Our 2030 Strategy places environmental, social and governance at the centre of our operations and culture. We see it as key to EDC’s long-term sustainability as an organization, and to Canada’s long-term economic sustainability. We also believe that, in today’s global economy, strong ESG practices are critical for Canadian companies—not just to mitigate risks but as a competitive accelerator.
Adding the Chief Corporate Sustainability Officer role to my portfolio signalled our intent to accelerate the embedding of ESG values, principles and processes across our organization and in our support of Canadian companies.
Perhaps the most telling example of how things have changed is the amount of time dedicated to ESG topics at board and executive meetings. At full board meetings, it rose from 20 minutes per meeting in 2018 to more than 180 minutes in 2021. We also updated the terms of reference of each board committee to reflect the ESG components they oversee.
In anticipation of greater demands on our Corporate Sustainability group, we reorganized into three teams—ESG Customer Success, ESG Policy, and ESG Strategy, Outreach & Reporting—each one headed by a new vice-president position, and we hired more relevant expertise. The ESG Customer Success team is divided into three customer streams (small, medium and large), in alignment with our 2030 Strategy and with our larger Customer Experience group structure, to help us provide the right level of ESG risk management, knowledge and advice to each segment.
They definitely will. In our due diligence and decision-making processes, before we even commit to engaging with a customer, we now weigh financial and ESG risks equally and consider the leverage we have available to help a company improve its ESG practices. We’re more willing than ever to say no to a transaction based on ESG risks.
We’re also more committed and better equipped to help customers unlock ESG opportunities. For example, with the transition to a low-carbon economy underway, we plan to use our capital and climate expertise to support more Canadian companies in their transition plans. We also see strong export potential for businesses owned or led by people who identify as part of equity-seeking groups, including women, Indigenous Peoples, Black and other racialized communities, persons with disabilities and the LGBTQ2+ community. We’re doubling down on our support for them, both to remove existing barriers and to help them seize emerging opportunities.
We have a good plan, but acknowledge that we don’t have all the answers. It’s going to be a phased approach, similar to the way we’ve implemented our Climate Change Policy commitments and TCFD disclosures over the past few years.
Our initial focus is on reducing our financing support for high-emitting sectors, including a sharp reduction in support for foreign fossil fuel projects and companies. Then, we will turn our focus to helping our Canadian customers lower their emissions while increasing our support for businesses aligned with a low-carbon transition.
While the 2050 target is important, it’s what you achieve by 2030 that will give the best indication of whether you can make it to 2050. That’s why our plan includes interim targets. Along with our published target of reducing financing support to the six most carbon-intensive sectors in our portfolio by 40% below 2018 levels by 2023, we’ve committed to setting and publicly disclosing emission intensity reduction targets and a sustainable finance target by July 1, 2022. A plan is posted on our website.
Given the makeup of our economy, we don’t see divesting away from Canadian oil and gas as a solution. Hundreds of thousands of people are directly or indirectly employed by the energy sector, and energy drives more than 20% of Canada’s exports. Instead, we intend to support oil and gas companies that are innovating and working hard to reduce their greenhouse gas emissions. Their efforts will play a key role in Canada’s overall transition to a low-carbon future.
We plan to work with, not against, our customers to decarbonize, which could include a number of solutions, such as sustainable finance products, cleantech investments, sustainability linked loans or green bonds.
Stakeholder engagement is a critical part of our approach to human rights—as it is for all aspects of ESG. We’re in a unique position to be able to engage with, and convene, people in both the public and private sectors to tackle issues and drive genuine change for the better.
Internally, we’ve introduced mandatory ESG training, which includes a section on human rights. We also formed and trained a working group of employees from across our business lines to help us embed our Human Rights Policy into our operations. Working with our human rights experts, we’ve developed new due diligence tools that will be launched in 2022 so that we can live up to our policy commitments.
Externally, we’re active in the Organisation for Economic Co-operation and Development (OECD) environmental and social practitioner group, and in 2021 presented an update on our Human Rights Policy implementation and leverage and remedy work. We also joined Shift’s Financial Institutions Practitioners Circle, a forum for leading practitioners to discuss their challenges and opportunities in implementing the United Nations Guiding Principles on Business and Human Rights.
In both of these areas, we continue to push ourselves to do better. In 2021, we commissioned a third-party ethics risk assessment and were pleased to see that EDC performed well against global industry peers, some of whom had been ranked by Ethisphere as being among the “world’s most ethical companies.” The assessment also made recommendations for improvement that we will work on in the coming year.
This was the second year of implementing our renamed and updated Transparency and Disclosure Policy, which sets out a framework for disclosing information about our business in a way that balances the confidentiality required by our customers with the details sought by interested Canadians. Our goal with the updated policy was to align with the times and with Canadian values, helping us evolve into a more open organization. Notably, in 2021 we updated our systems so that when a transaction is declined during an early-stage review, the ESG risks are identified and recorded. As a result of this change, we’re now able to report on the approximate number of prospects turned down for ESG-related risks at the product or account-team level. This represents a maturation of our reporting of ESG-related turndowns since this commitment was made in 2020.
Meeting our ESG commitments and targets will take us a long way toward achieving our ESG ambitions and demonstrating best-in-class practices in the financial sector. However, I would highlight a few key initiatives that started in 2021 and will ramp up next year: the refresh of our ESG Strategy to align with our corporate strategy; the findings of a materiality assessment; stakeholder consultations related to the next review of our environmental and social risk management policies; and, of course, near-term target setting to ensure we keep on track to achieve our net zero commitment. In all instances, we will publicly communicate our progress along the way. More detailed information about our ESG plans and strategy can be found in the ESG section of this report.
EDC Chief Corporate Sustainability Officer