Analyses of project finance (PF) are usually concerned with the distribution of risks between the participants in designing, building and operating an undertaking, each party looking to find the right balance between its exposure and its returns. This chapter has a different focus: it looks at the potential impact that such calculations by the parties can have on the society in which the project is located. The analysis will first identify the relevant components of risk management; it then considers the objectives of each of the project participants as they negotiate with one another over appropriate risk allocations; and it then considers how different allocations can affect the risks that the surrounding society incurs from the building and operation of a mine, oil pipeline or projects with similar potential impacts.

What is the appropriate relationship between the management of two types of risk arising in project finance: risks to returns for the project participants – from lenders through to subcontractors; and risks of damage to the basic rights of third parties – individuals or groups located in areas in which the project functions; as well as in the wider society? By ‘basic’ rights I will for these purposes understand the entitlements indicated in the norms of the International Finance Corporation (IFC) as well as Equator Banks (hereafter IFC/EP standards). These overlap with, while not covering the same terrain as, elements of international human rights law, but they are a useful benchmark for these purposes, not least because they have grown out of concerns of the finance industry itself.