Lender Liability for Environmental Damage – Some Preliminary Thoughts on Efficiency and Justification

Abstract

This paper discusses some assumptions applied to justify lender liability for environmental damage. In the paper’s first part views are discussed as to who, the lender or the borrower, can be regarded as the cheapest cost avoider in light of the cost-benefit analysis of environmental liability. Subsequently, the paper discusses a model of lender conduct under international codes of conduct for financial institutions (e.g. the Equator Principles), based on ethical justification. The conclusion compares the approaches.

Keywords: Lender Liability, Environmental Damage, Cost-benefit Analysis, the Equator Principles