The Equator Principles Version 4 (EP4) is an updated financial industry benchmark and risk management framework—effective since October 1, 2020—that financial institutions use to identify, assess, and manage environmental and social (E&S) risks in project-related financing.

 The Equator Principles Version 4 (EP4) is an updated financial industry benchmark and risk management framework—effective since October 1, 2020—that financial institutions use to identify, assess, and manage environmental and social (E&S) risks in project-related financing.

Key Scope and Thresholds

EP4 applies globally across all industry sectors for five specific financial products:

• Project Finance Advisory Services: Total capital costs of US$10 million or more.

• Project Finance: Total capital costs of US$10 million or more.

• Project-Related Corporate Loans: Aggregate loan amount of US$50 million or more, tenor of at least 2 years, and majority related to a project where the borrower has effective operational control.

• Bridge Loans: Tenor of less than 2 years.

• Project-Related Refinance and Acquisition Finance: Applicable before project completion.

Major Changes and Additions in EP4

• Human Rights: Mandates structured human rights due diligence aligned with the UN Guiding Principles on Business and Human Rights, and requires project-affected worker and community grievance mechanisms for Category A and appropriate Category B projects.

• Climate Change Risk Assessment: Requires climate risk assessments for Category A and Category B projects, as well as any project with combined annual Scope 1 and Scope 2 emissions exceeding 100,000 tonnes of CO₂ equivalent. This evaluates both physical risks (climate impacts on the project) and transition risks (shifts to a low-carbon economy), plus consistency with Paris Agreement climate commitments. Annual greenhouse gas reporting is also required.

• Indigenous Peoples: Strengthens requirements around Free, Prior, and Informed Consent (FPIC) for specific impacts, evaluated through independent consultants.

• Designated Countries Shift: Eliminates automatic assumptions of compliance for projects in high-income OECD ("Designated") countries. Lenders must now evaluate whether specific E&S risks in these countries require application of IFC Performance Standards alongside local laws.

Equator Principles

The Equator Principles_EP4_July2020

EP4 (July 2020): Financial industry benchmark managing environmental/social risks in Projects. Scope thresholds: * Advisory Services/Project Finance: US$10M+ ca...