We welcome the Office of the Auditor General’s (OAG) report on EDC’s application of the Environmental and Social Review Directive (ESRD). As always, the audit and its recommendations are an important element of how we continuously improve our diligence processes under the scope of our ESRD.
Conducting business in a sustainable and responsible manner is an integral part of EDC’s values and something we take very seriously. We understand the urgency in taking climate action and, as Canada’s export credit agency, we are committed to enabling a low-carbon economy while fulfilling our mandate to support Canada’s exporters and enhance Canada’s competitiveness in the international marketplace.
The ESRD is one of several policies and due diligence processes under our Environmental and Social Risk Management (ESRM) Policy Framework, which includes the following policies: ESRD, Environmental and Social Risk Management Policy, Climate Change Policy, Human Rights Policy, and the Transparency and Disclosure Policy. This framework guides all our business and is aligned to various international agreements and standards, including the OECD Common Approaches, the UN Guiding Principles on Business and Human Rights, and the Equator Principles.
We would like to clarify to our stakeholders some important elements that were not included in the audit report to help explain how EDC approaches environmental and social risks.
First, the ESRD is a specific type of due diligence process that is scoped to project-related transactions that meet specific criteria (e.g., value of project, length of loan tenor, proximity to a sensitive area, etc.). The definitions of these transactions are in alignment with industry practices and international guidelines under the OECD Common Approaches and the Equator Principles. All EDC-supported projects adhere to the ESRD.
Second, project-related transactions that fall within the scope of the ESRD represent a small subset of the total number of financing transactions EDC does. For the period of the audit, EDC assessed 33 transactions as being in scope of the ESRD. All of the remaining financing transactions were reviewed under EDC’s other due diligence processes and follow guidelines in the policies listed above.
Third, for other types of transactions, EDC takes a risk-based approach to evaluate environmental and social risks. EDC’s due diligence processes are aligned with international best practices and are guided by our Environmental and Social Risk Management framework.
We are committed to continuous improvement. EDC’s priority is to ensure we have the right processes in place to identify risks and make good decisions. This means having processes that reflect best practices in the financial sector, for export credit agencies and ESG practices more broadly.
Some of the OAG’s recommendations will be actioned over the short-term and others will be explored as part of our standing ESRM policy review process, which will be next conducted in 2024-2025. Please see our specific responses to the OAG’s recommendations contained in the report for more information.
