Protecting People and the Environment
We commit to promoting and upholding high social and environmental standards in all aspects of our business and with all companies we support, both large and small.
Environmental and Social Risk Review
We understand that there are environmental and social risks involved in the trade that we facilitate for Canadian exporters and investors. It’s critical for EDC to have strong procedures to identify potential negative impacts and ensure that all transactions we support are financially, environmentally and socially responsible.
Our environmental and social risk management framework guides all of our business and is underpinned by various international agreements and standards. The framework consists of our Environmental and Social Risk Management Policy, our Environmental and Social Review Directive (ERD) and our Disclosure Policy.
Our Environmental Advisory Services team (EAS) has established numerous procedures for assessing the environmental and social risks posed by the business EDC supports. Transactions are reviewed for these risks along a spectrum that takes into account the nature of the transaction and includes:
Financial officer screening of individual transactions
Exporter declarations that they are not aware of any significant environmental consequences of their transaction and/or business
Risk reviews by the EAS team
Application of the OECD Common Approaches on Environment and Officially Supported Export Credits
Application of the Equator Principles, an initiative among commercial banks and other international financial institutions to assess and manage environmental and social risks in limited or non-recourse project financing transactions
Application of our ERD, a legally binding requirement under the laws of Canada that is relevant for larger, project-related transactions
Review of non-project transactions
Non-project transactions are reviewed under a standardized risk assessment method that evaluates a customer’s process for managing its environmental, social and human rights risks. EDC’s Environmental Advisory Services team (EAS) reviews information related to the nature of the industry and the project, regulatory requirements, the company’s track record and corporate environmental and social risk management policies and procedures, and its commitments to CSR initiatives, standards and guidelines, among other aspects. The outcome of the assessment is used to advise EDC business teams on the acceptability of the customer’s performance in these areas.
Requests for financial services that relate directly to projects are reviewed by our EAS team against the requirements of our ERD and host country standards, as well as the internationally recognized OECD Common Approaches and the Equator Principles. These also reference the IFC Performance Standards on Environmental and Social Sustainability, a benchmark standard used by project sponsors to help avoid, mitigate and manage risks and impacts as a way of doing business in a sustainable way.
When EDC is involved in projects, the EAS team works with our underwriting and business teams to negotiate and structure environmental and social covenants, action plans and annual monitoring and reporting requirements in loan agreements. EAS also works with project sponsors and companies directly to provide guidance and propose risk mitigation plans.
A key part of our process, linked to commitments such as the Equator Principles, is ongoing monitoring of project performance. Once a loan agreement is signed, the EAS team requires project sponsors to provide documentation demonstrating their ongoing commitment to meeting national and international standards through monitoring reports, independent assessment or meetings. The team often visits project sites to confirm that environmental and social standards and commitments are being met throughout the life of the loan.
EDC is chair of the OECD Export Credit Agencies Environmental Practitioners Group and involved in a number of working groups including the Human Rights Practitioners Group. We are also the only export credit agency and Canadian financial institution to sit on the Steering Committee of the Equator Principles. These appointments enable us to participate in international discussions on how to approach environmental and social risks in international business, keep pace with international standards and benchmark methodologies for assessing risk.
Learn more about our approach
7 Equator Principles transactions
Seven projects assessed under the Equator Principles reached financial close in 2015, mainly related to mining and green energy projects. Details are posted to our website.
We continued to implement the recommendations of the 2014 audit by the Office of the Auditor General, including specialized training in greenhouse gas emissions auditing and calculations, and updating procedures for analyzing social risks (see Human Rights for details).
As a member of the Equator Principles Steering Committee, EDC co-led the Consistency Working Group, which is responsible for handling inquiries on scope and application of the Equator Principles from other Equator Principles Financial Institutions (EPFI) and for developing draft guidance notes for EPFI use on specific topics.
Where We’re Going
As growing numbers of Canadian exporters expand beyond traditional markets, EDC needs to be in a position to serve more customers and address increasingly complex environmental and social risks. For example, in response to the landmark 2015 Paris Climate Change Conference, we’re exploring ways to build our capacity and engagement on climate change. In addition to developing a robust approach for defining, categorizing, and reporting on our climate finance-related activities, EDC will be exploring mechanisms to better understand the carbon impact of our lending portfolio. We continue to contribute to the strategic direction of the Equator Principles and remain active in the Environmental Practitioners group of ECAs. EDC’s participation in both these organizations encourages cross-collaboration through various communities of learning as we work to ensure a level and consistent playing field for Canadian exporters and investors.
We also plan to work more strategically with EDC business teams to integrate CSR considerations. This will allow us to play a greater role engaging with potential clients in understanding their business needs and priorities while increasing our influence in areas of responsible business practices. We continue to build out and enhance our monitoring program of transactions we support to assess compliance with host-country and international standards, and further develop our process for corrective actions and response. To reflect these and other operational enhancements, we continually review and evaluate our risk review policies and procedures to incorporate evolving best practice and industry standards. As a result of these actions, EDC expects to strengthen its reputation as a CSR performer, while at the same time, ensuring we remain relevant to the Canadian exporters who we serve.