Recommended citation: Ailly P.G Sheehama (2021) Equator Principles 4-Revised Climate Change Risk: What Does This Mean For Project Financing in Africa Amidst The Ongoing Energy Transition?, The Journal of Sustainable Development, Law and Policy, 12:1, 72-91, DOI: 10.4314/jsdlp.v12i1.4
Since its inception, the Equator Principles Association introduced a risk management framework in response to the ever-changing environmental and social risk in projects. The Equator Principles (EPs) result from minimum standards for risk management to stop the race to the bottom. In June 2013, EP3 was introduced, and climate change requirements were added to address the 'transition towards an ethical and low-carbon economy.' This eventually led to the newly revised Equator Principles 4 (EP4s), 'Climate Change Risk Assessment' (transition risk), in July 2020. This article analyses the effect of the transition risk of EP4 to determine whether this new addition will support or inhibit oil and gas project financing in Africa amidst the ongoing energy transition by questioning the underlying assumptions upon which the policy design was developed.
The article concluded that consideration for project financing in Africa could be expected to address the energy needs in Africa while at the same time essentially pushing governments to take into consideration climate change by putting in place processes, policies, and systems to manage these risks.' Furthermore, the transition risks definition and implementing standards of EP4 are broadly worded, allowing adapting the principles to a wide range of regimes that positively contribute to these domains. This essentially enables consideration of ethical transition and provides for coordination and coherence across different policy domains.
