UC Berkeley

This dissertation presents one of the first empirical studies of the implementation of the Equator Principles by some of the largest private financial institutions in the world. These banks created this regime of private global governance to standardize industry approaches to risk management of large-scale infrastructure projects. Particularly when constructed in weak regulatory environments, these projects historically have been criticized for their adverse impacts on local populations, including environmental degradation and forced resettlement. To prevent such "problem projects" from being financed, banks adopting the Equator Principles commit to imposing on their borrowers World Bank environmental and social risk management standards and procedures, and pledge to withhold or withdraw funding from any project found not to be compliant with these standards. Using the EPs as a case study, this dissertation explores different ways to evaluate the effectiveness of self-regulation. Overall, the study finds that a majority of the 24 surveyed institutions, which constitute a representative sample of the larger population of participating institutions along key criteria, made considerable organizational changes to implement the Principles. Though key stakeholders--a global network of NGOs--have been less than satisfied with the EPs, there is considerable evidence that they have made a substantial impact on the project finance industry.

The study also uses the example of the Equator Principles as a further empirical setting in which to analyze a long-standing debate across several fields: whether (and to what extent) isomorphic external pressures from institutional environments, the power of reputational concerns, and the quest for organizational legitimacy are sufficient forces to shape organizational behavior absent strong mechanisms of enforcement. Though the challenges of data gathering and measurability constrain the researcher's ability to draw strong conclusions with respect to causality, the study offers considerable evidence of the influence of external actors on bank behavior and the force of reputational concerns as a driver of "compliance."