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In terms of overall lending, project financing is a small part of most banks' operations--from 5% to 10% at HSBC, for example--but lending that is environmentally and socially sound can have a huge long-term impact. Underwriters such as Citigroup point to the World Bank--backed pipeline running from Chad's oil fields through Cameroon to the Atlantic. Extensive environmental-impact assessments were carried out before the work got the green light, and oil companies like ExxonMobil have provided compensation and health care to local people whose lives and livelihoods were disrupted. A trust fund designed to give all Chadians--not just a well-connected élite--a share of the profits is another improvement, even though green groups such as Friends of the Earth say the project hurts the environment and exacerbates social problems and human-rights abuses.
Veteran green campaigners have been surprised by the speed with which banks have embraced change. "I think that many activists may have assumed that bankers were priests of the Church of Greed," says Steve Kretzmann, director of Oil Change, a Washington group that specializes in tracking project finance. "But many bank representatives have a sophisticated and advanced sense of the environmental, social and reputational risks."
Just ask Citigroup. In 2000, U.S. environmental activists from RAN began campaigning against the bank's funding of old-growth logging projects and a controversial new oil pipeline through an Ecuadorian ecological preserve. RAN placed a full-page advertisement in the International Herald Tribune labeling CEO Sandy Weill an environmental villain. Citigroup started meeting with RAN and last year announced that it would apply the Equator Principles to its business. The bank committed to banning investment in firms that logged primary tropical forests, and it pledged to invest in renewable-energy projects.
Don't expect the campaigning to stop just yet, though. In a scathing report published last year, "Principles, Profit or Just PR?", BankTrack accused many companies of failing to deliver on their lofty principles. The report highlighted the decision by nine Equator Principles banks--including ABN Amro, Italy's Banca Intesa and Citigroup--to fund BP's controversial Baku-Tbilisi-Ceyhan (BTC) pipeline, which will run through Azerbaijan, Georgia and Turkey to bring Caspian Sea oil to the West. The project, argued BankTrack, violates the Equator Principles in key areas, notably in regard to protection of indigenous peoples. BankTrack suggested the Turkish government might use the new pipeline as an excuse to crack down on ethnic Kurds living along its route. Banca Intesa withdrew from the project last December, but both Citigroup and ABN Amro rejected BankTrack's criticisms and stayed on. "BTC is a complex and challenging transaction, but we felt on balance that it did meet the Equator Principles," says Richard Burrett, ABN Amro's managing director for sustainable development.