conference & convention enabling the next generation of networks & services

EQUATOR PRINCIPLES COMPLIANCE FOR UNDERSEA CABLE

SYSTEMS
Neil Daetwyler (ENVIRON), Lance Pohling (David Ross Group)

Email: ndaetwyler@environcorp.com

ENVIRON UK Limited, 5 Stratford Place, London W1C 1AX, United Kingdom

Abstract: Cable system projects financed by external parties rather than the project
shareholders are likely to be subject to the social and environmental standards of one or more
of the International Financial Institutions involved, such as multilateral development banks,
commercial banks, and export credit agencies. The SEACOM cable system connects South
Africa with India and Europe via landings in Mozambique, Tanzania, Kenya, Djibouti, India
and Egypt, is privately-owned, and is funded in part by project finance arranged through
commercial banks. As a result the project is subject to the Equator Principles, the pre-eminent
financial industry benchmark for determining, assessing and managing social and
environmental risk in project financing. Equator Principles compliance requires conformance
with a range of international standards in addition to the environmental clearance
requirements of the project host countries, as the Principles do not supplant national social
and environmental requirements but rather supplement them. The SEACOM project has
successfully applied the Principles in parallel to the varying requirements of the landing
countries, including challenging circumstances such as landing the cable in a Nature Reserve
(in South Africa) and adjacent to a UNESCO World Heritage Site (in Kenya).

1. INTRODUCTION
The Equator Principles do not supplant
The Equator Principles represent a
national social and environmental
financial industry benchmark for
requirements, but rather supplement them.
determining, assessing and managing
The Principles are based on an external and
social & environmental risk in project
respected benchmark, namely key elements
financing. More than 60 International
of the Environmental and Social Review
Financial Institutions (IFIs) are now listed
Procedures of the International Finance
on the EP website [1] as having adopted
Corporation (IFC), the private-sector
the Principles, including most of the
lending arm of the World Bank Group.
industry’s major project finance providers.
In 2008, it was estimated that Equator
The Equator Principles (EP) were first
Principles Financial Institutions (EPFIs)
adopted in 2003 and were subsequently
covered more than 85 percent of the
revised in 2006 to accommodate
world’s project finance activity [2].
substantial changes in the IFC Review
Procedures. It is the ten current Equator
While many cable system projects continue
Principles and the key elements of the
to be financed through the internal
current IFC Environmental and Social
resources of the project partners, there is a
Review Procedures that are referenced in
trend for projects to look to external
this paper that describes how these
financing, meaning that the Equator
principles were applied to the SEACOM
Principles are likely to be applied to cable
system projects more and more frequently.

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project, whose financing arrangements Equator Principle 3 (Applicable Social and

included EPFIs. Environmental Standards) requires that the
project EIA demonstrates compliance with
the Performance Standards and the
2. THE EQUATOR PRINCIPLES Environmental, Health and Safety (EHS)
Guidelines of the IFC. For projects located
It is important to understand that, as
in ‘High-income OECD countries’ [3] the
currently drafted, the Principles apply to
EPFIs rely on national regulatory,
the EPFIs rather than to the project or the
permitting and public comment processes
project developer. EPFIs make financing
as these generally meet or exceed the
contingent upon the project developer
requirements of the IFC Performance
ensuring that the project complies with the
Standards and EHS Guidelines.
relevant requirements of the EP, and
monitor project compliance on a regular
Equator Principle 4 (Action Plan and
basis.
Management System) requires the
implementation of a Social and
Equator Principle 1 (Review and
Environmental Management System, and
Categorisation) represents a critical first
an Action Plan describing how the impacts
step in the compliance process; it requires
and risks identified in the EIA will be
an evaluation of the subject project and its
managed.
potential social and environmental impacts
and mitigations. Based on this evaluation,
Equator Principle 5 (Consultation and
the project is classified, in terms of the
Disclosure) requires consultation with
extent of its potential impact, into one of
project affected communities, and an
the following categories:
adequate incorporation of their concerns.
Category A – Projects with potential
Equator Principle 6 (Grievance
significant adverse social or environmental
Mechanism) requires that the project
impacts that are diverse, irreversible or
receives and facilitates the resolution of
unprecedented
any concerns and grievances from among
project-affected communities.
Category B – Projects with potential
limited adverse social or environmental
impacts that are few in number, generally Equator Principle 7 (Independent Review)
requires, in certain circumstances, an
site-specific, largely reversible and readily
independent review of the EIA, Action
addressed through mitigation measures;
Plan and consultation processes.
and
Equator Principle 8 (Covenants) requires
Category C – Projects with minimal or no
that compliance with the Equator
social or environmental impacts.
Principles be mandated in the project
financing documentation.
In reality, most submarine cable system
projects of any significant scale will be
Equator Principle 9 (Independent
classified as A or B, in which case the
remaining Principles apply as follows: Monitoring and Reporting) requires that in
some circumstances project monitoring
Equator Principle 2 (Social and data be independently verified.
Environmental Assessment) requires an
appropriate level of assessment (what is Equator Principle 10 (EPFI Reporting)
commonly called an EIA). requires that EPFIs periodically provide

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public reports of their implementation of
the Equator Principles.
While the Equator Principles are
themselves quite brief (reproduced in full
they cover only three pages), they rely
heavily on the detailed requirements of the
IFC’s Performance Standards and EHS
Guidelines.
IFC Performance Standards
The Performance Standards define the
roles and responsibilities of project
developers in managing their projects,
including information disclosure
requirements [4]. There are eight
Performance Standards, as follows:
• Performance Standard 1: Social and
Environmental Assessment and
Management System
• Performance Standard 2: Labor and
Working Conditions
• Performance Standard 3: Pollution
Prevention and Abatement
• Performance Standard 4: Community
Health, Safety and Security
• Performance Standard 5: Land
Acquisition and Involuntary
Resettlement
• Performance Standard 6: Biodiversity
Conservation and Sustainable Natural
Resource Management
• Performance Standard 7: Indigenous
Peoples
• Performance Standard 8: Cultural
Heritage
IFC EHS Guidelines
The EHS Guidelines are technical
reference documents with general and
industry-specific examples of Good
International Industry Practice (GIIP), as
defined in Performance Standard 3. The
EHS Guidelines contain the performance
levels and measures that are normally
acceptable to IFC and which are generally
considered to be achievable in new
facilities at reasonable costs by existing
technology [5].
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The EHS Guidelines comprise both
General and Industry Sector Guidelines.
General EHS Guidelines contain
information on cross-cutting
environmental, health, and safety issues
potentially applicable to all industry
sectors and are designed for use together
with relevant industry sector guideline(s).
There are more than sixty industry sector
guidelines; generally, only two have major
significance to the submarine cable
industry:
• Telecommunications
• Shipping
3. REQUIREMENTS OF OTHER
(NON-EPFI) INTERNATIONAL
FINANCIAL INSTITUTIONS
While the Equator Principles are primarily
applicable to commercial banks, various
other IFIs and IFI groups which could
potentially have substantial participation in
any project financed submarine cable
system have their own social and
environmental standards.
For example, the World Bank Group as
well as other major multilateral
development institutions (which include
the Inter-American Development Bank
(IDB), the African Development Bank
(AfDB), the Asian Development Bank
(ADB) and the European Bank for
Reconstruction and Development (EBRD))
may be considered as possible funding
sources for international submarine cable
systems. Each of these institutions has its
own set of standards with which borrowers
must comply. These standards have been
separately developed, but they are broadly
consistent with the IFC Performance
Standards. This means that compliance
with requirements of the multilateral
lenders will generally be achieved if the
project complies with the Equator
Principles.
Another group of financial institutions that
are often involved in major development
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projects such as submarine cable systems
are the Export Credit Agencies (ECAs).
ECAs are public agencies and entities that
provide government-backed loans,
guarantees and insurance. The major ECAs
are those of the member states of the
Organisation for Economic Cooperation
and Development, which have agreed a set
of common approaches for evaluating the
environmental impacts of the projects they
support. This framework [6] relies on a
project categorisation process consistent
with that of the IFC Environmental and
Social Review Procedure (and therefore
with the Equator Principles), and also
references the environmental standards and
guidelines of the World Bank Group, the
EBRD, the ADB, the AfDB and the IDB.
4. APPLICATION OF THE
EQUATOR PRINCIPLES TO THE
SEACOM CABLE SYSTEM
PROJECT
The SEACOM cable system connects
South Africa with India and Europe via
landings in Mozambique, Tanzania,
Kenya, Djibouti, India and Egypt (see
Figure 1). The system is privately-owned,
and is funded in part by project finance
arranged through commercial banks,
including an EPFI.
Figure 1 The SEACOM Cable System
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As is often the case for major Equator
Principles projects, the EPFI required that
SEACOM retain an environmental
consultant to advise on the application of
the Equator Principles. ENVIRON was
retained in this role, and an early task was
to recommend to the EPFI the appropriate
Equator Principles classification for the
SEACOM project.
Project Categorisation
ENVIRON was at this time working
closely with SEACOM and its principal
advisor The David Ross Group in planning
and securing the necessary environmental
approvals in the project landfall countries.
In several of these countries it was made
clear by national regulators that any
projects impacting the socially and
environmentally sensitive coastal zone
would automatically be assessed as
projects of the highest sensitivity,
regardless of whether the project itself is
relatively benign (as is generally the case
for submarine cable systems). However,
the careful selection of the cable route and
siting of the landfalls and cable stations,
especially in two areas of particular
sensitivity in South Africa and Kenya,
resulted in the project team concluding that
an Equator Principles classification of ‘B’
rather than ‘A’ was appropriate. This
conclusion was supported by detailed
knowledge of the comprehensive
management and mitigation measures that
are habitually applied by the international
cable system industry. These measures
were, of course, adopted for the SEACOM
project. The recommendation for ‘B’
categorisation was subsequently accepted
by the project’s EPFI.
National Environmental Clearances
Notwithstanding the Equator Principles ‘B’
categorisation it was still necessary to
conduct social and environmental impact
assessments of sufficient detail and
complexity to satisfy national regulatory
authorities. In order to ensure that the
requirements of the various national
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regulators were fully met, the
environmental clearances in the various
landing countries were developed with the
assistance of locally-based specialist
environmental consultants.
The scale and scope of the documentation
required to support these clearances varied
greatly from country to country. In India
and Djibouti the co-location of the
SEACOM system with other cable systems
for which permits and landing facilities
were already in place meant that
documentation requirements were
minimal. Conversely, in South Africa the
formal assessment process lasted for
almost 12 months, involving various public
consultations and the development of four
sets of publicly disclosed documentation
comprising more than 1,400 pages in all.
Examples of the environmental clearance
documentation are shown in figure 2.
Figure 2 Examples of EIA documentation for the
SEACOM project
Equator Principles EIA
The national regulators in the landfall
countries focus, of course, only on the
project within their area of jurisdiction.
However, by the very nature of a major
submarine cable system large parts of the
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project (those areas beyond the Territorial
Waters or the EEZ of the landing
countries) are not included in any national
social and environmental assessment. As
the Equator Principles require that the
project as a whole be assessed, for the
SEACOM project this shortfall was
addressed through the development of an
overarching system-level EIA (“EP EIA”),
in parallel with the national
documentation. The EP EIA was
subsequently disclosed to project
stakeholders via the SEACOM website [7].
In addition to the Equator Principles
requirement for an acceptable level of
social and environmental assessment (or
EIA) there are also a number of other
significant requirements made of the
project developer.
Social and Environmental Management
System and Equator Principles Action
Plan
In accordance with EP4, the SEACOM
project was required to produce an Equator
Principles Action Plan and a Social and
Environmental Management System
(SEMS) for the project. Action Plans may
range from a brief description of routine
mitigation measures to a series of
documents (e.g. resettlement action plan,
indigenous peoples plan, emergency
preparedness and response plan,
decommissioning plan, etc), with the level
of detail and complexity being
commensurate with the project’s potential
impacts and risks. The SEACOM SEMS
was required to be consistent with IFC
Performance Standard 1, and therefore
incorporated the following elements: (i)
Social and Environmental Assessment; (ii)
management program; (iii) organisational
capacity; (iv) training; (v) community
engagement; (vi) monitoring; and (vii)
reporting. As the need for a SEACOM
Action Plan had been identified at an early
stage it was developed as an integral part
of the EP EIA, and included the many
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environmental management prescriptions
developed in the national EIAs.
The SEMS for the construction phase of
the SEACOM project utilised existing
materials to the extent possible; in
particular, the existing management
systems adopted by the main project
contractors.
The construction phase SEMS has since
been modified and upgraded to produce a
project operations SEMS.
Consultation with Affected
Communities
EP5 requires consultation with project
affected communities in a structured and
culturally appropriate manner, and that the
Social and Environmental Assessment
documentation (the EIAs) and Action
Plans be made available to the public by
the project developer for a reasonable
minimum period in the relevant local
language and in a culturally appropriate
manner. For the SEACOM project
appropriate consultation and disclosure
was achieved through compliance with the
requirements of national regulators (in
respect of national environmental
clearance processes), supplemented by the
public disclosure of the EP EIA and EP
Action Plan.
Project Grievance Mechanism
In accordance with EP6 SEACOM
established an appropriately scaled
grievance mechanism as part of the SEMS.
Due to a combination of factors, including
the inherently benign nature of the project
and SEACOM’s extensive involvement
with the government, community and other
stakeholders in advance of construction,
the grievance process was not called upon
during the construction phase of the
project.
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5. CONSTRUCTION OF THE
SEACOM PROJECT IN
SOCIALLY AND
ENVIRONMENTALLY
SENSITIVE LOCATIONS
In two landing countries the SEACOM
project is located in close proximity to
highly sensitive environmental and social
resources: the Umlalazi Nature Reserve
near the town of Mtunzini, in KwaZulu-
Natal Province between Richards Bay and
Durban, South Africa; and the World
Heritage site of Fort Jesus in Mombasa,
Kenya.
Where such sensitive sites are known to be
present the preferred routing and siting
approach is avoidance – locate the project
facilities at sufficient distance from the
sensitive sites so as to avoid any significant
impacts to them. After careful evaluation
of various alternatives the SEACOM
project chose to proceed with cable routes
and cable station sites in very close
proximity to these sensitive resources for a
single reason – the presence of pre-existing
infrastructure. SEACOM was able to
demonstrate to the regulatory authorities
that the SEACOM cable could be installed
and operated without any significant
cumulative impacts with those that already
existed.
South Africa
In the case of South Africa the SEACOM
cable comes ashore adjacent to the existing
SAFE cable, thus avoiding the need to
impact a second section of shoreline. Early
project planning focussed on SEACOM
sharing an onshore cable route through the
Nature Reserve, but the desire to minimise
disruption due to construction activities
within the Reserve led to the adoption of
an unanticipated solution for installing the
terrestrial cable between the beach and the
cable station site – horizontal direction
drilling (HDD). SEACOM imported
specialised HDD equipment to South
Africa and successfully installed the cable
duct in a directionally-drilled borehole
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below the Umlalazi Nature Reserve
(Figure 3), over a distance of almost 1km
from the Cable Station to the beach
manhole.
Figure 3 Horizontal Direction Drilling of the
SEACOM cable below the Umlalazi Nature
Reserve, South Africa
Kenya
In the case of Kenya, the SEACOM cable
comes ashore in Mombasa immediately
adjacent to the 16th century Fort Jesus
UNESCO World Heritage Site (Figure 4).
Several other cables land in this same area
(Figure 5), with the SEACOM landing and
cable station sites being located on the
property of the Swahili Cultural Centres
(SCC), itself a socially sensitive location
(but not a World Heritage Site). SEACOM
was able to conclude an agreement with
the SCC that has resulted in a cable
landing site that has been carefully
constructed and reinstated (Figure 6). The
cable station itself was sited in consultation
with the SCC authorities, and considerable
effort has been made to render the finished
cable station compatible with its historic
surroundings by constructing an
architectural façade to the core pre-
fabricated cable station structure.
Construction of the façade is nearing
completion.
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Figure 4 Fort Jesus, Mombasa, Kenya – a
UNESCO World Heritage Site
Figure 5 Existing cables close to the SEACOM
landfall site in Mombasa, Kenya
Figure 6 Reinstatement of the terrestrial cable
route, Swahili Cultural Centres, SEACOM
landfall in Mombasa, Kenya
6. CONCLUSIONS
When sub-sea cable system projects are
financed by external parties (i.e. other than
the project shareholders), various
International Financial Institutions may
become involved, including multilateral
development banks, commercial banks,
and export credit agencies. For the
SEACOM project, as a result of the
involvement of commercial banks in
project financing, the project became
subject to the Equator Principles, which
since their establishment in 2003 have
become the pre-eminent financial industry
benchmark for determining, assessing and
managing social and environmental risk in
project financing.
The Equator Principles themselves are
underpinned by the policies and standards
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of the International Finance Corporation,
and these IFC policies are in turn broadly
compatible with the social and
environmental requirements of a wide
range of lending organisations, including
the major multi-lateral development banks
and the ECAs. The experience of the
SEACOM project, as one of the first major
cable system projects to be developed in
compliance with the Equator Principles is
therefore relevant to other cable systems
that may seek external financing.
Key conclusions from the SEACOM
project’s compliance with the EP are:
• The application of the EP requires
compliance with international
standards for social and environmental
performance, in addition to those
typically required by national
regulators.
• Minimising the cost and time impacts
of EP compliance requires careful
project planning, particularly in respect
of cable routing and the siting of
terrestrial infrastructure such as beach
manholes and cable stations. For cable
projects the sensitivity of the Equator
Principles (and similar standards) to
issues such as designated conservation
areas and the potential for involuntary
resettlement needs to be clearly
understood at the planning stage if
negative impacts to the project
schedule and budget are to be
minimised.
• While avoidance is the preferred option
in relation to sensitive resources
(whether social or environmental), the
SEACOM project has been able to
demonstrate that cable systems can be
located in highly sensitive areas
provided that the rationale behind the
routing and siting choices is carefully
considered and adequately
communicated to both regulators and
the wider community.
• Contrary to the experience of most
other classes of project, the level of
social and environmental assessment
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required for cable system projects
under the EP may be less stringent than
those applied by the national regulators
of the countries in which the project is
located.
• In addition to the earliest possible
identification of the processes required
to achieve compliance with the social
and environmental requirements of
national regulators and the EP, the
integration of the national and EP
clearance processes should be
maximised.
• Project developers should be aware that
the requirements of the EP extend
beyond social and environmental
assessments. To give two examples:
the current IFC Performance Standards,
which underpin the EP, specifically
require that projects be subject to a
Social and Environmental Management
System; and that the project establishes
and operates a Grievance Mechanism
to ensure that consultation, disclosure
and community engagement continues
throughout construction and operation
of the project.
• Major sub-sea cable system projects
are unusual (perhaps unique) in that
they typically impinge on areas that are
outside of national jurisdictions. In
most EP projects any shortfalls in
meeting EP standards are dealt with by
supplementing the documentation
prepared to satisfy national regulators.
In the case of cable system projects
large sections of a project may not be
subject to any national environmental
approvals process. In the case of the
SEACOM project this gap was closed
through the development of an EP EIA,
covering the system as a whole.
7. REFERENCES
[1] www.equator-principles.com
[2] http://businessiq.westpac.com.au/The-
Equator-Principles.html
[3] The current listing of High Income
OECD Countries may be found at the
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following World Bank Group webpage:

http://go.worldbank.org/D7SN0B8YU0
[4]
www.ifc.org/ifcext/sustainability.nsf/Conte
nt/PerformanceStandards
[5]
www.ifc.org/ifcext/sustainability.nsf/Conte
nt/EnvironmentalGuidelines
[6] Recommendation on Common
Approaches on Environment and Officially
Support Export Credits; or ‘The Common
Approaches’
[7] www.seacom.mu

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