Equator Principles 4-Revised Climate Change Risk: What Does This Mean For Project Financing in Africa Amidst The Ongoing Energy Transition?

Abstract

Since its inception, the Equator Principles Association
introduced a risk management framework in response to the
ever-changing environmental and social risk in projects. The
Equator Principles (EPs) result from minimum standards for
risk management to stop the race to the bottom. In June 2013,
EP3 was introduced, and climate change requirements were
added to address the 'transition towards an ethical and lowcarbon economy.'1 This eventually led to the newly revised
Equator Principles 4 (EP4s), 'Climate Change Risk
Assessment' (transition risk), in July 2020. This article
analyses the effect of the transition risk of EP4 to determine
whether this new addition will support or inhibit oil and gas
project financing in Africa amidst the ongoing energy
transition by questioning the underlying assumptions upon
which the policy design was developed.
The article concluded that consideration for project financing
in Africa could be expected to address the energy needs in
Africa while at the same time essentially pushing governments
to take into consideration climate change by putting in place
processes, policies, and systems to manage these risks.'2
Furthermore, the transition risks definition and implementing
standards of EP4 are broadly worded, allowing adapting the
principles to a wide range of regimes that positively
contribute to these domains. This essentially enables
consideration of ethical transition and provides for
coordination and coherence across different policy domains.