September 27, 2004

EDC issues second report on application of environmental review to project deals

Export Development Canada (EDC) has just issued the second annual report from its chief environmental advisor, reporting on transactions in 2003 that were subject to environmental reviews.

"Following up on the feedback received from members of the NGO community on our inaugural report issued in 2003, this report looks at how successful we have been at meeting our international commitments, and it provides more information on both EDC's internal environmental review processes and the transactions that were declined because of insufficient environmental information," said Arthur FitzGerald, EDC's chief environmental advisor.

In 2003, EDC signed 30 transactions related to projects which were subjected to and met its environmental review criteria. Nine of these transactions were related to Category A projects, i.e. those likely to have significant adverse environmental effects. The projects covered seven industry sectors, with the largest number (13) related to infrastructure. Five were in the manufacturing sector, followed by telecommunications (four), oil and gas (three), mining and power (two each), and transportation (one). In addition, over half (16) of the 30 transactions were for projects located in North America and the Caribbean. Seven were in Central and South America, four were in Europe and three were in the Middle East and Africa.

The application of EDC's environmental procedures has resulted in deals either declined for support or not pursued by EDC. For example, EDC will decline to support a project when it is unable to obtain sufficient environmental assessment information or when EDC determines that it is not justified in entering into a project. In 2003, for example, EDC declined support for a newsprint mill project on a greenfield site in Asia. In addition to benchmarking the project against World Bank and European Union standards, EDC did its own review and found fundamental gaps in the information it received relating to the project design.

Since 2001, EDC has developed an Environmental Review Directive (ERD) which established a methodology for reviewing projects, including categorization, standards and monitoring. EDC's environmental review process adheres to international agreements - notably the Organization for Economic Co-operation and Development (OECD) Common Approaches on Environment and Officially Supported Export Credit (Common Approaches) - as well as its own ERD. Moreover, before signing any project-related transaction, EDC is required under Canada's Export Development Act to determine, in accordance with its ERD, whether the project is likely to have adverse environmental impacts even with the implementation of mitigating measures. If so, the Corporation's environmental advisors must determine whether EDC is justified in supporting the transaction.

In addition to environment, EDC's commitment to corporate social responsibility (CSR) encompasses four other operating principles: business ethnics, transparency, community investment and organizational climate. Together, says Fitzgerald, the EDC process adds value to Canadian exporters, investors and banks. By adhering to international standards for project reviews, Canadian companies minimize risk to their customers, shareholders and other supporters, and their reputations, as well as their profitability.

EDC is a Crown corporation operating as a commercial financial institution. A self-sustaining entity receiving no annual government funding, it provides trade finance and risk management services to Canadian exporters and investors in markets worldwide.

The Chief Environmental Advisor's Annual Report, 2003 may be viewed on the EDC Web site, www.edc.ca/corpinfo/csr/environment/2003_chief_enviro_adv_report_e.pdf.

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