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Application for Projects

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Application Process

Categorization and Requirements

The Equator Principles Financial Institution (EPFI) categorizes the project into one of the following three categories, based on the magnitude of associated environmental and social impacts. EPFI also ensures that the client undertake appropriate mitigation actions depending on the project category.

Categories by Magnitude of the Potential Impact on Environment and Society
  Definition of the categories Impacts of the project
Category A Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
  • Significant impacts on the local communities (e.g. Land Acquisition, Involuntary Resettlement, Indigenous Peoples)
  • Significant impacts on Biodiversity , Natural Habitat and Cultural Heritage
  • Diverse substantial impacts (i.e. individual impacts alone are less adverse than those of Category A, but they cumulatively warrant Category A treatment.)
Category B Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site–specific, largely reversible and readily addressed through mitigation measures
  • Potential impacts are less adverse than those of Category A projects.
  • Potential adverse impacts are site–specific. Reasonable measures can be designed for pollution prevention and abatement.
Category C Projects with minimal or no adverse environmental and social risks and/or impacts
  • Minimal or no adverse social or environmental impacts

Projects classified as Category A, those with significant adverse impact on the environment and society, need to satisfy all ten of the following requirements. In addition to the environmental and social impact assessment report prepared by the client, a report by an independent environmental and social consultant is also required.

Requirements of Category A [In case of Project Finance]
a. Require the client to conduct an environmental and social impact assessment report
b. Require the client to conduct an Alternative Analysis (for project emitting more than 100,000 tons of CO2 equivalent annually)
c. Require the client to prepare an Action Plan
d. Require the client to establish an environmental and social management system
e. Require the client to conduct Stakeholder Engagement with project–affected communities
f. Require the client to establish a grievance mechanism
g. Require the client to disclose the environmental and social impact assessment report online
h. Require the client to disclose the GHG emissions (for projects emitting more than 100,000 tons of CO2 equivalent)
i. Require an independent environmental and social consultant to prepare an assessment report on the above items (a) to (f)
j. Require an independent environmental and social consultant to conduct monitoring after project funding is executed

Review by EPFIs

EPFIs review (a) the environmental and social impact assessment report and (i) the assessment report by an independent expert and will determine whether the project complies with the requirements of the Equator Principles before deciding whether to provide loan to the project.

Reflection on the Financing Agreement

Equator Principles (EPs) require the client to include the following four covenants in the loan agreement:

  1. Compliance with the applicable host country's environmental and social laws, regulations and permits;
  2. Compliance with the ESMPs and Equator Principles Action Plan;
  3. Preparation of periodic reports regarding the compliance of items (a) and (b)
  4. Decommissioning plan of the facilities (where applicable).

Action Plan is prepared, as a result of the EPFI's due diligence process, to describe and prioritize the actions needed to address any gaps in the Assessment Documentation, ESMPs, the EMS, or Stakeholder Engagement process documentation to bring the Project in line with applicable standards of the EPs. The Equator Principles Action Plan is typically tabular in form and lists distinct actions, mitigation measures, follow–up studies or plans to complement the assessment.

The impact of environmental and social risks of the project can be reduced and the project can be modified to qualify for financing by including the compliance of the Action Plan as a requirement for financing. Project expense may increase due to the implementation of the Action Plan.

In case of Project Finance, after the syndicate member banks providing funds to the project are officially determined, the lead arranger will initiate the negotiations between the client and the syndicate toward an accord on the Action Plan and the covenants.

Disclosure of the Implementation Process and the Number of Screened Projects

Each Equator Principles Financial Institution is required to publicly report its internal EPs implementation process and the number of projects to which EPs are applied each year by category, by industry and by region, etc.

Mizuho discloses relevant information in accordance with this requirement.

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