In October 2007, EDC joined a growing list of international financial institutions committed to the Equator Principles, a financial industry benchmark for the determination, assessment and management of social and environmental risk in project financing.
Prior to adopting the Equator Principles, and since 2003, EDC has also been applying the Organisation of Economic Co-Operation and Development’s Common Approaches on the Environment, which binds export credit agencies to specific environmental and social review practices. EDC views the Equator Principles as a complement to the Common Approaches, and enables EDC to bridge the leading practices of both ECAs and commercial financial institutions. EDC’s other commitments to assessing projects is cemented in its corporate Environmental and Social Risk Management Policy and the EDC Environmental and Social Review Directive (ESRD). The ESRD sets out the process by which EDC will assess the environmental and social impacts (and mitigation measures) of a project, and is a legally-binding requirement for EDC under the laws of Canada.
The Equator Principles, the Common Approaches, and the ESRD are aligned in the requirement for projects to meet the elements of the same international standards, namely the International Finance Corporation’s Performance Standards on Social and Environmental Sustainability and sector-specific Environmental, Health, and Safety Guidelines. By aligning these requirements, clients of ECAs and commercial financial institutions benefit from meeting the same standards when undertaking environmental and social impact assessments.
Further detail on EDC’s project review process is described in Understanding EDC’s Project Review Process.
EDC has a dedicated team of environmental and social risk specialists, tasked with implementing EDC’s environmental and social review processes and procedures, including conducting reviews under the Equator Principles. The ESG Customer Success team consists of environmental and social advisors, reporting to the ESG Customer Success Directors and the Vice-President of ESG Customer Success Group. With different backgrounds including environmental science, biology, engineering, business, and international development, the team draws on a breadth of experience and knowledge relevant to the environmental and social risk assessment field.
Projects are examined by ESG Customer Success for potential adverse environmental and social impacts.
Initially, EDC has various forums in place including team alignment meetings, huddles, and a triaging committee, that help identify deal related issues. At this point in time, ESG Customer Success then looks for areas that may not be aligned with our internal policies on human rights, environmental and social responsibility. Depending on the degree to which projects measure up to the internationally recognized standards noted above, we will either engage project sponsors in further dialogue, discuss ways to deal with any serious issues, or, if gaps cannot be addressed, we decline the project outright.
Should we proceed to the next stage, EDC takes an in-depth look at the project design and evaluates the Environmental and Social Impact Assessment provided by the project developer/sponsor. Information requirements and the depth of EDC’s review are linked to the project categorization: Category A, B or C. In some cases, a lender’s group, of which EDC is a member, hires a number of specialized advisors to assist with a more detailed review. An independent environmental and social expert will provide unbiased input about the project’s potential impacts, adequacy of the mitigation measures and the project’s ability to meet international standards. Transactions supporting projects are reviewed by senior leadership during the due diligence process prior to signing of the loan.
ESG Customer Success also ensures the project developer/sponsor formulates an environmental and social action plan. The plan will describe and prioritize time-limited commitments to complete any additional measures that the project will satisfy EDC and that it has fully met the requirements of the IFC Performance Standards. If the outcome of this stage is favourable, the environmental and social review must be authorized by EDC's President. After the loan agreement is signed, EDC continues to monitor the project for compliance.
For a list of transactions that underwent a review under the Equator Principles, see table below.
Four Project Finance transactions (PF) and one Project-Related Corporate Loan (PRCL) subject to the Equator Principles reached financial close during 2021.
|Project Name||Project Description||Sector||Region||Project in Designated Country||Project Finance (PF) or Project-Related Corporate Loan (PRCL)||Independent Review Performed||International Standards Applied|
|Category A Projects|
|Guajimia Storm and Sanitary Sewer Project||The Project will support the rehabilitation of the Guajimia storm and sanitary water sanitation system in the Municipality of Santo Domingo Oeste, within the urban area of the Santo Domingo Province of Dominican Republic (Project).||Infrastructure||Americas (Dominican Republic)||No||PF||Yes||IFC Performance Standards|
|Category B Projects |
|Minera Los Pelambres||Investment project including desalination plant, pumping station and pipeline, new SAG and ball mills, additional floatation cells and a stockpile expansion||Mining||Americas (Chile)||Yes||PRCL||No||Host Country Standards (Environmental Impact Assessment)|
|Hillston Solar Farm||Construction and operation of an 85 MWac solar farm in NSW Australia||Power||Asia Pacific (Australia)||Yes||PF||No||Host Country Standards (Environmental and Social Assessment)|
|Azure Power 41 Solar Project||The Project consists of a 300MW solar photovoltaic power project in the Jodhpur District of Rajasthan, India and consists of the construction, installation and operation of photovoltaic solar panels, internal access roads, an office building and a 2.4km transmission line connecting the Project to a substation on a 596 hectare site.||Power||Asia Pacific (India)||No||PF||Yes||IFC Performance Standards (Environmental Impact Assessment, Environmental Management Plan)|
|Lightsource Solar Plants West Wyalong and Woolooga||The Projects consist of the construction of the 211MW Woolooga Solar PV Farm in Queensland, Australia and the 105MW West Wyalong Solar PV Farm in NSW, Australia. Each project consists of the construction, installation, and operation of photovoltaic solar modules from Risen Energy, a substation and underground and overhead powerlines, with PCL Construction acting as the EPC contractor for the construction of the Projects.||Power||Asia Pacific (Australia)||Yes||PF||No||Host Country Standards (Environmental Impact Assessment)|
Host Country Standards, IFC Performance Standards
A summary of EDC’s assessment of the environmental and social impacts is prepared for all Category A projects. Those reviews can be found in this table.
1 Equator Principles III and IV requires reporting on transactions which have reached financial close. For additional detail see ‘The Equator Principles, June 2013’, and ‘The Equator Principles, July 2020’.
2 Designated Countries are those countries deemed to have robust environmental and social governance, legislation systems and institutional capacity designed to protect their people and the natural environment.
3 Project-Related Corporate Loans are corporate loans, made to business entities related to a single Project, either a new development or expansion, where the Known Use of Proceeds is related to a single Project. For additional detail see ‘The Equator Principles, June 2013’, and ‘The Equator Principles, July 2020’.
|Project Finance ||Project-Related Corporate Loans |
|Sector||Category A||Category B||Category A||Category B|
|Independent Review Performed|