Global Banks as Global Sustainability Regulators? : The Equator Principles

Banks might now seem odd candidates for the role of global sustainability regulator. Nonetheless, in limited areas of their operation, where global banks kept risk on their balance sheets and were financially exposed to many types of risk often otherwise treated as “externalities,” banks began to enact policies to encourage what they construe as “sustainable” banking. A small number of these banks have started to extend these principles of responsible action more broadly, across many of their business lines, as conditions of lending to their corporate clients. To this extent, it is possible to talk about (some) global banks as global sustainability regulators. The “law of unintended consequences” as used in the legal literature almost always refers to the unintended negative consequences of a regulation or policy. In this article, however, we discuss a potentially positive unintended consequence of the deregulatory and privatization trend of the 1980s and 1990s that was fueled by neoliberal political commitments: some private banks have taken a leadership role in regulating development. Specifically, these banks are enacting policies that attempt to mitigate the potentially negative social and environmental consequences of infrastructure development in politically unstable or environmentally fragile landscapes. The vehicle for doing this is a voluntary agreement called the Equator Principles (EPs). The article describes and analyzes the EPs and reports the initial results from an interview‐based study of the various EPs stakeholders, including bankers, government officials, lawyers, consultants, and critics from nongovernmental organizations. We address - from the perspective of these stakeholders - such questions as why the participating banks decided to join the EPs, what effects, if any, the EPs are having on development practice, and whether the EPs will ultimately prove to be more than a public relations exercise