Equator Principle 2
Equator Principle 2: Environmental and Social Assessment
Under the Environmental and Social Assessment principle, the lender (EPFI) will require the client to conduct an appropriate Assessment process to address, to the firm's satisfaction, the relevant environmental and social risks and scale of impacts of the proposed Project.
The Assessment Documentation should propose measures to minimise, mitigate, and where residual impacts remain, to compensate/offset/remedy for risks and impacts to Workers, Affected Communities, and the environment, in a manner relevant and appropriate to the nature and scale of the proposed Project.
The Assessment Documentation will be an adequate, accurate and objective evaluation and presentation of the environmental and social risks and impacts, whether prepared by the client, consultants or external experts.
For Category A and, as appropriate, Category B Projects, the Assessment Documentation includes an Environmental and Social Impact Assessment (ESIA). One or more specialised studies may also need to be undertaken.
For other Category B and potentially C Projects, a limited or focused environmental or social assessment may be appropriate, applying applicable risk management standards relevant to the risks or impacts identified during the categorisation process.
The client is expected to include assessments of potential adverse Human Rights impacts and climate change risks as part of the ESIA or other Assessment, with these included in the Assessment Documentation. The client should refer to the UNGPs 3 when assessing Human Rights risks and impacts, and the Climate Change Risk Assessment should be aligned with Climate Physical Risk and Climate Transition Risk categories of the TCFD.
A Climate Change Risk Assessment is required:
- For all Category A and, as appropriate, Category B Projects, and will include consideration of relevant physical risks as defined by the TCFD.
- For all Projects, in all locations, when combined Scope 1 and Scope 2 Emissions are expected to be more than 100,000 tonnes of CO2 equivalent annually. Consideration must be given to relevant Climate Transition Risks (as defined by the TCFD) and an alternatives analysis completed which evaluates lower Greenhouse Gas (GHG) intensive alternatives.
The depth and nature of the Climate Change Risk Assessment will depend on the type of Project as well as the nature of risks, including their materiality and severity. Refer to Annex A of the Equator Principles for an overview of a Climate Change Risk Assessment, including alternatives analysis requirements.
