Natural Environmental Risk Mangement In Financial Sector: A Study On Equator Principles

Natural environmental risk management is not a new agenda in financial sector business activities. It has received great attention worldwide through the critics of financial sector that involve directly in natural environmental issues. Because of this development, in 1992 United Nation (UN) had introduced United Nation Environmental Programme as code of conduct containing principles that banks should follow if they are to deal with natural environmental issues in the running of their business. Due to this development, in 2002, ten commercial banks held a meeting in London to discuss environmental and social issues in project financing. Four banks, ABN Amro, Barclays, WestLB, and IFC, presented case studies on past projects which had attracted controversy because of environmental and social issues. The meeting led to establishment of Equator Principles (EPs) known as code of conduct for financial institution to deal with natural environmental issues in project financing. From the study, it showed that natural environmental issues has big impact towards financial sector and realizing this phenomenon, financial sector has taken proactive role by introducing EPs.