The implementation of the Equator Principles environmental and social obligations on renewable energy projects: an exploratory study

Abstract

The financial sector provides necessary capital and funding that is required to drive economic growth as well as contributing to the agenda for a sustainable society. In recognition of this role, commercial banks adopt Equator Principles (EPs), a financial institution benchmark to identify, assess and manage the environmental and social risks in projects they fund. As it is with other funded projects, renewable energy projects that are financed by an Equator Principle Financial Institution (EPFI) are required to adhere to EPs. This is because the EPs obligations extends to all projects the EPFI funds as a secondary requirement to the project companies and this is through a loan agreement. When it comes to project development is South Africa, the mature legislative process provides clear mapping on its regulatory processes and compliance thereof. However, the EPs because of their self-regulatory and voluntary nature, do not provide adequate information regarding how a renewable energy company could take on their secondary responsibility to adhere to EPs. The aim of this study was therefore to explore the implementation of the Equator Principles’ obligations in renewable energy projects.. A qualitative research approach in the form of interviews with representatives from the renewable energy companies, the commercial banks and independent industry specialists was followed. The research questions explored whether renewable energy companies lacked understanding of the Equator Principles (EPs), whether such a lack of understanding created challenges in their implementation, and what mitigation measures could help these companies manage the social and environmental risks addressed by the EPs. . The study revealed that there was lack of understanding by the renewable energy companies, that this lack of understanding affected implementation of EPs within the projects by the operational teams. The study suggested training, upskilling by the EPs as one of the mitigations that could see the objectives of the adherence of EPs being met.