In May 2013, the Equator Principles Association (EP Association) published the final version of the third version of the Equator Principles (EPIII) (see Legal Update, Third Version of Equator Principles Released). The EPIII became effective on June 4, 2013, subject to a transition period for existing projects that expired on December 31, 2013. To reflect the changes to the EPs, on March 12, 2014, the EP Association issued:

Under Principle 8 of the EPs, for all project finance and project-related corporate loans, borrowers will covenant in the loan documents that they will comply in all material respects with all relevant host country environmental and social laws, regulations and permits. To assist EPFIs in incorporating these covenants in their loan documents with borrowers, the EP Association issued in 2009 the Guidance to EPFIs on Incorporating Environmental and Social Considerations into Loan Documentation (the EP Loan Guidance). The EP Loan Guidance has been revised to reflect the expanded scope of the EPs, which following the adoption of the EPIII, now applies beyond project finance transactions to project-related corporate loans greater than $100 million with a term of at least two years as well as to certain bridge loans.

The EP Loan Guidance contains standard wording for clauses on representations and warranties, conditions precedent, covenants and events of default. It also includes proposed language to address the new reporting obligations set out in the EPIII, including publicly reporting greenhouse gas emission levels (combined Scope 1 and Scope 2 Emissions) during the operational phase for projects emitting over 100,000 tons of CO2 equivalent annually.

EPFIs are not required to use the wording provided in the EP Loan Guidance. They have a lot of flexibility as to the language and scope of provisions they include in their documents depending on the business, sector, and complexity of environmental and social risks of the project, as well as the precise nature of the loan.

Under Principle 7 of the EPs, an Independent Environmental and Social Due Diligence Review (Review) by a Consultant is required for:

The new guidance issued by the EP Association is intended to assist consultants in conducting this review. It sets out the minimum information that the consultant's report should include. The guidance can also be used by EPFIs to assess whether the Review delivered by a Consultant is appropriate.

For more information on the EPs and the different categories of projects, see Practice Note, The Equator Principles.