Statement of Priorities and Accountabilities for Export Development Canada
September 3, 2019
Ms Martine Irman
Chair, Board of Directors
Export Development Canada
150 Slater Street
Ottawa ON K1A 1K3
Dear Ms Irman:
I am pleased to provide you with the 2020 Statement of Priorities and Accountabilities (SPA) to guide Export Development Canada (EDC) in supporting the government’s policy priorities.
EDC plays a key role in helping Canadian exporters to access international markets. I would like to recognize Mairead Lavery’s leadership since assuming the position of President and CEO of EDC. She began her first 100 days by launching a comprehensive review of the organization’s competencies, and has already made important changes to the organization’s overarching structure and risk management team. Importantly, Mairead has prioritized greater openness and transparency – including with media and civil society stakeholders. Cultural change begins at the top of any organization, and Mairead has ably demonstrated the talents required to lead EDC into a new era of engagement with governments, business, and civil society.
I applaud EDC’s performance in facilitating $104.6 billion of total business, as reported in your 2018 Annual Report. In 2018, EDC transacted with thousands of Canadian exporters, counting both financial services and non‑financial customers, including many small and medium‑sized enterprises (SMEs). These activities are integral to the success of Canada’s international trade strategy. EDC’s record of success provides a solid foundation for continued growth and diversification, both in new sectors and new markets.
I request EDC to focus on the following priorities for the upcoming year:
Support the Government’s Export Diversification Strategy
Export diversification remains an integral part of the government’s strategy to support strong economic growth and prosperity for all Canadians. As outlined in the 2018 Fall Economic Statement, the government has launched the Export Diversification Strategy to help more Canadian businesses take advantage of commercial opportunities abroad, particularly in markets made more accessible by Canada’s free trade agreements. EDC support will be crucial for businesses to realize the full potential of these hard‑won market access gains. I request that EDC undertake a review of its risk appetite and services with the objective of increasing exports to non‑U.S. markets for Canadian exporters in order to support the Government of Canada in achieving its goal of increasing overseas exports by 50 percent by 2025, and that this review be shared with my office for awareness. Future annual reports should include a section measuring the number of transactions and business volumes by market in order to illustrate how EDC is supporting Canada’s trade diversification efforts.
I also request that EDC conduct an internal assessment to determine whether the organization is taking sufficient risk to meet the challenges of trade diversification ––both in terms of the types of businesses it supports, and the markets in which it is enabling business. In the 2019 EDC Statement of Priorities and Accountabilities letter, I requested that EDC deploy its full capacity with a view of ensuring that EDC is assisting as many Canadian firms as possible to reach new markets. As a follow‑up to this request, I ask that EDC prepare a report on its risk framework policies by November 15, 2019. I ask that this report highlight how EDC is supporting the government’s Export Diversification Strategy through a properly calibrated risk framework. I also ask that this report outline additional steps that EDC can take to ensure the organization’s risk-taking is oriented towards increased support for SMEs and the advancement of Canadian business interests in emerging global markets.
Support SME Efforts to Diversify their Export Markets
SMEs are foundational to Canada’s economy, representing 99 percent of all businesses in Canada and employing more than 10 million Canadians. They embody the best of Canadian entrepreneurship, innovation and high‑growth potential. However, only 11.7 percent of SMEs export. In order to ensure that the gains of trade are widely shared and grow our middle class, we need more of our SMEs to scale up through exports.
The 2018 Fall Economic Statement announced significant new investments in SME export‑readiness and promotion programming with the goal of supporting the government’s Export Diversification Strategy. Related to risk, I ask that EDC consider recalibrating its internal risk framework to ensure it supports an increasing number of SMEs. I expect EDC to support these initiatives by setting and pursuing concrete targets for increasing the number of SME clients served and by reporting on this measure in future annual reports. I ask that the reporting include: the number of small (1‑99 employees) and medium‑sized (100‑499 employees) enterprises receiving financial services, which financial services these companies are receiving, in which sectors these companies are and to which markets these companies are exporting.
Enhance the Assessment of Responsible Business Conduct and Human Rights
As outlined in my September 24, 2018 letter, I continue to encourage EDC’s work with respect to the enhancement of responsible business conduct and human rights policies. These subjects remain critical to the objectives of the Government of Canada. I appreciated your responses of November 29, 2018, and January 23, 2019, outlining the actions EDC has taken and will take in order to ensure it remains a role model for Canadian businesses.
I also note your August 1 and August 14 efforts to update the public on the World Bank’s ongoing investigation into Bombardier Transportation’s 2013 contract in Azerbaijan, and on EDC’s 2015 loan to Westdawn Investments. In the case of Bombardier, I am pleased to see that EDC has engaged a third-party to provide an assessment of the company’s compliance systems and practices. EDC’s proactive effort to ensure its involvement with the company is transparent and aligned with anti-corruption best practices are indicative of an important cultural shift in the organization’s management. In the case of Westdawn Investments, I appreciate EDC’s improved transparency and willingness to ‘own up’ to its unfortunate involvement in this transaction. I look forward to hearing more from EDC leadership regarding its lessons learned and a concrete plan to ensure improved due diligence practices are implemented.
I would also like to acknowledge EDC’s recent unveiling of a new, stand‑alone human rights policy. Given my prioritization of this subject, I ask that EDC work closely with Global Affairs Canada officials on the implementation of this new policy and future policies. It is crucial that EDC continue to model its efforts on industry‑accepted best practices and collaborate with CSR leaders, such as SHIFT, with the goal of adhering to Canada’s international commitments and being an industry leader. I ask that EDC continue to engage with leading international partners, including the World Bank’s Corporate Social Responsibility practice, to ensure the organization is at the forefront of global due diligence best practices.
Finally, I commend EDC for providing information on responsible business conduct in its annual report for the first time. I would like to reiterate my comments from the previous year in requesting that EDC provide a more robust section in its corporate plan with respect to its response to human rights and responsible business conduct concerns. This section should contain key performance indicators that are derived from the 2018 Annual Report, reflect industry best practices and align with Government of Canada priorities. Enhanced reporting and transparency will highlight EDC’s work in this important area and display this deeper alignment.
Align EDC Performance Measures with Government Objectives
I wish to commend EDC on its continued growth in total business facilitated from $103.5 billion in 2017 to $104.6 billion in 2018. EDC’s effective outreach, financial support to companies and promotion activities mean that more Canadian companies are growing by exporting or considering taking this next step into international commerce.
In order to reinforce effective governance, I ask that EDC maintain consistent performance indicators that align with the priorities of the Government of Canada and allow for an accurate and consistent assessment of EDC’s performance. This should be reflected across all EDC results and corporate reporting, including the Annual Report, the Corporate Plan and the EDC President & CEO Performance Agreement. As the minister responsible for EDC, I request that the volume of Business in Emerging Markets performance metric (or equivalent title) be reinstated to the EDC Scorecard. This metric reflects the government’s diversification agenda and demonstrates EDC’s support to Canadian exporters by servicing regions that are underserved with respect to financing.
As EDC continues to build its client base, it will be important to have strong data and tracking mechanisms in place to respond to changing client needs and characteristics. This should not supplant existing tracking statistics that EDC uses, but should provide quantitative evidence of EDC’s alignment with government priorities, such as providing financial support to businesses owned by women, Indigenous persons and members of other groups that are currently under‑represented in trade.
Furthermore, I request that EDC separate the tracking of financial and knowledge clients in future annual reports. As EDC is now tracking non‑financial clients as customers, it is important that the two remain separate for tracking purposes in order to be consistent with results reported in years previous to EDC introducing its suite of knowledge products.
Cooperate with the Trade Commissioner Service and Other Government Departments
EDC and the Trade Commissioner Service (TCS) play distinct, but complementary roles in helping Canadian firms unlock opportunities around the world. Both parties must work toward seamless client service delivery to optimize federal government support to Canadian exporters and look to manage their relationship as a strategic partnership.
I am pleased by how much both organizations have accomplished over the past year to make it easier to share information and intelligence, refer clients between both organizations, and conduct more coordinated marketing and outreach. Referrals between organizations must be efficient and responsive to the needs of exporters. To do this, EDC and the TCS agreed on making information sharing a default position. EDC and the TCS developed an information sharing framework that lays out all areas of information between both organizations as well as a client referral protocol to guide client referral from both sides. Where there are EDC and TCS offices abroad exchanging information on clients, customers, contacts, market opportunities or strategic plans, with the goal of providing streamlined, timely and seamless service to Canadian businesses, these partnership frameworks should be applauded and replicated. The effectiveness of pairing EDC financing and insurance products with TCS advisory services in order to help Canadian exporters reach priority markets cannot be overstated.
I request that both organizations institutionalize these new tools and approaches so that they are embedded in operations and organizational culture, becoming the new standard of cooperation. These new approaches should be reflected in the new memorandum of understanding between the two organizations that is currently under development. I also expect EDC to continue to build on this foundation, developing new measures to further strengthen collaboration to the benefit of Canadian firms. Canada faces unprecedented challenges and competition globally; we must make every effort to provide the cohesive and seamless federal government support of the highest quality to Canadian businesses to help them compete and win globally.
In addition to this important collaboration with the TCS, the fostering of relationships and coordination with other members of the government’s international trade ecosystem is critical to the realization of Canada’s Export Diversification Strategy. As a result, EDC should work with the Canadian Commercial Corporation and the Business Development Bank of Canada (BDC) to deliver on this strategy and address issues facing Canadian exporters.
I also encourage EDC to coordinate with Destination Canada, the Regional Economic Development Agencies and other key federal partners to contribute to the development of Canada’s tourism strategy. More specifically, I am requesting that EDC enhance its support of Canada’s tourism product and service export sector. This support should be aimed at increasing Canada’s competitiveness in the international market-place.
Continue to Support Foreign Investment Contributing to Exports
I appreciate EDC’s ongoing support for foreign direct investment, which contributes to Canada’s export capacity. I request that EDC look to collaborate with the Trade Commissioner Service and Invest in Canada in order to ensure that all related instruments and services to attract foreign investment are deployed where appropriate. This approach will establish a modern process for servicing potential foreign investment, one that is attuned to the realities facing corporations looking to establish new operations in Canada. Measures to attract foreign direct investment provide Canada’s abundance of high‑skill workers yet another avenue to input their knowledge and ingenuity into global value chains. The more Canada’s federal partners are aligned with respect to investment attraction, the more robust a role Canadians can play in a globally connected economy.
Engage Global Affairs Canada and Finance Canada on the Approach for Domestic Powers
Under the Export Development Canada Exercise of Certain Powers Regulations, the corporation is allowed to extend bonding support for public‑private partnership (P3) transactions, which affords Canadian construction companies the ability to compete with international firms. As the domestic powers will be examined in the context of the 2018 Review, and as EDC has been asked to not extend bonding support beyond December 31, 2019, I request that EDC engage with Global Affairs Canada and Finance Canada to develop a workable approach for the period between January 1, 2020, and the time when a decision on the provision of bonding services by EDC will emerge as a result of the 2018 Legislative Review. In the meantime, I request EDC to continue to seek ministerial authorization before extending this kind of support to Canadian companies.
Provide Support to Key Sectors
I commend EDC for its swift action in supporting the government’s assistance package to the oil and gas sector. Earmarking $1 billion to aid Canadian oil and gas companies is an important step in the right direction for aiding a vital sector of the Canadian economy facing unprecedented challenges. I ask that EDC provide a monthly report to my department and my office on transactions undertaken in this envelope in order to ensure my office is fully aware of its progress.
With respect to the steel and aluminum industries, I thank EDC for being a part of the government’s response plan in making over $900 million in commercial financing and insurance available over the next two years for assisting viable companies in these respective industries. It is my understanding that since October 2018, EDC has supported 29 companies in these sectors, providing a support of $235 million. I request that EDC continue to actively engage with the sector and provide services to those viable companies in need of support.
I note EDC’s commitment to make available an additional $150 million in insurance support to Canadian companies operating in the canola sector. Providing support to Canadian canola companies looking to diversify their export markets is in alignment with Government of Canada priorities as is increased engagement with firms in this sector. I ask that you proactively engage with Canadian canola exporters to ensure they have the technical information they need to make use of this insurance support. Further, I ask you provide my department, my office, and the federal-provincial canola working group with monthly written reports on the status of program implementation.
Increase Support for Sustainable Growth and Clean Technologies
I commend EDC’s collaboration with the TCS, BDC, Sustainable Development Technology Canada (SDTC) and other federal departments, including the Clean Growth Hub and Innovation Canada, to offer complementary and customer‑centric solutions and to further the government’s objective to move to a “one‑window” model for delivering federal support for clean technologies and firms. I encourage EDC to continue cooperation with BDC and SDTC on the Joint Account Management (JAM) mechanism and urge EDC to share with the TCS the names of JAM companies and the status of funding decisions so that the TCS can ensure that these high‑potential cleantech companies receive enhanced and targeted export development support from the TCS.
Furthermore, EDC and the TCS should continue to undertake joint events in Canada such as the Cleantech Global campaign to promote programs, services and funding mechanisms to support international growth in the sector. EDC should continue to support Canadian firms looking to leverage global climate finance opportunities, working in close coordination with the TCS as it implements its International Business Development Strategy for Clean Technology.
I appreciate that EDC has taken the steps to implement and publicize a new climate change policy aligning with Canada’s commitments and international leadership in combatting climate change as of January 28, 2019. The addition of sector‑leading experts on corporate social responsibility (CSR) to the EDC CSR Advisory Council and the recent release of policies resulting from the Environmental and Social Risk Management Policy review will allow EDC to build on its foundation in CSR and human rights screening and assessment.
As you know, the government is also committed to taking ambitious action on climate change. As part of Canada’s commitment to the Paris Agreement, the government is delivering on its pledge to contribute $2.65 billion by 2020‑2021 in climate finance to support developing countries’ climate change efforts. Canada’s contribution will continue to support sectors such as clean technology and renewable energy, climate‑smart agriculture, sustainable forest and water management and climate risk resilience. I expect EDC to continue to scale up and report to me on its support to climate change solutions through its annual report. As well, I ask that EDC report its climate finance activities to Environment and Climate Change Canada to ensure that EDC’s contribution is included in international reporting on how Canada is meeting its climate finance commitments.
Support the Government of Canada at both the OECD and in the International Working Group on Export Credits
I thank EDC for its ongoing contribution to the work of the Canadian delegations, led by Finance Canada, to the OECD Working Party on Export Credits and Credit Guarantees, the Participants to the Arrangement on Officially Supported Export Credits, and the International Working Group on Export Credits.
In recent years, emerging economy export credit agencies have joined OECD export credit agencies in assertively supporting exports. Global competition for export trade is high and it is more important than ever to support strong multilateral rules for the fair and transparent use of export credits while safeguarding against subsidies.
We expect negotiations for renewed multilateral rules for export credits to intensify over the coming year. Noting that these rules can materially impact EDC’s operations, I encourage EDC’s enhanced engagement in the technical aspects of these negotiations to ensure that negotiated outcomes will be credible, robust and in the interest of Canadian exporters.
Share Information as Directed
As the minister responsible for EDC in Parliament, I request to be provided with Board of Directors meeting materials, including agendas and minutes. The government’s role as EDC’s sole shareholder and the government’s emphasis on directional alignment across the trade portfolio require that a high level of visibility on the activities of Crown corporations be maintained. The Financial Administration Act (FAA), Part X, Section 149 (1), provides me with the authority to request information such as “accounts, budgets, returns, statements, documents, records, books, reports or other” as I may require.
I have learned that EDC Chief Executive Officer Mairead Lavery has initiated regular calls with the Deputy Minister of International Trade and the Deputy Minister of Finance. I appreciate these efforts and request that these calls continue.
I am pleased that FinDev Canada is now fully operational and is engaged in pursuing transactions that will contribute to Canada’s international assistance priorities.
I welcome the appointment of FinDev Canada’s first official Board of Directors in April 2019. I am pleased with the inclusion of four independent board members, including many with significant international experience in development finance. This is a major milestone in establishing FinDev as a key player in the development finance space.
FinDev Canada is approaching transition from its Early Phase (2018-2020 – during which it is focused on building its capabilities and a viable portfolio – to its Growth Phase (2021-2023). While I encourage FinDev Canada to continue building out the institution, I ask that FinDev Canada take the necessary steps to stay on course on the established growth path, which requires it to complete seven to nine deals annually in its Early Phase, and 10 to 18 deals annually during its Growth Phase.
I note that integrating leading technology and data solutions into FinDev Canada’s operations and investment focus is a key strategy for the institution to set itself apart from other Development Finance Institutions (DFIs). I ask to learn more on how FinDev Canada operationalizes this strategy as well as its plans to become a technology leader among DFIs.
Now that FinDev Canada has applied its Development Impact Framework to select and conclude transactions, I look forward to hearing more on its experience and lessons-learned in using the tool. In particular, I would welcome any refinements resulting from this experience and look forward to plans to share the lessons with GAC officials.
In that regard, I ask that FinDev Canada continue to work closely with GAC, including with our International Assistance Innovation and Climate Finance programs, to establish the parameters of such collaboration. The collaboration should take into consideration the specificities of both institutions’ respective objectives, capabilities and authorities, resulting in a coherent and well-functioning program offering that will position Canada at the forefront of development finance effectiveness.
I also note that, as part of its approach to the Environmental, Social and Governance (ESG) assessment of its transactions, FinDev Canada has an Interim Environmental and Social Assessment Policy in place, which is expected to be reviewed now that the institution is fully operational. In that regard, I look forward to a finalized Environment and Social Assessment Policy, responding to the highest international standards on the matter.
While I understand that all DFIs face the challenge of demonstrating additionality, I ask FinDev Canada to work to concretely demonstrate how it is not displacing commercial capital as it invests in developing markets. In that regard, I look forward to learning more on the development of FinDev Canada’s Additionality Assessment Framework.
In closing, I commend EDC for its performance in the previous year and encourage EDC to continue to support the trade diversification and growth of Canadian exports while ensuring responsible governance. Thank you for your ongoing collaboration and engagement with my department and my office. I look forward to continuing to working with you to continue to ensure that EDC fulfills its mandate of supporting Canadian exporters, while also reflecting Canadian values.
The Honourable Jim Carr, P.C., M.P.