In the summer of 2003, major banks and finance institutions made a significant step forwards in addressing the environmental and social costs of their investment decisions. The Equator Principles 1 are a set of voluntary benchmarks, committing banks to follow World Bank environmental and social guidelines when financing large infrastructure projects.

About a dozen large multinational banks based in Europe and Canada have adopted the Principles, which will require clients to carry out environmental assessments, enter into a dialogue with affected groups, and take steps to mitigate their impacts.

The Principles were adopted as a result of an alliance between activists and progressive investors. The response from NGOs to their adoption was a cautious welcome. "Major US investment banks are beginning to respond to the pressure that groups... are putting on them to recognise their role and responsibility in advancing sustainability" said Michelle Chan-Fishell, Green Investments Campaigner for Friends of the Earth, USA. 2

Friends of the Earth and other groups - including WWF and AIDEnvironment - were part of a 100-strong international civil society coalition who in January issued their own 'Collevecchio Declaration on Financial Institutions and Sustainability,' setting far more stringent standards. In June, the group was critical of the scope of the industry-specified guidelines: "The Equator Principles recognises that financiers have a role in and responsibility for the social and environmental impacts of their transactions. Whether or not the Equator Principles represent a significant initiative or a negligible one depends on banks' commitment to strengthen them and be transparent in their implementation of the Principles." 3

This move towards increased attention by financial institutions to the social and environmental consequences of investment was highlighted in August, when UBS Investment Bank - part of the Swiss-owned financial services giant - signed up US-based Innovest Strategic Value Advisors, to train 400 bankers, research analysts and legal advisers. Matthew Kiernan, Innovest's chief executive, said UBS's executives would follow a high-level training programme - a kind of "MBA in SRI. You wouldn't normally expect investment banks to be doing this. It is born of a growing recognition that environmental issues can cost companies money or create it." 4

Also in August, eight UK-based institutional investors - representing over £454bn in funds under management - agreed to co-funded a pilot programme to "deepen and learn from collaborative approaches to active share-ownership focused on material social and environmental risks."

"Investors are increasingly taking a collaborative approach to communicating with companies to discuss their shared concerns or highlight a collective position on investment risk issues - such as the 'Investor statement on pharmaceutical companies and the public health crisis in emerging markets'" according to the UK Social Investment Forum, reporting the announcement." 5

Would there be more examples in 2004 of investors 'going it alone' to press companies for change, like the bold move earlier in the year by the UK's ISIS Asset Management and the Universities Superannuation Scheme (USS)? Both funds tried to use their leverage in a positive way to urge drug companies and governments to improve access to medicines for the poor. 6

It remained to be seen whether the collective good will of 'niche' ethical SRI funds and finance institutions signed up to the Equator Principles would be enough to assuage activists' concerns about the growing power and influence of investors.