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Canada’s export financing agency applies its own flagship environmental and social review process in less than 1 per cent of the transactions it supports, the Auditor-General of Canada’s office has found.

An audit report released to Parliament Thursday determined that of nearly 7,800 loans EDC supported between May, 2019, and March, 2023, just 33 (or 0.4 per cent) were reviewed under EDC’s Environmental and Social Review Directive. The report recommended that EDC apply the directive more broadly and warned that when it does not, it’s at elevated risk of financing projects that increase greenhouse gas emissions, harm biodiversity and violate human rights, and operating at cross-purposes to the federal government’s own commitments.

The audit was led by Elsa Da Costa, a principal in the Auditor-General’s office. Her team also found that the Crown corporation’s monitoring of projects it supports was “incomplete,” that its public reporting on reviewed projects “lacked transparency” and that it continues to support carbon-intensive sectors “as it does not consistently identify them as posing a high environmental risk.”

EDC’s chief risk and sustainability officer, Lorraine Audsley, wrote in a statement that projects requiring review under the directive “represent a small subset of the total number of financing transactions EDC does.” Separately, in its formal response included in the audit report, the organization stated that it “maintains a robust suite of due diligence processes to ensure transactions not covered under the scope of the directive are reviewed.”

EDC is Canada’s export credit agency and it performs many functions. One major responsibility is providing loans, insurance and other services to customers of Canadian exporters. It’s a crucial cog in the federal government’s apparatus for promoting international trade in Canadian goods and services.

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Many countries have export credit agencies, but EDC enjoys one of the broadest mandates among its peers. In its latest annual report, the organization said it had quadrupled its customer base in just four years, and it trumpeted plans to grow Canada’s exports by 60 per cent over the next decade.

Critics have long accused EDC of inadequately vetting its clients, which have included companies that have been dogged by allegations of corruption, human-rights violations and environmental abuses. Of particular concern recently has been EDC’s continuing support for carbon-intensive sectors such as airlines, upstream oil and gas operations, cement production and metals smelting.

See no evil: How Canada is bankrolling companies accused of bid-rigging, graft and human-rights violation

The Auditor General’s report pointed to recent EDC-supported transactions that were excluded from review under its own directive. Up to $150-million of funding was approved for one oil and gas project, for example. More than $300-million was awarded to a company that bought aircraft, but that deal also wasn’t captured under the directive because it involved the purchasing of equipment. EDC granted a $500-million loan in the mining sector for which EDC had identified “high environmental and social risks,” but the directive wasn’t applied in that case, either. (The report did not identify the companies involved.)

And the audit discovered two transactions with associated greenhouse gas emissions greater than 100,000 tonnes of carbon dioxide equivalent per year – amounts the report deemed “high.” But EDC deemed these effects to be “site specific” and not significant, and thus applied a lower level of due diligence.

EDC’s directive was introduced by its board of directors in 2001, and amended in 2010, 2019 and 2022. The board’s risk management committee is responsible for monitoring compliance. EDC said its management had briefed the board on the Auditor-General’s latest findings.

The Globe and Mail sought comment from EDC board chair Vivian Abdelmessih and other board members on Thursday and Friday; none were made available.

Karen Hamilton is director of Above Ground, a non-governmental organization that monitors the human-rights effects of companies based in Canada or supported by the federal government. She said Parliament should amend the Export Development Act to strengthen EDC’s due diligence.

“This [directive] applies to such a small percentage of transactions, and even in its application, there are ongoing problems that have been identified for at least five years, if not longer,” she said.

“It’s good to see that the Auditor-General is speaking out on some of these ongoing concerns.”

In its latest annual report, EDC boasted that it enjoys a “chorus of endorsement” from the federal government and, in particular, from Minister of International Trade and Export Promotion Mary Ng. On Friday afternoon, The Globe asked Ms. Ng’s office whether she shared the Auditor-General’s concerns, but did not receive an answer.

“Conducting business in a sustainable and responsible manner is an integral part of EDC’s values and something that the corporation takes very seriously as does our government,” Shanti Cosentino, Ms. Ng’s press secretary, wrote in a statement.

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