Exploring EIA follow-up value in South African financial institutions : perspectives from Equator principles signatories

Abstract

Over the past decade, a sense of responsibility and accountability has been created for the financial sector, which encourages stronger verification measures that would need to be exercised to reduce the possible liability of irresponsible lending. As a result, financial institutions globally have adopted the Equator Principles. This risk management framework allows for determining, assessing, and managing environmental and social risks in projects, and allows for the strategic incorporation of ESG risk into project financing activities. EIA in central to these principles. Since EIA follow-up is crucial to determining the outcomes of the EIA but is often a missing part of the overall EIA process, this research set out to explore EIA follow-up value in the under-researched context of Equator Principle financial institutions, with regards to their project financing activities. Based on a pragmatic approach, this mixed method study used the perspectives of the Equator Principles signatories to allow for the exploration of the link between the two vital concepts in the study, i.e., EIA follow-up and value. To achieve this, data collection firstly involved conducting a review of literature to examine the knowledge in the research field by reviewing national and international literature on the study topic. Thereafter, primary data were collected through qualitative interviews and quantitative surveys from representatives of the South African Equator Principle financial institutions. Representatives of Project Finance, Environmental and Social, and Sustainability divisions were targeted. Analysis revealed a few areas that require strengthening to enhance EIA follow-up value in these institutions include improving the openness and transparency policies related to big projects and developments; penalties for non-compliance of EIA follow-up activities by clients; and establishing a category of high-risk projects to require EIA follow-up reports over long term and not only until the loan of the project is repaid. Despite these aforementioned areas for improvement, EIA follow-up was found to be a vital process and furthermore, perceived as a positive tool in project financing activities in the South African Equator Principle financial institutions.