Article #208 Using Technology to Enable Equator Principles Financial Institutions (EPFIs) to Monitor, Evaluate, and Report on the Adoption of Social and Environmental Performance Standards

There is a growing trend among financial institutions in adopting the Equator Principles when it comes to financing large infrastructure and industrial projects. Those institutions want to ensure that the projects they finance are developed in a manner that is socially responsible and reflects sound environmental management practices. Those institutions which are known as Equator Principles Financial Institutions (EPFIs), recognize the importance of climate change, biodiversity, and human rights, and believe negative impacts on project-affected ecosystems, communities, and climate should be avoided where possible.

The Equator Principles comprise a voluntary credit risk management framework, adopted by financial institutions, for determining, assessing, and managing environmental and social risk in project finance. It is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. There are ten (10) Equator Principles that EPFIs need to adopt to determine, assess and manage environmental and social risk in projects they finance.

Using a Project Management Information System (PMIS) like PMWeb, EPFIs can use PMWeb to support the implementation of the Equator Principles as well as monitor, evaluate and report on the adoption of the social and environmental standards. Initially, PMWeb will be used to capture the details for all projects that the EPFI might consider financing as well as all projects being financed. User-defined fields will be added to the PMWeb project module to capture the details needed to identify the project category which could be A, B or C. Category A Project is a project that has significant adverse social and environmental impacts, Category B Project is a project that has limited adverse social and environmental Impacts while Category C Project is a project that has no adverse social and environmental Impacts. For category A and B projects, those projects would need Social and Environmental Assessment (SEA) and an Action Plan to develop and implement mitigation measures, corrective actions, monitoring for the impacts and risks.

PMWeb Form Builder will be used to create the Social and Environmental Assessment (SEA) checklist also known as Sustainability Assessment Checklist. The checklist will include the three sustainability principles, the five components for each principle, and the screening questions for each component that will be used as a guide to help the project owner to assess the sustainability of the capital project. For each question, the project owner needs to decide if the question is relevant? And if yes, had the project owner considered it? This will become the basis for detailing how the project will have a positive, negative or neutral sustainability impact on the component being assessed and what mitigation measures should be undertaken when there are negative impacts.

Similar to other PMWeb modules, the attachment tab will be used to attach all supportive documents used in responding to the checklist. Those could include the proposed project location plan, pictures, studies done by third parties, details of meetings held with the local communities among others. It is highly recommended that all those supportive documents are uploaded and stored into the PMWeb document management repository under a folder that will be titled Sustainability Assessment Checklist. In addition, links to other PMWeb records like meeting minutes among others as well as imported MS Outlook emails be linked to the SA checklist form.

To ensure the formal review and approval of the Sustainability Assessment Checklist response including the justification provided for each sustainability principle component, a workflow will be assigned to the SA checklist form. This will enforce the needed accountability in submitting, reviewing, and approving the Sustainability Assessment Checklist.

Depending on the location where the capital project will be financed, the EPFI needs to determine what will be the applicable social and environmental performance standards for identifying and managing environmental and social risks. If there is no specific performance standard requirement, then the International Finance Corporation (IFC) benchmark for identifying and managing environmental and social risk will be used. The IFC eight performance standards include:

  • PS1 Social and Environmental Assessment and Management Systems (SEAMS)
  • PS2 Labor and Working Conditions
  • PS3 Pollution Prevention and Abatement
  • PS4 Community Health, Safety, and Security
  • PS5 Land Acquisition and Involuntary Resettlement
  • PS6 Biodiversity Conservation and Sustainable Natural Resource Management
  • PS7 Indigenous Peoples
  • PS8 Cultural Heritage

Using PMWeb Form Builder module, a form will be created to capture the details of the Environmental and Social Due Diligence. The form will identify the key elements and questions to be considered for each performance standard as well as the key findings and the action plans to treat those findings.

The EBFI could have its team perform due diligence or seek the support of specialists in particular for performance standards PS5, PS6, PS7, and PS8. The Environmental and Social (E&S) Due Diligence will become the basis for preparing the Action Plan which will be used to develop and implement mitigation measures, corrective actions, monitoring for the impacts of the identified risks.

The implementation of the Equator Principles requires ongoing monitoring and reporting after Financial Close and over the life of the loan, for all category A and category B projects, by the appointment of an independent environmental and social consultant. The consultant will track and follow up with companies about environmental and social project-specific information, as per the loan agreement and report on the identified environmental and social risks and the action plans that were identified and implemented to mitigate the adverse impacts of those risks. The reporting will also monitor the number and nature of adverse environmental and social events that have occurred.

About the Authorfounder

Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with more than 35-year service record providing project management and controls services to over 100 projects with a total value over the US $5 Billion. Those projects included Commercial, Residential, Education, and Healthcare Buildings and Infrastructure, Entertainment and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication, and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training, and business development.

Bassam is a frequent speaker on topics relating to Project Management, Strategic Project Management, and Project Management Personal Skills. Over the past 35 years, he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe, and South America. He has written more than 250 articles on project management and information systems featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP), and Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE) and Green Project Management (GPM).

Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA, and London Business School, London, UK.


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