the project finance industry.

However, as US federal and state legislatures and local governments actively debate proposed climate change regulations, banks and financial institutions have begun to sharpen the focus of their environmental due diligence on the generation and emission of greenhouse gases and, in particular, carbon dioxide. The question of carbon risk – whether arising out of...