While the number of financial institutions adopting Equator Principles (EP) is gradually increasing, much needs to be done to ensure that the banks, which have adopted these principles (equator banks) effectively implement these principles and to encourage other banks to adopt these principles.

No other project has received as much criticism as the three Gorges Dam. Besides the fact that if completed, it will be the third largest hydro electric project in the world, built on the world's third longest river Yangtze, it will also find place in the list of projects that have caused severe damage to the environment and the society. The reservoir will stretch over 350 miles upstream, displacing 1.9 million people. Non-Governmental Organizations (NGOs) and other social activists have been targeting the financial institutions like China Development Bank, which have accepted to finance the project and Morgan Stanley, which has underwritten the bonds issued by China Development Bank. Other projects like Baku-Tblisi-Ceyhan project, which may approach lenders shortly and Camisea pipeline in Peru are prominent projects that are also controversial.

Of all the projects, one project worth examining is Camisea pipeline, which is expected to be financed by Inter-American Development Bank and Citigroup. One noteworthy factor about this project is that it is expected to be financed by Citigroup Plc, which was the first bank to adopt the equator principles. Equator principles are the guidelines used to assess the environmental and social impact of the projects that are being financed by the financial institutions. If Citigroup, one of the world's biggest bank in terms of market cap and the first bank to adapt to equator principles, fails to implement these principles, what will be the incentive for smaller banks to adopt and implement these principles? Today, the framework of the equator principles is also undermined with many shortcomings, which need to be rectified. The following sections deal with the basic idea behind the equator principles and its shortcomings.

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