In 2020, we achieved an important milestone well ahead of schedule by meeting our 2023 target to reduce our lending exposure to carbon‑intensive sectors. In 2021, we plan to build on our momentum, elaborating on our efforts to address climate change with new targets.
Heading into 2020, EDC’s Sustainable Business and Enablement group had set bold objectives for the year. We were focused on implementing key elements of our updated Environmental and Social Risk Management (ESRM) Policy Framework, continuing the buildout of our financial crimes program and enhancing our integration of environmental, social and governance (ESG) principles across EDC. Needless to say, early in the new year those plans changed – although, upon reflection, not as markedly as initially expected.
As EDC mobilized financial support for Canadian companies, it became starkly apparent that we were at an inflection point in the global view of ESG and the role ESG principles would play in facilitating a shift to a more sustainable economy, increasing the resiliency of companies and helping to build back better from the ravages of the economic shock brought on by the pandemic.
EDC doubled down, focusing and dedicating its energy to supporting Canadian companies going through the challenging times. It’s important to acknowledge the energy that EDC employees devoted to building entirely new financial programs literally overnight. Rather than compromise our sustainability and responsible business objectives, they looked for opportunities to maintain and build on our strong ESG foundation. We recognized that responsible business and ESG are critical components of fostering resiliency and future planning for Canadian exporters’ success. Among the many lessons we and others were taking from the pandemic was the importance of having strong ESG practices and how they define high-performing companies.
Throughout 2020, we focused on finalizing the implementation of a number of new policies rolled out under our ESRM Policy Framework. This included work on our Climate Change Policy related to target setting and implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and work on our Human Rights Policy, as we developed approaches to leverage and remedy.
In 2020, we achieved an important milestone well ahead of schedule by meeting our 2023 target to reduce our lending exposure to carbon-intensive sectors. In 2021, we plan to build on our momentum, elaborating on our efforts to address climate change with new targets. This will involve continuing to reduce our exposure to carbon-intensive sectors while growing our support of clean technology and other business aligned with the low-carbon transition. EDC is also focused on supporting companies as they work to reduce their emissions.
We remained committed to assessing our financing portfolio and making decisions on how to manage its overall carbon intensity. This was exemplified in the work we undertook with our customers operating in the oil and gas sector to encourage disclosure of their climate-related governance, strategy, risk management, metrics and targets through annual reporting in line with the recommendations of the TCFD. Through these efforts, it became clear that many of these companies were already focused on managing and reducing their climate-related risks and welcomed EDC’s solutions and support in this area.
Our large and diverse portfolio includes companies operating in carbon-intensive sectors, as well as businesses at the leading edge of the cleantech sector. In light of our climate commitments, we understand the public’s interest in the support we provide to Canada’s oil and gas sector, which remains an important segment of our national economy and will need to play an increasing role in the transition to a low-carbon future.
The amount of business support we provide to the oil and gas sector has been gradually reducing in recent years. In 2020, EDC provided approximately $8.1 billion in total business support to the oil and gas sector through our financing and insurance solutions, compared to $10.6 billion in 2019 and $12.5 billion in 2018. Meanwhile, EDC has steadily increased its support of Canada’s burgeoning cleantech industry. The number of cleantech companies we served in 2020 grew by 27 per cent compared to 2019, to 288 businesses, and we provided $4.55 billion in total business support – an 80 per cent year-over-year increase. For context, compare this to 2015 when EDC served 86 cleantech customers and facilitated $917 million in business. This progress demonstrates positive momentum, but there is more work to be done. Our goal over the long term is to continue to grow our support to the cleantech sector as we build the portfolio of the future.
We continued to advance our Human Rights Policy and implementation plans with the approval of EDC’s Principles on Leverage and Remedy, which are discussed in our 2020 Human Rights Disclosure. Our approach to leverage and remedy was developed through extensive stakeholder engagement, and we consider it to be critical to our broader objective of equipping Canadian businesses with the right risk management approaches to participate and compete in a global economy where expectations for responsible business conduct are rising.
EDC completed the review and update of its Transparency and Disclosure Policy to reflect a more open, clear and responsive approach and to align with stakeholder needs. In keeping with our policy commitments, we’ve included information in this report on the number of financing transactions and companies turned down because of their ESG risks. This was one of the pieces of information that interested Canadians have often told us is important to them, and we heard it again in 2020 in our first-ever, formal engagement sessions between EDC executives and representatives of civil society organizations.
Finally, of significant importance has been our work to formalize our ESG strategy, which is aligned with EDC’s 2030 corporate strategy. Through our ESG strategy objectives, we are actively integrating ESG principles across the corporation so that we can clearly demonstrate how EDC is evolving its approach to environmental, social and governance principles and how we reflect them in our work with customers. The strategy is not just about our current suite of policies and processes, but about how we are building new sustainable products and services, how we engage with our customers and stakeholders, and how we promote sustainable financial products as a key to building a resilient economy. We will be looking to provide more proactive support to our customers through the development of strong ESG frameworks to support their resiliency, meet standards and set them up for success as exporters looking to expand into more diverse and challenging global markets. Our ESG strategy builds on our strong foundation in ESG and sets us up to develop our expertise further as we seek to be a role model and leader in supporting our partners and customers.
We feel that we’ve made great strides in 2020 but know that we must improve if we are to give Canadian companies the support they need to succeed in ever-changing international markets. EDC’s 2030 Strategy puts ESG principles at the core of our corporate decisions. They will not only dictate how we operate but will be part of our value proposition to the companies we support across all segments and sectors. We firmly believe that this is key to EDC’s – and our customers’ – long-term sustainability. I look forward to reporting back on our progress.
Senior Vice-President, Sustainable Business and Enablement