Export Development Canada (EDC) has become the latest export credit agency to stop financing for coal-related ventures as part of its new climate change policy.
The policy, which came into effect on January 28, means that the Canadian ECA will no longer finance coal-fired power plants, thermal coal mines or dedicated thermal coal-related infrastructure, regardless of geographic location.
A spokesperson for EDC tells GTR that the agency will also begin to phase out any assets in its portfolio that do not align with its new position as they come up for renewal or refinancing.
EDC will also begin setting targets to reduce the carbon intensity of its lending portfolio as of 2020, as well as integrating climate-related considerations, such as carbon intensity, into its risk assessment processes for future financing deals.
The pressure on ECAs to stop funding fossil fuel projects has been building in recent years with international bodies such as the OECD and the G20, along with multiple campaigns and charities, pushing for governments to throw their weight behind clean energy instead.
Nevertheless, a 2017 report by the Oil Change International and Friends of the Earth claimed that, from 2013 to 2015, ECAs provided more than US$32bn annually to support oil and gas projects, which is more than 11 times more than ECA financing for clean energy.
EDC’s shift away from fossil fuels brings it in line with other nation’s ECAs, such as Sweden’s EKF, which has joined the country’s Fossil Free initiative and aims to phase out fossil fuel financing by 2020.
The African Development Bank and the Asian Development Bank also ceased to finance oil and gas exploration projects as of 2012 and 2009 respectively. A range of international banks have implemented similar banks initiatives – most recently Barclays and Standard Chartered.
Data from the Canadian government place the country as the world’s eighth largest exporter of coal, with roughly half of its production going overseas, the majority of which ends up in Asia. Oil and gas products accounted for 19% of Canadian exports in 2017.
“At EDC, we recognise we can contribute to creating a sustainable economy through the policies we set and the choices we make, while honouring our mandate,” says Catherine Decarie, senior vice-president of corporate affairs.
“This revised policy clarifies the principles that guide our approach, articulates our explicit climate-related commitments and ensures EDC is keeping pace with leading players in the global financial services sector.”
The new climate change policy builds upon previous green moves by EDC, including being the first financial institution in Canada to issue green bonds in 2014. It has since issued more than US$1.5bn in green bonds.
According to EDC, the climate change policy is the result of consultations with external stakeholders, customers and experts, as part of its Environmental and Social Risk Management policy review, an independent report that was published in May 2018.
EDC is also reviewing its policies in areas such as the environment and human rights, the results of which are due later this year.