The New Protectors of Rio: Global Finance and the Sustainable Development Agenda

Author:Ariel Meyerstein
Position:Associate attorney at Debevoise & Plimpton, LLP
15SPRING 2012
by Ariel Meyerstein*
In this twentieth anniversary year of the Rio Earth Summit
of 1992,1 the United Nations is hosting a Conference on
Sustainable Development (“Rio +20”). As a supplement to
Rio+20, the U.N. Global Compact will organize the Rio+20 Cor-
porate Sustainability Forum in cooperation with the Rio+20 Sec-
retariat, the UN System, and the Global Compact Local Network
Brazil.2 The Corporate Sustainability Forum is a prime example
of contemporary global governance — what some have termed
transnational “new governance”3 — in that it will be a multi-
stakeholder affair sponsored by international organizations,
transnational corporations, and NGOs. As such, the Corporate
Sustainability Forum is a fitting addition to Rio+20, since much
of the sustainability agenda since the 1992 Earth Summit has
been driven by interactions with the private sector and, as this
Article will describe, much of its future rests in the hands of the
private sector — particularly with global financial institutions.
Since its earliest formulations, a tension has resided at
the heart of the concept of sustainable development between
the need of developing countries for economic growth and
the simultaneous advancement of increasingly progressive
approaches (through the development of international environ-
mental law) to constraining the negative impacts of industrial
development on the environment and society. When the United
Nations’ General Assembly called for what would become the
Rio Earth Summit, it described it as a conference on the “envi-
ronment and development.4 The Earth Summit was intended
to advance “ international environmental law, taking into
account the Declaration of the UN Conference on the Human
Environment, as well as the special needs and concerns of the
developing countries.”5 These special needs and concerns were
the worries that newly established international environmental
law and policy would create trade restrictions that would be
prioritized over poverty reduction efforts.6
For decades before the Earth Summit, development policy
was dominated by exogenous growth theory,7 which led the
World Bank Group’s International Bank for Reconstruction
and Development (“IBRD”) to focus nearly forty percent of its
lending activity on large infrastructure projects.8 Since at least
the 1970’s, however, local and transnational civil society groups
have protested the adverse impacts some large projects have
had on local populations and ecosystems, including the forceful
dislocation of politically marginalized, often indigenous people
from their homes, ancestral lands and way of life, and in some
instances threatening to destroy irreplaceable cultural sites,
unique habitats or species.9 Such “problem projects” often result
from the incapacity of the regulatory systems in project host
countries to properly assess environmental and social impacts
and enforce compliance with national and international laws.10
According to United Nations High Commissioner for Human
Rights, Navi Pillay, “many of the estimated 370 million indig-
enous peoples around the world have lost, or are under imminent
threat of losing, their ancestral lands, territories and natural
resources because of unfair and unjust exploitation for the sake
of ‘development.’”11 Problem projects can also be found at the
epicenters of many national and international conflicts throughout
the world, some of them violent.12
The IBRD’s fetish for large project financing continued with
intensity until a few years after the Earth Summit, when such
lending declined sharply to less than thirty percent of the IBRD’s
total lending.13 This departure from the scene was mirrored by
a drastic decline in other official sources of aid to governments,
which dropped 40% between 1991 and 1997.14 The decline in
public development finance has been attributed to the emer-
gence of a global market for private investment in infrastructure
spurred by the privatization and deregulation of many industrial
sectors, as well as the continued globalization of financial mar-
kets through the harmonization of tax regimes and the lowering
of restrictions on foreign capital.15 Although these changes to
global markets were likely the main force behind the IBRD’s
partial (and temporary) retreat from infrastructure lending,
another significant contributing factor was the substantial repu-
tational costs that had been imposed on the bank by its history of
developing infrastructure projects in an unsustainable fashion.16
By the mid-1990s, civil society demands led to the
creation of accountability mechanisms and continually evolv-
ing social and environmental risk review policies within the
multilateral development banks, specifically the World Bank’s
Inspection Panel.17 As the World Bank’s private lending arm,
the International Financial Corporation (“IFC”), picked-up the
IBRD’s slack in financing large projects (often in syndicates
along with commercial lenders), it too saw a backlash of civil
society protest that gave way to an accountability mechanism
Ariel Meyerstein is an associate attorney at Debevoise & Plimpton, LLP. He
holds a Ph.D. from the University of California Berkeley in Jurisprudence &
Social Policy. Mr. Meyerstein received his J.D. from U.C. Berkeley, and B.A. from
Columbia University. All views expressed in this article are Mr. Meyerstein's
alone and not those of Debevoise & Plimpton, LLP.
— the Compliance Advisor Ombudsman — and a host of
continually updated environmental and social policies.18 These
mechanisms have provided some limited means for affected
communities to have project approval processes reviewed, but
the mechanisms have been criticized for not truly protecting
project-affected populations from undue harm.19
Despite these advancements at multilateral development
institutions, at the turn of the new millennium there remained
a gap between the level of scrutiny applied to project finance
transactions by development banks and the processes (or lack
thereof) for environmental and social risk review deployed by
commercial banks. With this gap in mind, civil society groups
sought to build on their accomplishments vis-à-vis multilateral
development banks and focus on private financiers of large
development projects.20 NGOs launched a series of public
advocacy campaigns directed at the leading commercial lend-
ing institutions, all of which were invested to varying degrees in
problem projects.21
At the World Economic Forum in Davos in January 2003,
a coalition of NGOs launched the Collevecchio Declaration on
Financial Institutions and Sustainability.22 The Collevecchio
Declaration recognized the “role and responsibility” of financial
institutions (“FIs”) in globalization, stating that FIs are “chan-
neling financial flows, creating financial markets and influencing
international policies in ways that are too often unaccountable
to citizens, and harmful to the environment, human rights, and
social equity,” and called on them to “promote the restoration
and protection of the environment, and promote universal human
rights and social justice,” which principles “should be inher-
ent in the way that they offer financial products and services,
and conduct their businesses.”23 The Collevecchio Declaration
remains the benchmark against which civil society actors
measure multilateral and private financial activity.24
A core group of four banks who had been subject to
aggressive public advocacy campaigns before the Collevecchio
Declaration already formed a working group in late 2002 to
explore the creation of an industry standard for environmental
and social risk management procedures.25 The group decided to
base their new framework on the IFC’s Performance Standards
because of the utility of having one global standard applicable
throughout the entire project finance industry.26 After further
refinement, on June 4, 2003, the senior executives of ten com-
mercial banks met at the IFC in Washington, D.C and formally
adopted the “Equator Principles” (“EPs”).27 The goal, as the
name suggests, was to “level the playing field” by establishing
one standard of project review that would apply globally, i.e., on
both sides of the Equator.
The Equator Principles’ Preamble states that they were
adopted “in order to ensure that the projects we finance are
developed in a manner that is socially responsible and reflect
sound environmental management practices.”28 Accordingly,
the Preamble declares that “negative impacts on project affected
ecosystems and communities should be avoided where possible,
and if these impacts are unavoidable, they should be reduced,
mitigated and/or compensated for appropriately.29 Significantly,
the banks were never coy about the mutual benefits of this
approach, i.e., their faith in the “business case” for sustainability,
noting further in the Preamble that “[w]e believe that adoption
of and adherence to these Principles offers significant benefits
to ourselves, our borrowers and local stakeholders through our
borrowers’ engagement with locally affected communities.”30
The Preamble then hints at the potential for such regimes: “[w]e
therefore recognise that our role as financiers affords us oppor-
tunities to promote responsible environmental stewardship and
socially responsible development.31
The regime has grown from ten initial founding members
with about thirty percent of the global market share32 to seventy-
six institutions from over thirty countries.33 The EPFIs claim
that over seventy percent of all emerging market project finance
transactions are covered by the EPs.34 The EPFIs’ ranks include
commercial banks, export credit agencies, and development
finance institutions.35 As much as the EPs have grown to become
an industry standard, they have thus far not deeply penetrated
institutions in key emerging markets where a tremendous
amount of project finance and some of the largest individual
deals. Thus, while the EPs have expanded tremendously in their
eight years of existence, the global playing field still has some
uneven patches on it, and those patches are where a significant
amount of development is taking place and where some of the
most vulnerable populations reside. Although the global spread
of the EPs is a significant measure of their utility as a regime,
others have theorized about what specific attributes of a regime
are necessary conditions for effective governance, which this
article explores below.
The transnational civil society movement that encouraged
institutional change at the World Bank simultaneously led to
the creation of the World Commission on Dams (“WCD”),
which was brokered between the World Bank and the World
Conservation Union (“IUCN”). The WCD is perhaps underap-
preciated now for what it was: among the very first examples of
multi-stakeholder global governance,36 a transnational merging
of the governmental, civil society, and private sectors, though a
decade later it had already become more commonplace.37 The
broader contribution of the WCD, some have argued, was its role
as an agent of normative change, as it proposed that infrastructure
decision making should be a procedurally dense process imbued
with “a “[human] rights and risks” perspective organized around
“disclosure, consultation, and dialogue.”38 These concepts have
informed the development of the development finance institu-
tions’ approaches to project review and risk mitigation and are at
the core of the EPs, although not yet as robustly as they could be,
in the views of the EPs’ key NGO interlocutors.39
Twenty years later, the phenomenon that began with the
WCD has gone “viral.” The diverse regulatory phenomena that
have emerged in response to global regulatory gaps have been
typologized as transnational “new governance”40 and “civil
17SPRING 2012
regulation” or “private regulation.41 They are direct public and
private responses to a series of missed opportunities by State
actors to collectively create effective regimes of global interna-
tional business regulation. For example, the Forest Stewardship
Council emerged directly out of the frustration by environmental
groups at what they considered to be the complete failure of gov-
ernments at the 1992 Rio Earth Summit to conclude a binding
international treaty on forestry issues.42
What has resulted, however, is a “new global public domain”
that does not “replace states” so much as “embed systems of
governance in broader global frameworks of social capacity and
agency that did not previously exist.43 As political scientists
Kenneth Abbott44 and Duncan Snidal45 have argued, these new
arrangements of regulatory power constitute the emergence of
a complex “governance triangle,46 in which international stan-
dards are now created, implemented, monitored, and enforced
by varying combinations of states, firms, and NGOs seeking to
transform whole supply chains and global networks of operations
spanning multiple jurisdictions.47 There are now over 300 such
initiatives attempting to introduce governance into nearly every
major global economic sector, including energy, the extractive
industries, forestry, chemicals, textiles, apparel, footwear, sport-
ing goods, coffee, and cocoa.48
But how are we to measure the effectiveness of such diffuse
regulatory regimes? Abbott and Snidal propose that regulatory
processes occur in roughly five stages (although they do not
always occur in an orderly fashion): Agenda-setting, Negotiation,
Implementation, Monitoring, and Enforcement (a process they
short-hand as “ANIME”).49 Truly effective regulatory schemes,
they argue, must address all five stages.50 In addition, they
explain that throughout these stages, the actors involved (states,
firms, and NGOs) can exhibit four competencies to varying
degrees at different stages: independence, representativeness,
expertise, and operational capacity.51 All of these competencies
— which vary in their importance depending on the stage of the
ANIME process — are necessary, though not necessarily suf-
ficient, for a regime to be effective.52
In transnational settings, however, Abbott and Snidal argue
that no single actor — even an advanced democracy — has the
competencies required for effective regulation at all stages of
the regulatory process.53 While different actors may develop
additional competencies over time through hiring experts,
employees or consultants, certain capacities are beyond both
firms’ and NGOs’ reaches; for example, firms cannot be truly
independent, but they can improve the perception and fact
of their independence by hiring separate monitoring depart-
ments or enlisting external monitors.54 Given these limitations,
Abbott and Snidal conclude that “single-actor schemes, whose
competencies are primarily derived from their sponsors, are
implausible as transnational regulators.”55 Accordingly, they
argue that the “most promising strategy may be collaboration,
i.e., “assembling the needed competencies by bringing together
actors of different types.”56
In this regard, even when states do not regulate directly,
they can nonetheless play substantial roles indirectly by shap-
ing the bargaining among different actor groups that leads to the
formation and shaping of transnational governance regimes.57
A primary example of such indirect influence is in standard-
setting by states and international organizations; standards
“shape the expectations and normative understandings that guide
other actors engaged in [regulatory standard setting].”58 They
create levers by which NGOs hold firms accountable and focal
points that simplify bargaining over the content of standards and
reduce its cost.”59 Indeed, states and international organizations
can even play an “entrepreneurial role[]” in “enhancing the com-
petencies and bargaining power of other actors and modifying
the situational factors” relevant to the bargaining among actors.60
Despite the efforts by NGO-and-firm-based schemes to
innovate and create their own standards, they often root these
standards in state-generated norms or eventually return to
international norms as benchmarks.61 This is primarily due to
the legitimacy conferred by norms developed through state or
inter-state processes. These actors’ representativeness almost
certainly encompass a broader range of interest and preferences
than do the narrow missions of either NGOs or firms, and thus,
state-generated norms carry more legitimacy and by referring to
or relying upon them, NGOs and firms can confer greater legiti-
macy on their regulatory schemes.62 The use of legitimate public
standards also helps to shift the balance of power between firms
and NGOs in the creation of regulatory schemes: by relying
on the more legitimate state-based standards, NGOs make it
harder for firms to resist their demands. This is clearly what has
occurred with respect to the relationships among the IFC, the
Equator Principle Financial Institutions (“EPFIs”), and NGOs,
although in complex ways.
All of the relevant actor groups — the Equator Principle
banks, the IFC and the NGO community have been instrumental
in agenda-setting, negotiation of the applicable standards and
implementation of more sustainable practices by private actors.
Between 2004 and 2006, the EPFIs and NGOs participated in
the IFC’s review and update of its Performance Standards.63
When in February 2006 the IFC adopted its new Performance
Standards, the EPFIs conducted a further consultation from
March to May 2006 with NGOs, clients, industry associations,
and export credit agencies which led to the substantially revised
Equator Principles II (“EPII”), also based on the IFC’s updated
Performance Standards.64 EPII launched on July 6, 2006, at
which time forty institutions re-adopted the EPs. The most
important revisions in EPII arguably made them much more
effective than they were previously. These changes included
lowering the project cost threshold from fifty to ten million;65
the extension of the EPs to banks’ advisory activities;66 and
the inclusion of upgrades and expansions of existing projects
(including those not built under EP review) under the regime’s
coverage.67 Perhaps the most important change was the EPs’
first set of “teeth,” Equator Principle 10, which established the
requirement to report annually on progress and performance and
more robust public consultation standards.68 When the IFC later
updated its Environmental Health and Safety Guidelines in April
2007, the EPFIs incorporated this revision into the EPs as well.69
The resulting ten Equator Principles correspond loosely to
the various phases of the project finance lending cycle, which also
relate to the banks’ project development cycle. The first phase is
the lender’s due diligence (EPs 1, 2, 3, & 7), which occurs dur-
ing the pre-construction activities of project design and permit-
ting.70 The second phase is loan negotiation and documentation
(Principles 4 & 8).71 The third phase is portfolio management
(Principle 9), which correlates with project implementation.72
The disclosure, consultation, and grievance mechanism require-
ments (Principle 5 and 6) may apply throughout the lending
cycle, depending on the anticipated extent of impacts on local
communities.73 All requirements flow from the first Principle
1, EP1 on the categorization of projects, which dictates that
borrowers categorize projects as either Category A (projects with
potential significant adverse social or environmental impacts
that are diverse, irreversible or unprecedented), Category B
(projects with potential limited adverse social or environmental
impacts that are few in number, generally site-specific, largely
reversible and readily addressed through mitigation measures),
or Category C (projects with minimal or no social or environ-
mental impacts).74
According to Equator Principles 3, the choice of the stan-
dards or law applicable to project risk review and mitigation
depends on the categorization of the project: when develop-
ing projects in high-income Organization for Economic
Co-operation and Development (“OECD”) countries, borrowers’
environmental and social risk assessment must comply only
with national law.75 When developing projects in low-income
or non-OECD countries, the IFC’s Performance Standards are
the applicable environmental and social standards governing
project risk assessment and mitigation.76 However, even in high-
income countries, national law is not necessarily an ironclad
guarantee against problem projects. Regardless, when a project
is being developed in an emerging market context, i.e., a non-
OECD country or low-income OECD country, the EPs insist
that project sponsors also take into account the International
Financial Corporation’s Performance Standards on Social and
Environmental Sustainability, which include detailed environ-
mental and social assessment policies and procedures related to
specific thematic areas, each of which is interpreted by Guidance
Notes.77 In addition to the Performance Standards, the EPs also
reference the World Bank’s Environmental, Health and Safety
(“EHS”) Guidelines, which identify specific performance levels
and technical guidance for sixty-three sectors.78
Shortly after the launch of the EP Association in June 2010,
the EPs underwent a seven month-long Strategic Review led
by external consultants that overlapped in time with the IFC’s
comprehensive overhaul of its Performance Standards.79 The EP
Association offered a response to the Strategic Review, but now
that the 2011 revision of the IFC Performance Standards has
been finalized, the EP Association has incorporated the revised
Performance Standards and has launched a further complete
update — towards Equator Principles III — to be completed by
Thus, in the two substantial updates of the IFC Performance
Standards, the EPFIs — as the most common end-users of the
Performance Standards (“PS”), played an unusually large role
in shaping their evolution.81 Furthermore, any changes to the PS
will almost certainly have to be accepted and incorporated writ
large by the EPFIs now that they have relied on the PS for their
normative content for over seven years.82 Arguably the linkage
to the IFC’s Performance Standards caused the EPs to “ratchet-
up” their requirements more quickly than they might otherwise
have done if the banks were only facing-off against their NGO
interlocutors, which could have led to more of an entrenched
stalemate than already has emerged at times. From this perspec-
tive, the first few EPFIs certainly achieved one of their purported
goals in forming the EPs, namely, to have a seat at the table when
discussion of standards occur in the project finance sector. The
EPs have also taken on the role of global standard-bearer in ways
that complement the IFC’s own efforts: the EP banks “coordi-
nate closely” with the IFC on outreach activities in the emerging
markets,83 which according to an IFC staffer, allows the IFC to
extend its reach with commercial banks in those regions more
easily. This collaboration has at times been read in different ways
as well by the NGOs: according to Banktrack, the EPFIs had
used the ongoing PS review as a justification for inaction on
certain issues.84 Nevertheless, it cannot be denied that the trian-
gulated efforts of these actors has contributed to the formation
and proliferation of the EPs.85
Although the EPs have dramatically changed the regulatory
landscape of global project investment and development, like
any regulatory regime, they are far from perfect. From the start
there were concerns that the EP regime did not go far enough in
meeting the ideals expressed in the Collevecchio Declaration.86
In the months following the creation of the EPs (January 2004), a
new coalition of NGOs — Banktrack — formed to monitor sus-
tainability practices in the financial sector.87 Banktrack quickly
designated itself as a watchdog of the EPFIs, releasing report
after report analyzing the banks’ implementation and apparent
commitment levels.88 Banktrack later devoted a special section
of its website to featuring “dodgy deals,” serving as a clearing-
house for information on controversial projects, including NGO
activities and complaints as well as an opportunity for banks to
respond to concerns.89 It must be emphasized, however, that the
NGOs’ ability to perform this function — which some suggest
they do only reluctantly — is impeded by the EPFIs’ unwilling-
ness thus far to do more extensive project-level disclosure.90
The NGOs’ complaints about the Equator Principles have
remained fairly constant from the start, although some of them
have been addressed partially or completely by the EPFIs, lead-
ing the perceived legitimacy of the regime to wax and wane over
time — at least in the eyes of their NGO interlocutors.91 Indeed,
19SPRING 2012
the long-standing relations between the EPFIs and the Banktrack
network of NGOs reached its lowest point in early 2010 when
the NGOs announced a boycott of the EPFIs’ large annual meet-
ings at which the NGOs had become regular participants.92
Banktrack stated that they no longer believed these large annual
meetings to be productive fora for advancing their objectives
and announced that they would not participate in them until real
progress was made by the EPFIs.93
The major persisting criticisms in the NGOs’ eyes are the
EPs’ insufficient transparency on the project, institution, and
regime levels;94 and the related lack of an independent monitor-
ing, verification, or enforcement mechanism.95 NGOs are also
dissatisfied with the EP’s insufficient project level grievance
mechanisms,96 particularly their limited scope of application
only to project finance transactions as opposed to all project-
related transactions regardless of financing structure97 and their
failure to proactively address climate change.98 It is beyond the
scope of this Article to address these complaints in depth, but
it suffices to note that whether the NGO community likes it or
not,99 they have assumed the role of policemen and in the pro-
cess, have created a kind of uneasy alliance — a quasi hybrid
governance scheme, demonstrating the wisdom of Abbott and
Snidal’s insight that to achieve effective governance the best
strategy might be collaboration and “assembling” the various
competencies of different actors.
Looking more closely at the four competencies described
by Abbott and Snidal, we see that if we broadly construe
the activities of governance related to project finance in the
private sector, the EPs do have most of the competencies covered,
particularly if its supporting governance actors — the NGOs
and the IFC — are included as part of the “governance”
structure, or “triangle.”100
Representativeness. Though both NGOs’ and banks’
representativeness would ordinarily be subject to some criti-
cism,101 this is offset somewhat by the inclusion of the IFC — a
multilateral institution with over 140 Member States — and its
significant influence on both standard-setting and ongoing assis-
tance in technical advisory services and outreach.102 Although
true representativeness, one that would include the views of
impacted populations, is far from being achieved, the most
recent revision of the Performance Standards took considerable
steps in this direction, and the EPs may very well follow suit.
Operational Capacity and Expertise. The EPFIs provide
sufficient operational capacity individually and are continually
ramping-up their collective capacity and resources. Originally the
“Management Structure” consisted of the Steering Committee
members (about a dozen banks) and a modest secretariat staff (of
one person) that divided-up the work of administering, strength-
ening, and growing the EP regime.103 This governance structure
includes subcommittees known as Working Groups that focus
on various substantive aspects of maintaining and enhancing
the EP regime, including Working Groups on (a) adoption, (b)
best practice, (c) climate change, (d) outreach (divided again by
region), (e) scope review — corporate loans, (f) scope review
— export finance, (g) social risks, (h) stakeholders — NGOs,
(i) stakeholders — socially responsible investment, and (j)
stakeholders — industry outreach.104
Responding once more to NGO concerns, in July 2010 the
EPFIs launched the “Equator Principles Association,” a legally
binding governance structure complete with bylaws, voting
mechanisms, membership dues.105 This enhanced formaliza-
tion also responded in part to another of the NGOs’ concerns,
as it introduced a de-listing procedure for removing EPFIs who
are not compliant with the annual reporting requirement in EP
10.106 With the launch of the Association, the EPs have drasti-
cally improved their operational capacity, as they now collect
membership dues and have formal rules to govern their relations
with one another.107 Nevertheless, there remains much room for
Independence. While the independence of the EP
Association from its individual members remains an open ques-
tion, this, along with the issues of monitoring and enforcement,
are being counter-balanced by persistent NGO monitoring,
engagement and activism (and, on project-specific issues, inde-
pendence is increased by EP 7’s requirement that on Category
A and B projects the banks must hire an external independent
In sum, when viewed in isolation, the EPs can be charac-
terized as fitting Abbott and Snidal’s positive model predicting
that single-actor governance schemes will provide only modest
self-regulation; the newly-formed EP Association has some of
the competencies described as necessary by Abbott and Snidal
(expertise, operational capacity, and some representative-
ness), while primarily lacking demonstrated independence.109
Arguably, however, this is to take too myopic a view of the over-
all “governance triangle” operating with respect to the project
finance sector. When the combined effects of the IFC and
NGOs are included a different picture emerges with the vari-
ous actor groups collectively providing all four competencies,
albeit imperfectly and in an ever-evolving schema of hesitant
Perhaps the most interesting aspect of the EPs’ growth and
development is the way in which they have made themselves an
indispensible party to future debates on sustainable development
and the specific articulation of standards key to economic growth
— the IFC’s Performance Standards. Such developments are not
limited to the EPs, however. In fact, there have been signs that
the financial sector is assuming a considerably more active role
in directing the global governance of their own activities, and by
extension, much of the global economy. For example, leading
into renewed climate negotiations in Cancun in late 2010, 259
investors from Asia, Africa, Australia, Europe Latin America
and North America with collective assets under management
totaling over $15 trillion110 called for governments to take action
on climate change. These investors were not necessarily united
by their passion for the environment, but more likely by their
realization of the financial risks related to climate change, which
they claimed could amount to GDP losses of up to 20 percent by
2050, as well as the economic benefits of shifting to low-carbon
and resource-efficient economies.111
Similarly, in 2005 U.N. Secretary-General Kofi Annan
helped launch the Principles for Responsible Investment.112 Not
unlike the EPs, the PRI provide guidance to investors in how
to integrate issues of environmental and social governance into
their investment policies. As of April 2012 over 1000 investment
institutions from over 45 countries have become signatories,
with assets under management equaling approximately US$ 30
trillion.113 A particularly active group of PRI signatories have
in fact turned-up the pressure on the largest but also most criti-
cized114 U.N.-sponsored initiative — the Global Compact, which
has more than 10,000 participants, including over 7,000 busi-
nesses in 140 countries, although over 3,100 companies have
already been expelled for noncompliance and 750 are expected
to be expelled in the second half of 2012.115 In January of 2008,
a coalition of 38 investors worth over US$ 3 trillion wrote letters
to the CEOs of 130 major listed companies that are signatories
of the UN Global Compact.116 In their letters the investors
praised twenty-five Global Compact signatories for meet-
ing their obligations under the Compact to produce an annual
“Communication on Progress,” but simultaneously identified
over 100 other companies as “laggards,” who were mainly based
in emerging markets, and demanding them to comply with their
obligations.117 The investors pointed out that they represented
a “critical mass of institutional investors who believe manage-
ment of corporate responsibility or [Environmental, Social and
Governance] issues is highly relevant to the long-term financial
success of their investments” and that the Compact’s reporting
system provided an important measure of companies’ perfor-
mance on these issues.118
The NGOs’ ‘nudges’ continue to have some impact, even
if the progress is slower than they might wish. In the absence
of coordinated multilateral action from governments on climate
change, the NGOs and the EP Strategic Review called upon
the EPs to adopt policies addressing the issue.119 A few banks
have responded by separately creating the Carbon Principles,
which aim “to provide a consistent approach for banks and their
U.S. power clients to evaluate and address carbon risks in the
financing of electric power projects” and in the process have
articulated a set of Principles and an “Enhanced Environmental
Due Diligence Process” to help create industry best practice in
the energy sector in the United States.120 In addition, the EPFIs,
in collaboration with the World Wildlife Fund and the Business
and Biodiversity Offsets Program, has launched “B4B” — the
Biodiversity for Banks program — which is “designed to help
financial institutions overcome the challenges of incorporating
risks associated with biodiversity and ecosystem services —
all of the valuable resources provided by nature including safe
drinking water — into their lending decisions.”121
The initiation of these conversations among financiers on
climate change and biodiversity — and the demands on compa-
nies from investors for real improvement, not just lip service on
these issues — offer a glimpse of what we might see at Rio+20’s
Corporate Sustainability Forum.122 Unlike the first Rio Earth
Summit, which was driven principally by government nego-
tiation and attended by NGOs,123 the Corporate Sustainability
Forum provides a unique opportunity for the private sector —
and financiers and investors in particular — to set the sustain-
ability agenda for the next twenty years.
Endnotes: The New Protectors of Rio: Global Finance
and the Sustainable Development Agenda
1 See generally EARTH SUMMIT,
(last visited Apr. 15, 2012).
3e00ca1d66e5bfd.aspx(last visited Apr. 15, 2012).
3 Kenneth Abbott & Duncan Snidal, Strengthening International Regulation
through Transnational New Governance: Overcoming the Orchestration Deficit,
42 VAND. J. TRANSNATL L. 501, 520 (2009); see also Tim Büthe, Private Regu-
lation in the Global Economy: A (P)Review, 12 BUS. & POL. 1, 3 (2010); David
Vogel, Private Global Business Regulation, 11 ANNU. REV. POLIT. SCIENCE 261,
264 (2007).
4 G.A. Res 42/187, ¶1, U.N. Doc. A/RES/42/187 (Dec. 11, 1987).
6 Id.
7 Robert M. Solow, “A Contribution to the Theory of Economic Growth,”
70 Q.J. ECON. 65, 67 (1956).
8 Christopher Wright, Setting Standards for Responsible Banking: Examining
the Role of the International Finance Corporation in the Emergence of the
GOVERNANCE 51, 56 (F. Biermann, B. Siebenhüner & A. Schreyrogg eds., 4th ed.
2007); see INFRASTRUCTURE NETWORK, Discussion Paper, Infrastructure: Lessons
of the Last Two Decades of World Bank Engagement, 2 (Jan. 30, 2006).
10 Miles Scott-Brown & Marcello Iocca, Environmental Governance in
Oil-Producing Developing Countries: Findings from a Survey of 32 Countries,
Greening the Bank: The Struggle Over the Environment, 1970-1995, in THE
WORLD BANK: ITS FIRST HALF CENTURY 611, 619 (Davesh Kapur, John P. Lewis
& Richard Webb eds., 1997); Natalie Bridgeman & David Hunter, Narrowing
the Accountability Gap: Toward a New Foreign Investor Accountability
Mechanism, 20 GEO. INTL. ENVTL. L. REV. 187, 190 (2008).
Endnotes: THE NEW PROTECTORS OF RIO: GLOBAL FINANCE continued on page 52