(Bloomberg, Ottawa, 19 July 2022) Canada’s export credit agency is targeting a 15% cut to its financing portfolio for upstream oil and gas production by 2030. The target will include a 3% shift – against a 2020 baseline – in the composition of production to gas from oil, recognizing that the former may play a role in supporting energy demand during the transition to net-zero emissions. EDC, a government-backed lender, also wants a 37% reduction in emissions per passenger kilometer from its airlines portfolio by 2030. The new targets for two sectors that make up a sizable portion of the agency’s financing business are part of its broader push to achieve net zero by 2050. Meanwhile, UKEF claims to have spent “its first year without providing any support for overseas fossil fuel projects”.
Canada
G-7 rolls out answer to China’s Belt and Road initiative
(Politico, Washington, 27 June 2022) Biden and other G-7 leaders meeting in Germany on Sunday pledged to provide $600 billion in public and private financing for developing country infrastructure projects over the next five years, in a move aimed at countering China’s growing global economic clout. The United States will “mobilize” $200 billion of the public and private capital for the Partnership for Global Infrastructure (PGII), the G-7’s answer to China’s multitrillion-dollar Belt-and-Road infrastructure initiative that Beijing launched back in 2013. It is not clear what portion of the US $200bn support will come from EXIM.
EDC launches program to guarantee bank loans to companies in carbon intensive sectors
(Globe & Mail, Toronto, 2 May 2022) Export Development Canada has agreed to partly guarantee $1-billion of loans which the Bank of Montreal plans to make to companies in carbon-intensive industries in order to help them lower their emissions, reducing the risks of the bank’s foray into funding an urgent but uncertain energy transition. The three-year guarantee agreement will provide financing for medium-to-large-sized Canadian companies, rather than the largest corporate entities, which have easier access to capital. EDC will guarantee up to half of BMO’s term loans to a maximum of US$60-million per borrower for up to seven years. It is an early result of a federal effort to help reduce the risks of funding investments in early-stage technologies that could be crucial to cutting greenhouse-gas emissions, such as carbon capture or hydrogen fuel.
Greenwashing won’t cut it: Canada risks disaster by barely mentioning financial sector in climate plan
(National Observer, Vancouver, 6 April 2022) Canada’s recently published emissions reduction plan provides a roadmap for how Ottawa plans to hit its 2030 climate targets, but critics say until the financial sector is aligned with climate goals, the government’s plans are “derelict.” Environmental Defence’s climate finance manager Julie Segal says Canada appears excited about the benefits of sustainable finance but doesn’t appreciate the risks from continued fossil fuel investments. First, there’s the systemic risk from climate change and how the financial sector and financial regulators approach that, and then there’s the piece about how the financial sector is contributing to climate change through investments,” she said. “And Canada is being derelict on those accounts.” The 271-page emissions reduction plan contains [only] 4 pages dedicated to “sustainable finance” that outline at a high level a few of the federal government’s initiatives. However, Segal says the brief attention to financial issues in the plan, when compared to the detail offered for other sectors, shows Ottawa isn’t grasping the importance of the file. “Part of the reason they’re not getting it is because the Sustainable Finance Action Council — all of the work on sustainable finance — is very much led by industry,” she said. “The federal government hasn’t thought about finance and climate properly. They just haven’t really understood what’s going on here,” said Adam Scott, director of Shift Action for Pension Wealth and Planet Health. Greenwashing won’t cut it because real emissions reductions are needed to protect the economy at large from ever-worsening natural disasters and the economic impacts of climate change. Page 5 of a recent Oil Change International report shows that Canada leads the world in its public finance support for fossil fuel investments.
EDC targets growing demand for ESG financing
(Globe & Mail, Toronto, 28 March 2022) Canada’s export credit agency is looking to capitalize on the growing trend for sustainable investing, launching a set of new financial tools aimed at supporting socially oriented businesses and helping large greenhouse gas emitters reduce their carbon footprint. Export Development Canada has issued green bonds since 2014, using the proceeds to invest in public transportation and renewable energy projects. [We have pointed out in other articles in this month’s What’s New that EDC provided more public finance for fossil fuels than any G20 country other than China, on average $13.8 billion in support to oil and gas companies each year between 2016 and 2018. So they have a long way to go to offset their fossil fuel vs sustainability imbalance.]
EDC backed loan to primarily Russian-owned Buhler Industries
(CBC, Winnipeg, 9 March 2022) In December 2020 Export Development Canada — a federal Crown credit corporation — signed a guarantee to back half of a $14-million loan to Winnipeg’s 97% Russian owned Buhler Industries to support the company’s ongoing operations. The manufacturer of farming equipment, including Versatile tractors, has been under scrutiny since Konstantin Babkin, who resigned as a Buhler director on March 2, made at least two public statements in support of Russia’s invasion of Ukraine. Babkin leads the Action Party, a Russian political party that has supported Russian President Vladimir Putin. On Feb. 21, Babkin tweeted out the party’s support of Putin’s decision “to recognize the Donetsk and Luhansk People’s Republics” in Ukraine. Buhler Industries has repeatedly denounced Russia’s attack on Ukraine. Babkin’s resignation did not impact his ownership stake in Buhler Industries, which is 97% owned by Combine Factory Rostselmash. That company is a subsidiary of Novoe Sodrugestvo CJSC, a Russian conglomerate co-owned by Babkin, current Buhler director Dmitry Udras and Buhler CEO Yury Ryazanov. EDC has not purrsued business related to Russian contracts or Russian borrowers since 2014, when Russia annexed the Crimean peninsula, Buhler Industries says pulling out of the loan could have a huge impact on Canadian workers, farm equipment dealers and farmers who count on the company for spare parts.
Paris Agreement alignment of EDC (NOT!)
(Perspectives Climate Group, Freiburg, 15 February 2022) Perspectives Climate Group has launched a new 41 page report which finds that despite commitments made at and after COP26, Export Development Canada’s activities are not aligned with the Paris Agreement’s 1.5 degree objective. In total, the exposure of EDC’s portfolio to carbon-intensive activities stood at 26% – equalling a total exposure of about USD$16 billion – by the end of 2020. Support for ‘cleantech’ activities, the Canadian label for climate- or sustainability-related activities, was small compared to fossil fuel-related support standing at about USD 2.33 billion per year. Total portfolio exposure is not reported for ‘cleantech’ and a definition of ‘cleantech’ based on a positive list of activities does not exist. Currently, negative emission technologies like carbon capture and storage (CCS) are eligible for the cleantech definition. While there are reasons to justify CCS in some cases, we deem it as misleading to classify them as ‘cleantech’ because they can lead to prolonging fossil fuel infrastructure lifetime and to spurring fossil fuel demand. EDC’s official exclusion policy for fossil fuels only applies to thermal coal, not mettalurgical coal, another high-carbon intensive and important Canadian export good. Limiting temperature increase to 1.5°C above pre-industrial levels requires massively re-directing financial flows away from carbon-intensive activities and towards low-carbon activities. However, despite commitments made under Article 2.1(c) of the Paris Agreement … many countries still provide significant financial support to fossil fuel value chains, among others, through their export credit agencies (ECAs). Canada’s National Observer notes that EDC needs to clean up its act on climate.
Canada Bangladesh FTA negotiations with EDC role?
(New Age Business, Dhaka, 8 February 2022) The governments of Bangladesh and Canada are working on signing a free trade agreement and a foreign investment promotion and protection agreement to increase bilateral trade between the two countries. Masud Rahman, president of the Canada-Bangladesh Chamber of Commerce and Industry, said that Export Development Canada (EDC) can play a role in increasing investment through the formation of ‘Bangladesh Fund’.
Why oil-loving Ottawa must end its financing of fossil fuels
(Toronto Star, Ottawa, 17 January 2022) By Karen Hamilton, director of ECA Watch member Above Ground, a project of MakeWay Charitable Society that works to ensure companies based in Canada or supported by the Canadian state respect human rights and the environment wherever they operate. Fossil fuel subsidies will likely figure prominently in climate policy debates when Parliament resumes sitting later this month, with particular focus on how Ottawa will fulfil its recent pledge to end fossil fuel subsidies by 2023, two years earlier than originally promised. Equally deserving of public attention is the government’s commitment to phase out public financing of fossil fuels. This support, which the government does not consider a subsidy, has led to Canada being singled out on the world stage as one of the biggest boosters of fossil fuels. At last count, this support totalled $13.6 billion a year on average. Most of Canada’s fossil finance comes from Export Development Canada (EDC), which provides loans, insurance and other forms of support to companies in Canada and abroad. EDC has recently issued billions in loans for controversial projects such as the Trans Mountain and Coastal GasLink pipelines.
JBIC and Private Banks Must Reconsider Decision to Finance LNG Canada Project
(Friends of the Earth Japan, Tokyo, 29 October 2021) The Japan Bank for International Cooperation (JBIC), a public financial institution fully owned by the Government of Japan, announced in a press release today that it has decided to provide up to US $850 million for the LNG Canada Project. The LNG Canada project plans to liquefy shale gas extracted from Montney, British Columbia and transported through its 670 km Coastal Gaslink pipeline to Kitimat for export to Asian markets.The decision by JBIC ahead of the 26th session of the Conference of the Parties (COP 26) to the United Nations Framework Convention on Climate Change (UNFCCC) starting from the end of this week in Glasgow, England, goes against the call by the UK government to stop public financing for fossil fuels, and shows that Japan’s approach to climate change is still far from that of the rest of the world. It is inevitable that Japan will once again become the target of criticism from the international community. Serious violations of indigenous peoples rights have been pointed out in an associated project of the LNG Canada project. We strongly condemn JBIC’s decision to provide financing, disregarding the impact on climate change and the human rights of Indigenous Peoples, and call on involved operators and financial institutions to immediately withdraw from the project.
