Justine Hendricks on EDC’s role in tackling climate change

There are growing calls for the global finance industry to use its leverage to drive climate action. How is EDC answering these calls?

We know that the need to transition to carbon neutrality is urgent and we know it will be expensive. In Canada alone, it’s estimated that mid-market companies currently operating in carbon-intensive sectors will require $120 trillion in sustainable financing to support reaching net zero by 2050. As Canada’s export credit agency (ECA), EDC has a role to play by helping Canadian businesses access the financing they need to transition to a cleaner economy, remain competitive and realize their full export potential.

For us, sustainability has long been a key focus and we have continued to ramp up our efforts as the need for action has become more urgent. EDC has set bold sustainability objectives and, although there is much work to be done, we have taken great strides. ESG principles are at the core of our new 10-year corporate strategy and this year we committed to reaching net zero emissions by 2050. A big part of that involves changing the composition of our portfolio in a responsible and measurable way. We’re focused on helping our customers understand that climate action is a competitive advantage in business today, and we, ourselves, are increasing our support to businesses aligned with the low-carbon transition. Today, we are one of the largest financiers of Canada’s cleantech sector and have increased our support by more than 120% over the last three years. We’re also expanding on our product offerings, working hard to develop sustainable finance products that will help drive further momentum in addressing climate change.

Part of the purpose of COP is to foster the collaboration needed to tackle climate change. How does EDC work with others to drive climate action?

EDC believes climate change is the most important and complex issue of our time and that it will take global collaboration to address, particularly when it comes to financing the projects and initiatives necessary to realize this goal.

Collaboration is foundational to EDC, to our mandate, and how we do business. We are fortunate to have strong relationships with Canadian financial institutions, many of whom we have partnered with on existing products and services. We are looking to continue this approach on future products, including sustainable financing options.

Canadian companies are our most critical partners and we are committed to helping them innovate, support the transition to carbon neutrality, achieve longer-term business growth, and become more competitive on the global stage.

And, of course, our Government of Canada partners and export credit agency peers around the world are key as well. It is important that we continue to work together, learn from each other, and find ways to make tangible progress, and COP26 is a critical venue for enabling that engagement. 

To reach global net zero by 2050, international finance institutions will need to dramatically increase climate finance. What is EDC doing?

EDC’s net zero commitment is heavily focused on responsibly transitioning our portfolio to enable financing that supports the transition to carbon neutrality, and is backed by three components.

The first is that we are phasing out support for foreign oil and gas companies and are reducing our exposure in these foreign assets. This journey started in 2018 and we have exceeded our initial reduction targets and are pursuing more aggressive ones.

The second component is upping our own investment in climate research and science, then passing the dividends of that investment on to our customers. Over the last number of years EDC has added internal expertise and been an active participant in international organizations and agreements pursuing greater climate awareness and accountability.

The third part of our plan is sustainable finance—using EDC’s capital and climate expertise to support the transition plans of Canadian companies. Our cleantech investments are one obvious example, and we are happy to be one of the largest financiers of cleantech in Canada, supporting $13.5 billion in cleantech exports since making cleantech a corporate priority in 2012. Recently, we have been growing our business support for renewable energy companies and projects, providing $3.2 billion in business support to the renewable power generation sector in 2020. Our green bonds are another example, the first of which we issued in 2014, making us Canada’s first financial institution to do so. We have also introduced sustainability-linked loans, which are financing agreements that come with specific, climate-related performance conditions. Finally, we are developing new sustainable finance products to support the transition to carbon neutrality, and are working on specific sustainable finance targets to make our path to net zero clear and transparent. Those targets will be announced by July 2022.

What do you say to those who say that EDC’s support for oil and gas is at odds with your commitments to climate change?

Our philosophy supporting this activity is simple and consistent. It goes back to our vision—helping grow Canada’s economy, one that is more sustainable, responsible and inclusive, through international trade. We believe we can do this in the energy sector more effectively by being a partner to it, rather than its opponent.

We have heard the idea that we should just get out of oil and gas immediately. My answer to that is, “Then what?” What about the 180,000 people in Canada employed directly by the sector or the 400,000 it employs indirectly? What about the eight percent of Canadian GDP? And, what about energy driving more than 20% of Canada’s exports? What our economy needs is a transition to low carbon. Pulling out of oil and gas overnight is not a transition. It would be disorderly, disruptive, and rife with unintended consequences.

EDC is doing the much harder work of making a plan that puts the transitional needs of these companies front and centre. These are the companies that recognize the need for change and who are taking steps to do so. We believe that by engaging with these industries, by getting behind efforts already begun, or by prompting new efforts, we can do our part to enable a just transition and have a greater impact than we would by simply walking away.

What do you say to those who are not onboard with your net zero goals?

The way we see it at EDC is that the economy and climate are opposite sides of the same coin. We no longer have the luxury of tossing that coin to decide which crisis we will manage first. All business decisions are, ultimately, climate choices and we have come to a point where financial institutions, investors, customers, employees and regulators are expecting companies to step up. And around the world, in those markets where opportunity awaits, you should have no doubt that regulations are coming. We must all be prepared to respond to those changes or watch the borders close and opportunities slip away.

To be frank, reaction to our position has been mixed, and that’s not surprising. We have companies operating along a spectrum: from those who are fully invested in transition and sustainable planning to those who just aren’t there yet. EDC is here for those with a plan, and those working hard to develop one. We are determined to continue pursuing a path to sustainability, and in the process, make us a more effective partner for Canadian companies seeking international success. This is the reality of doing business in today’s world—as much a reality as meeting payroll and paying rent.

Climate action is table stakes.

For more information about EDC’s net zero by 2050 commitment, please visit its website.

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