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Sustainable finance? The environmental impact of the 'equator principles' and the credit industry

Sustainable finance? The environmental impact of the 'equator principles' and the credit industry More than a decade after its inception, the environmental impact of the equator principles (EP) program remains unclear. While research in the field of sustainable finance usually addresses the business case of sustainability, this paper explores the sustainability case of the financial sector. This study investigates the environmental performance of EP members and non-members, in terms of financing projects with extreme adverse environmental impact. Based on literature about voluntary programs, I suggest that the institutional design of the EP lacks some important elements that are associated with better performance. Therefore it is hypothesised that EP membership will not lead to improvements in environmental performance. The results show that EP members are not involved in fewer hazardous projects than non-EP members. Also, a comparison between the activities of EP members before and after their adoption of the EP shows that they financed more hazardous projects after they adopted the EP. Keywords: green bank; green financing; green credit; responsible finance; responsible banking; corporate social responsibility; environmental management systems; environmental risk management; sustainable development; sustainable banking; BankTrack; equator principles; sustainable finance; voluntary environmental program; environmental impact. Reference to this paper should be made as follows: Eshet, A. (2017) `Sustainable finance? The http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Innovation and Sustainable Development Inderscience Publishers

Sustainable finance? The environmental impact of the 'equator principles' and the credit industry

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Publisher
Inderscience Publishers
Copyright
Copyright © 2017 Inderscience Enterprises Ltd.
ISSN
1740-8822
eISSN
1740-8830
DOI
10.1504/IJISD.2017.083305
Publisher site
See Article on Publisher Site

Abstract

More than a decade after its inception, the environmental impact of the equator principles (EP) program remains unclear. While research in the field of sustainable finance usually addresses the business case of sustainability, this paper explores the sustainability case of the financial sector. This study investigates the environmental performance of EP members and non-members, in terms of financing projects with extreme adverse environmental impact. Based on literature about voluntary programs, I suggest that the institutional design of the EP lacks some important elements that are associated with better performance. Therefore it is hypothesised that EP membership will not lead to improvements in environmental performance. The results show that EP members are not involved in fewer hazardous projects than non-EP members. Also, a comparison between the activities of EP members before and after their adoption of the EP shows that they financed more hazardous projects after they adopted the EP. Keywords: green bank; green financing; green credit; responsible finance; responsible banking; corporate social responsibility; environmental management systems; environmental risk management; sustainable development; sustainable banking; BankTrack; equator principles; sustainable finance; voluntary environmental program; environmental impact. Reference to this paper should be made as follows: Eshet, A. (2017) `Sustainable finance? The

Journal

International Journal of Innovation and Sustainable DevelopmentInderscience Publishers

Published: Jan 1, 2017

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