The Guidance Note aims to support Equator Principles Financial Institutions navigating the environmental and social due diligence process.

By James R. Barrett, Joshua W. Marnitz, and Malorie R. Medellin

In July 2022, the Equator Principles Association published a Guidance Note on how to apply the latest iteration of the Equator Principles (EP), EP4, during the Environmental and Social Due Diligence (ESDD) process. In particular, the Guidance Note addresses the scope of work and terms of reference for Independent Environmental and Social Consultants (IESCs) undertaking ESDD on behalf of Equator Principles Financial Institutions (EPFIs) under EP4, including the appropriate scope for the development of an EP4-compliant Environmental and Social Impact Assessment (ESIA).

The Guidance Note is significant because it addresses the changes to the pre-financial close ESDD required to be undertaken by IESCs under EP4, including with respect to projects located in Designated Countries that are no longer “deemed in compliance” with the Equator Principles solely by virtue of satisfying host country law. For information on the transition to EP4 and our analysis of its implications for projects in Designated Countries, see this December 2019 blog post, June 2020 Client Alert, and December 2020 Client Alert.

This blog post summarizes key elements of the Guidance Note for project lenders and sponsors to consider.