Standard Bank, which operates in Zimbabwe through the Stanbic Bank franchise, recently became the first African financial institution (FI) to be elected chair of the Equator Principles Association (EPA).
Standard Bank Group is the largest African bank by assets, with a footprint across 20 African countries. Headquartered in Johannesburg, South Africa, it is listed on the Johannesburg Stock Exchange. NewsDay financial columnist Omen Nyevero Muza (ONM) recently engaged Nigel Beck (NB), Standard Bank’s executive and head: environmental and social advisory, investment banking, who happens to be chair of the Equator Principles Association for 2015/16; to discuss the continental implications of this appointment as well as the benefits of the Equator Principles and the extent of their adoption by African FIs. Below are excerpts of the interview:
ONM: Could you outline what the Equator Principles are all about in very simple terms? NB: Launched in June 2003, with a subsequent revision in July 2006 and finally June 2013, the Equator Principles (EPs) are a voluntary set of standards for determining, assessing and managing social and environmental risk in project financing. The EPs are considered the financial industry’s “gold standard” for sustainable project finance. The EPs, based on the International Finance Corporation (IFC) performance standards on social and environmental sustainability and on the World Bank Group’s Environmental, Health and Safety general guidelines, are intended to serve as a common baseline and framework for the implementation by each adopting institution of its own internal social and environmental policies, procedures and standards related to its project financing activities.
ONM: Give us an insight into what the chairperson of the EPA does in the ordinary course of business and over the two-year tenure? NB: The elected steering committee has the power and authority to manage and co-ordinate the administration, management and development of the Equator Principles on behalf of the Equator Principle Financial Institutions (EPFIs). The role of the elected chair is to chair the steering committee and to provide co-ordination across the steering committee, the working groups and the EPFIs (including developing strategy, budgeting and spend etc.)
ONM: Standard Bank is considered a time-honoured pan-African institution. Against such background, what’s the significance of this appointment for the African continent as a whole? NB: The EPFIs wanted the adoption of the principles to be a global initiative, not just a Northern Hemisphere one. Hence “Equator” which seemed to represent that balance perfectly — leading to the name “Equator Principles”. The significance of Standard Bank’s chairing is that delegation of this responsibility has been afforded to an African institution (through a voting process), hence there is an opportunity to ensure that application and growth of the principles is able to focus on Africa. Emerging markets are where environmental and social (E&S) risks and opportunities are often more relevant and more difficult to manage.
ONM: You are on record as saying that while the world is aware of the need for change in terms of environmental and social considerations, there is no meeting of minds on how to achieve this. As new chair of EPA, how do you propose to achieve this meeting of minds? NB: As chair, there will be an opportunity to understand different FIs’ opinions and agendas. Taking into account these and geographic nuances will allow progress to be made towards achieving a middle ground, taking into consideration environmental and social risk and economic growth within business decision-making. ONM: Of what benefit is EPA membership to financial institutions? NB: EPFIs believe that the adoption of and adherence to the EPs offers significant benefits to them, their borrowers and local stakeholders through their borrowers’ engagement with locally affected communities. EPFIs should be able to better assess, mitigate, document and monitor the credit and reputation risk associated with financing development projects. Additionally, the collaboration and learning on broader policy application, interpretation and methodologies between EPFIs, and with their stakeholders, helps knowledge transfer, learning and best practice development. Some of the business benefits include improved risk management (business and reputation), increased business opportunities in the international project finance arena; ability to lead large syndicated loans, reduction in non-governmental organisation pressure due to proactive public disclosure of high-risk projects. Institutions also acquire increased ability to distribute project debt and improve their ability to secure credit from other banks (such as International Finance Corporation and Development banks).
ONM: And the clients of these financial institutions; in what way do they benefit in turn? NB: The benefits that come from applying the Equator Principles are largely the same for our clients as the ones we enjoy. Additionally, at client level, there is potential for greater production efficiency with associated improved investment returns.
ONM: Out of the 80 financial institutions that are members of the Equator Principles, how many are from Africa? NB: Nine.
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ONM: That’s just over 10% in terms of composition. Can you outline how you will leverage on your position at the apex of the association to seek an increase in Africa membership? NB: The outreach working groups are actively engaged with institutions in China, Russia, India and Africa/Middle East, and South America. Standard Bank is the lead on the Africa/Middle East outreach group with a mandate to increase understanding and adoption of the Equator Principles regionally. Engagement can take the form of one-on-one meetings, conferences or seminars. Our position, as chair, will raise awareness and enable ongoing dialogue with export credit agencies (ECA) and development finance institutions (DFIs) regarding investment in African project finance opportunities leading to demonstrative value-add in being an EPFI. ONM: In what ways are the EPs similar to the United Nations principles for responsible investment (PRI)? NB: The Equator Principles are similar to the UN Principles for responsible investment in a various ways, chief among which are that both initiatives operate across an international network of financers/investors; function on a voluntary basis and focus on the incorporation of environmental, social and governance issues into investment practices and decision-making. ONM: So does the EPA collaborate with the PRI in any way? NB: Not formally, but some individual EPFIs are involved with and contribute to both initiatives.
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