THE STANDING SENATE COMMITTEE ON HUMAN RIGHTS
OTTAWA, Wednesday, March 29, 2017
Committee on Human Rights met this day at 11:30 a.m. to
study issues relating to human rights
and, inter alia, to review the machinery of government dealing with Canada’s
international and national human rights obligations; and to study
issues relating to the human rights of prisoners in the correctional system
(consideration of a draft budget).
Senator Jim Munson (Chair)
in the chair.
The Chair: Good afternoon
to the public. This is the Standing Senate Committee on Human Rights. We're
back after a break. We have a number of studies on the go, and of course one
is the study dealing with Canadian prisoners in Canadian prisons, but we're
taking a break today to get back to a study that we've been doing for some
time on the initiative of Senator Ngo, and that has to do with the
exports protection act. Senator Ngo and a few other senators felt that we
needed it tidied up a bit before we have a report before the end of March.
Well, it's pretty close.
Today we have before us, from EDC,
Export Development Canada, Christopher Pullen. Before we call upon him,
we'll have the senators introduce themselves. We'll start on my right.
Senator Bernard: Wanda
Thomas Bernard from Nova Scotia.
Senator Martin: Yonah
Martin from British Columbia.
Senator Ngo: Thanh Hai Ngo
Senator Omidvar: Ratna
Omidvar from Ontario.
Senator Hartling: Nancy
Hartling from New Brunswick.
Senator Pate: Kim Pate from
Senator McPhedran: Marilou
McPhedran from Manitoba.
The Chair: I'm Jim Munson,
Welcome, Mr. Pullen. The floor is
yours. There will be a few questions for you.
Christopher Pullen, Director,
Environmental Advisory Services, Export Development Canada: Thank you,
Mr. Chairman and honourable senators, for inviting Export Development
Canada, that's EDC, to appear before this committee to discuss EDC's
environmental, social and human rights assessment procedures and policies.
My name is Chris Pullen and I'm
the director of the Environmental Advisory Services at EDC, and I'm here
today to speak to the committee about how EDC undertakes our assessments of
environmental and social risks related to our business activities and those
of our customers.
It is my hope that some of my
testimony today can be of use to you in your study of economic levers to
enhance human rights internationally.
By way of background, EDC is an
arm's-length Crown corporation mandated to help Canadian companies export
internationally. As Canada's export credit agency, we provide financing,
insurance and expert advice to Canadian companies as they seek to grow their
business internationally. EDC operates on commercial principles. It is
financially self-sustaining, does not receive annual funding from the
Government of Canada and, in fact, regularly pays a dividend back to the
government. In 2016, we partnered with over 7,100 companies, 80 per cent of
which were small- to medium-sized businesses.
Conducting business in a
responsible manner is a corporate priority and something EDC takes extremely
seriously. Our environmental and social risk management framework guides all
of our business activity and is underpinned by various international
agreements and standards to which we are party. We evaluate these standards
regularly and adjust our framework to respond to changes in global best
As part of our commitment to doing
business in a responsible manner, all transactions EDC considers are
screened under a standardized risk management framework. This framework
provides guidance on how we evaluate the transaction and a potential
customer system for managing their environmental and social risk, which
includes human rights.
In my role, I'm responsible for
the environmental and social risk advisory team at EDC, which is a group of
experts who specialize in areas related to environmental management,
biodiversity, community engagement, occupational health and safety, labour,
human rights and climate change. My team is responsible for evaluating and
providing guidance to our business teams on the environmental and social
risks of the transactions that come in to EDC for consideration.
For each transaction request, EDC
has a process to evaluate a company's track record; their corporate,
environmental and social risk management policies; their commitments to
various domestic and international standards; the guidelines they observe;
and how they address Canadian law, as well as the laws of the importing
countries in which they're planning to operate.
The outcome of our assessments
provide guidance to EDC on the potential customer's performance in these
areas, as well as the overarching country risks, and we make recommendations
on whether we should proceed with providing support.
is considered an international leader amongst export credit agencies and
commercial banks in how we undertake our assessments, and we are often
sought out by other financial institutions for advice and consultation.
In the case of support for large
infrastructure projects, which fall under our project finance program, EDC
follows strict requirements that are outlined in what is called our
environmental and social review directive. Under this directive, for a
project to be considered for support, it is required to meet international
standards, which include the IFC performance standards on environmental and
social sustainability, the OECD's
common approaches and the Equator Principles, the latter two being risk
management frameworks used by ECAs — export credits agencies
— and international commercial banks for assessing and mitigating
environmental, social and human rights risk.
The OECD common approaches,
which form the foundation of EDC's policies, are an agreement among OECD
countries on the approach to take when assessing environmental and social
risks related to officially supported export credits. The most recent
revision of the common approaches includes specific guidance for export
credit agencies for addressing human rights risks, including those outside
of project scenarios. EDC was a key member of the working group that made
The Equator Principles
are an environmental and social risk management framework developed by
international commercial banks that assess and manage environmental and
social risks, including human rights, for project financing. Some export
credit agencies are now members of the Equator Principles, including EDC.
EDC is also the first Canadian member of the steering committee of the
Equator Principles and we have played a lead role in strengthening these
standards over our involvement of the past six to eight years.
The IFC performance standards,
which are the benchmark standards for many organizations, including EDC, the
Equator Principles and those common approaches were developed for clients of
the IFC, which is the financing arm of the World Bank.
These standards outline the requirements for projects, including things like
environmental protection through the lifetime of the project, labour and
working conditions, biodiversity, pollution prevention, community
engagement, community safety and security and grievance mechanisms. These
standards are recognized as industry best practices and followed by
progressive and world-leading financial institutions.
To speak specifically to human
rights, EDC takes seriously the role it has in ensuring human rights are
protected in the business it supports. This means both working internally to
ensure our processes and procedures are constantly being re-evaluated and
updated to align with current best practice and emerging issues, and working
with Canadian companies to ensure they understand the risks and
responsibilities they take on when exporting internationally.
The evolution of EDC's approach to
human rights predates the work of John Ruggie, whose principles have become
the benchmark for business and financial institutions for their activities
abroad. These principles resulted in the development of the UN Guiding
Principles on Business and Human Rights
and they have become a key element in influencing and informing our
EDC has a publicly available
statement on human rights, and this statement, coupled with our internal
policies, the common approaches, the Equator Principles and the IFC
performance standards, guides our practices in assessing the human rights
implications of our business.
This was a high-level summary of
the work EDC does in assessing and mitigating the environmental and social
and human rights impacts and effects of its business around the world. Our
processes are always evolving. We actively monitor and participate in
international discussions in the areas of corporate social responsibility,
which include human rights, the environment and society to ensure that we
are keeping pace with leading financial institutions, academia, NGOs and
I'm happy to delve further into
detail in answering any questions you have regarding EDC's policies and
The Chair: Thank you very
much. As I mentioned before, this study that we're on now was at the
initiative of Senator Ngo. Senator Ngo, you have the floor.
Senator Ngo: Thank you for
your presentation. As you know, this committee has received some concerns
and its filtering software. We heard testimony last November that Netsweeper
filtering software has been used in Bahrain to quell legitimate dissent.
Furthermore, the committee received a letter from Above Ground last January
stating that EDC has granted financial support to the Canadian-based company
for its activities in Bahrain.
My question to you is this: Did
EDC consider the human rights risks involved in guaranteeing a loan that
permitted Netsweeper to sell software to Bahrain, a country with an
authoritarian government that restricts Internet freedom and monitors
individual online activities?
Mr. Pullen: In response to
that, I can't speak specifically about the structure of a particular
transaction in which EDC provided support to a bank, which is what a
guarantee is in this case. What I can say is in any transaction that we look
at, we definitely evaluate the nature of the product, the performance of the
company and the countries in which they operate. I can say that when EDC
identifies specific risks related to countries' operations abroad, or
particular risks within a country, we can structure our support so that the
company's activities do not benefit from EDC support in those contexts.
Further, I can confirm that, at
this point, the guarantee that is the subject of the complaint is no longer
in place, nor is the company a customer of EDC.
Senator Ngo: Could you
summarize the conclusion of the review, and also what human rights issues
Mr. Pullen: Again, because
the specifics of our assessment are directly tied to the nature of the
support, I can't go into full detail. However, what I can speak to is in
evaluating countries which we consider to have high-risk circumstances, we
will take the nature of those circumstances into account, the nature of the
product of the company that is seeking support or, in the case of
guarantees, when they're seeking to benefit from a loan from a bank to which
EDC is being requested to provide a guarantee to that bank. In this case,
the customer is not the exporter, but the bank.
All those factors are taken into
account, and my team may make recommendations to the underwriters to take on
to the bank that there may be certain markets to which EDC support cannot be
directed. However, the activities of the company may be such that they are
operating in lower risks or North American markets, and they are a company
that could benefit from support domestically, and that may be a situation
where support is directed.
Senator Ngo: If that's the
case, let's take on technology groups which have ties with the Communist
Party in China, for example. They received the green light by the camera
to allow China to purchase ITF Technologies
in Montreal, a leader in fibre laser technology. Knowing China's human
rights record, the Chinese government continues to lead the world in
number of people executed. Would that pass EDC's due diligence test? If so,
Mr. Pullen: In terms of
summarizing the question, are you asking if that particular company came to
EDC for support, how would they get past our test?
Senator Ngo: That's right.
Mr. Pullen: I can't speak
specifically to government policies. EDC responds and uses those in our
procedures. It's the same scenario that would be undertaken if, in our
evaluation, the nature of the product is such that it could result in use to
counter human rights, liberties or freedoms. That would be taken into our
I can say that one of the
objectives that EDC tries to undertake is when exporters are seeking to work
abroad and getting into markets that are new to them, we are able to provide
support and guidance. Part of our evaluation is to take a decision of
whether EDC's participation could help bolster a company's capacity by
providing advice and guidance and awareness of the risks of the markets that
they're entering, in addition to any financial support they may receive.
But if the company is unwilling to
participate with us in those discussions or, as I mentioned before, certain
risks are above the threshold that we consider acceptable for EDC's
position, we may make the decision to not proceed with support, even in
markets that are not currently considered higher risk.
Senator Ngo: I'll come back
on the second round. I'll leave space for the other senators.
Senator Hubley: Thank you
for your presentation this morning. My apologies for being a little late.
When a company approaches Export
Development Canada for support, at which point does the EDC assess the
potential human rights implications of the proposed project, and how long
would an assessment usually take?
Mr. Pullen: I'm going to
break this into two parts and characterize two broad buckets in which EDC
undertakes business. One is what we call general corporate support,
supporting companies in their day-to-day business, providing insurance,
guarantees, financing essential to their day-to-day operations. Then there
are other types of support that I referred to earlier, which is project
support, a very structured type of financing that is going to a very
specific activity on the ground in some country around the world.
Our process is evolving and
developing to engage in the discussion with customers throughout the process
of what we would call “onboarding” towards coming to a decision that we have
a product they could support. Any company that comes in for consideration
will undergo an early flagging system. If there are specific activities or
countries in which that company undertakes business that are already flagged
in our system as high-risk circumstances, it would immediately come to a
team like mine for evaluation, in which case we would be able to provide
early indication to a business team of whether there are flags or obstacles
that might preclude our ability to proceed with support.
EDC does receive comments that,
based on our disclosure page, we appear to support every company that comes
to us. What we don't disclose are all the companies that come in for
discussion and where issues are identified and we indicate to them that we
either cannot proceed with support or gaps we've identified. We will make
recommendations that should they be able to go and address those gaps, they
can come back for consideration. Most companies don't want to be on the list
that did not make it through our screening process. We appreciate that, but
there is a significant conversation around that.
The same process would be
undertaken for that very specific project finance scenario, where it is a
very specific activity tied to a specific project on the ground, where we
can clearly identify tangible risks and impacts of that development. And
that is a very rigorous process. I can say that depending on the scope of
the project, whether it's a small manufacturing facility all the way to a
large mining infrastructure project, those specific types of reviews that
involve benchmarking to international standards can take anywhere from three
months to two years, depending on the discussion and the issues that we've
identified, and engagement with the company.
I should also point out in
conclusion that EDC, for a lot of these facilities, is partnered with other
financial institutions, so we are required to work with them in partnership.
With our policies and procedures, we try to align them as best we can, but
there's also that discussion going on in terms of screening and identifying
Senator Andreychuk: I just
want a little background. EDC, you've indicated, is an arm's-length Crown
corporation mandated to help Canadian companies export internationally. That
I understand and know. Originally, we were looking at financial risks going
into other countries, and of course with the backing of the Canadian
government, we want to be sure that they're not undue risks. So there were
all kinds of mandates.
While it's arm's length, and while
you get a mandate through your corporation, what discussions do you have
with the Canadian government, more particularly the foreign affairs portion
of it, about how to do business in another country? Do you have annual
discussions? Do you have sporadic, ad hoc discussions about what level of
risk you should take, and in that risk, what risk do you take that there may
be some human rights consequences, et cetera, that Canada may not wish to
Mr. Pullen: To frame the
question for my response, you're specifically asking the level of engagement
we have with Global Affairs in terms of discussions around country risk, the
nature of EDC's activities and the discussion that goes on between the two
departments in terms of coming to a decision on what type of risk we might
take versus what Global Affairs might.
We have a specific group within
EDC that is actively engaged in discussions with Global Affairs and other
government partners. That occurs both within Canada and through the Canadian
delegation to the OECD. In terms of the formality of those discussions, they
are frequent and usually in response to discussion or informing each other
of changes, activities or specific information that we might want to share.
In the context of specific country
risk, it is not unusual for us to reach out to understand what their views
are of a particular market, and we are also engaged through the Trade
Commissioner Service for that type of exchange. We share views on risk and
understanding of a country context, and by and large we seek to find
alignment on the views in relation to certain country risks, but we each
have independent factors we also take into account. From a financial
perspective, EDC brings that to the table, and then with Global Affairs, the
view of their department.
Senator Andreychuk: On the
one hand, we want companies to export. That's our survival in Canada. On the
other hand, we want to adhere to standards that we have confidence in and
that we want to put forward, like human rights and environmental standards,
Right now, most of the corporate
social responsibility factors internationally are business driven. In other
words, they're not mandatory; they're discretionary. You've pointed out
Canadians sometimes wish that you were bound by certain standards that
perhaps lead to consequences. Right now, it's simply you join when you want
and those standards are discretionary. Do you think they need to be enforced
by the government more strongly?
Canada is now assisting some
countries in developing corporate social responsibility monitors within
their countries. Do you think that's a benefit to Canadian companies or not?
The push-back I hear from companies is: Well, you want us to live by these
standards, but your like-minded countries are not so we're at a
disadvantage. How do we grow, how do we work, when the standards are not
equal for all companies competing? We know which countries we're talking
Mr. Pullen: It's an
interesting topic. What I can say is EDC is not a policy-developing
institution. We look to the government. As policies are developed that might
impact our business, we will look to incorporate that into our business and
act upon that. In terms of providing commentary on policy direction, it's
not something specifically I can speak to.
However, in terms of your comment
about the challenges of companies operating abroad and what they might need
to adhere to versus voluntary standards versus obligations under regulation
— I'll frame this. For EDC, our overarching priority is that the companies
we support meet the standards that we have. The standards that we have are a
reflection of guidance coming out through the OECD, the commercial areas in
which we operate and the legislation of the countries that they operate in.
Those are the indicators that we
use, and the fact that they are voluntary in some manner does present some
challenges with respect to optics in terms of being voluntary; you can opt
out. However, as financial institutions, at EDC, including other ECAs and
other commercial banks, we're fairly specific about the lines that we have
in terms of the standards that we require companies to meet. We're trying to
be as transparent as possible as to what those are and are willing to engage
in discussion with either industry and/or governments in terms of where the
Senator Andreychuk: Can I
follow up or should I go on a second round?
The Chair: Do you want to
follow on that thought? That's fine.
Senator Andreychuk: You say
that you have some discussion with the government. So is it the government
that sets the standards of corporate social responsibility with you, or are
these driven by the international community that you work in? If it is the
international community, do you believe that EDC standards are equal to the
other lending institutions that you have to compete with, or at least
business has to compete with, like the Americans, like the Germans?
Mr. Pullen: I would say
that as a Crown corporation receiving our mandate from our minister and
through our interactions with Global Affairs, we seek to align and get a
certain amount of direction from Global Affairs in terms of we seek guidance
from the M&E guidelines, from multinational enterprises. That comes in and
is incorporated into our thinking.
Because of the nature of EDC's
business, it serves us to align with commercial banks in terms of their
evolution in terms of implementing standards. There is an ongoing evolution
in the financial sector of meeting specific bars or levels of implementation
of standards, and there is variation in that industry. Those who are very
active in certain sectors, such as EDC and other commercial banks and other
ECAs, work hard to not only align our standards with each other but also
best practice that is either coming out of international thinking or the UN
or other elements so that we can stay as progressive as possible, and we
feel that does align with certain positions that national governments take
in terms of best practices.
Senator Omidvar: I will
follow that line of questioning around standards and indicators that you
use. So far, you have mentioned largely institutional standards from the
OECD, Global Affairs, national governments, et cetera, but we do have very
telling information from international NGOs, like Human Rights Watch,
Amnesty International, Care Canada, et cetera. Can you describe to me how
you tap into that wisdom, which sometimes is complementary and sometimes is
contradictory to what you hear from the OECD, et cetera, and how do you
ensure that the knowledge of our highly respected NGOs is taken into account
as you advise your clients?
Mr. Pullen: You're right.
We have standards that we draw on from the IFC and the OECD, but part of the
thinking and part of the working groups within the practitioners group
within the OECD or the Equator Principles
is to seek out and draw upon the guidance of
international NGOs, UN forums and consultants who are leads in the field
whose ideas may be different from the standards that we apply or other
international frameworks. That all gets incorporated into our thinking as we
try to constantly move this bar to understand the role of a financial
institution in managing this risk. How do we play our part in ensuring that
we are operating within the bounds, what is considered appropriate within
the human rights discussion, which is the topic of today? It is a constant
intake of information. So while we represent we have specific standards that
are our baseline benchmark, the objective is to constantly absorb best
practice, and we are very open to any forum in which that is discussed.
Senator Omidvar: Should we
assume that you are getting regular country updates from these NGOs to
update your understanding of the human rights situations in export-destined
countries? Is it completely responsive — there's a client, there's a
customer, there's a country — or do you make a systematic institutional
effort to stay up to date on trends and findings and reports?
Mr. Pullen: I can answer
that in the affirmative. EDC has groups that I'm not a part of but that
actively monitor country situations. We develop and constantly update our
internal databases, which are informed by external think tanks and
institutions, to help keep that as current as possible. We provide the
organization with continual updates from both the political and country risk
context, which gets absorbed by all aspects of EDC's business, both from the
financial side and it's extremely relevant for my group as well.
Senator Omidvar: Thank you.
That's very good to know.
Senator McPhedran: I have
an observation and then I'll move to a question. My observation is that it's
really helpful to have acronyms explained at the beginning of a
presentation. Could you tell me, please, what IFC stands for?
Mr. Pullen: The IFC is the
International Finance Corporation,
and it's the commercial arm of the World Bank Group.
Senator McPhedran: Thank
I want to build on some of the
inquiry from Senator Andreychuk and be a little more specific. Senator
Andreychuk said we all know what companies we're talking about, but I'd
actually like to be more specific than that and ask you: Among your clients
or your collaborators in the corporate sector, how many produce arms and how
many are companies in the extractive industry?
Mr. Pullen: For full
transparency, I don't have the list of all our customers. Any interactions
we have with companies that may operate in the arms sector are governed by
EDC's military guidelines. I don't have them with me, but if that's
something of interest to you, we can get that information to you.
In terms of the number of
companies in the extractive sector, I'm not sure I have the full list of
companies, but as Canada's export credit agency I can say that we do support
and work with many Canadian companies in the extractive sector. Again, if
you need that information, we can get it to you.
Senator McPhedran: Thank
you. Mr. Chair, I would appreciate receiving that information, please.
The Chair: Yes, we would
like to have that, and as soon as possible.
Mr. Pullen: Sure.
Senator McPhedran: Thank
you. You referenced John Ruggie
and the UN business principles that have been developed over the past 10
years or so. I wanted to ask specifically about the extent to which you as a
company integrate the UN Declaration on the Rights of Indigenous Peoples,
which are specifically referenced by Ruggie and specifically adopted in the
annual business and human rights meeting that's held in Geneva sponsored by
the Office of the High Commissioner for Human Rights.
Could you give a sense, please, of
the extent to which, in your decision making and implementation of policies,
this is kept in mind and whether you actually ask for reports from the
companies you support on the extent to which they incorporate the UN
Declaration on the Rights of Indigenous Peoples into their business?
Mr. Pullen: In short, the
declaration is something that we consider. It is also one of the references,
and I imagine the committee is becoming fatigued to my references to
standards that EDC uses. However, those standards have many openings for,
depending on the situation, the context in which you're considering
providing support. You are to reach out and use the most relevant
information to help guide your decision-making process and inform the
companies that you seek to support.
To your specific question about
indigenous peoples, it is a very relevant topic for EDC. There are specific
standards that speak specifically to how to consider the engagement with
vulnerable and indigenous peoples within the business.
Further to that, if we are
considering support to a company that has a direct interface or is operating
in an environment where indigenous peoples, First Nations people, tribal
lands need to be factored in, we will seek specific reference from them of
how they are addressing their engagement, their interaction and what
policies and procedures they have to manage and inform them of that
Senator McPhedran: To that,
I wonder if I might ask to you be a little more specific and if you could
identify the locus of expertise within your organization in terms of the UN
Declaration on the Rights of Indigenous Peoples and whether you also use
established international expertise, Canadians who are very well known. For
example, Chief Wilton Littlechild
has chaired for many years the indigenous advisory group to the Office of
the High Commissioner for Human Rights in terms of the business in human
rights guidelines. Do you have expertise within the EDC, or do you reach out
beyond the EDC to actually have the expertise needed to evaluate this kind
of reporting to actually know if it's substantial?
Mr. Pullen: I will speak in
broad terms. On my team, we have three individuals who spend most of their
day on social and human rights matters. We also actively participate in
external working groups on these topics, including human rights, indigenous
peoples and interactions with First Nations. In those forums, to address the
development of guidance or specific questions, we will reach out to whatever
expertise helps us get information on those topics. It is driven by the
issue of the day, a specific transaction or more broadly as we move forward
in the development of our policies and procedures.
Senator Martin: My
colleagues have asked some very good questions. There are some questions
that I have, which are sort of exceptional cases but I'm sure that they are
no longer the exception in this world of continuing interconnectedness and
larger global projects.
In the case of supporting larger
infrastructure projects, let's say that among the Canadian companies, your
clients have met the standards and they are approved. What happens if they
are involved in a project with other companies from other countries and
there is information regarding these companies that would cause them to not
meet those standards? In a complex project where there's more than one
partner, what would happen to the Canadian company in terms of the support
that they would get from EDC?
Mr. Pullen: Just to briefly
frame that, if a company is involved in — I'm trying to remember the term —
a conglomerate that is seeking to develop a large project that could include
companies from multiple countries around the world, that gets factored into
our assessment. We have to take into consideration the role of the Canadian
If they have a prime
responsibility or a key influence over the development, management and
overall implementation of a project, our expectation is that they will work
with their business partners and be able to represent that the other
companies are seeking to adopt or meet the standard that we are applying to
that project. In cases where there are gaps, that will be taken into our
decision-making process in terms of seeking other options to frame the
agreement to require that to happen and if not, we may make a decision not
In cases where the Canadian
company does not have that role, it will elevate our consideration of the
risk of participation and if there is any opportunity of EDC's support
potentially helping that company then influence the other companies. I know
that's a fairly lofty statement but that is one of the objectives that we
would seek to do in our evaluation. Again, if we determine that it is just
too much of an issue that we cannot resolve, it may impact our decision to
be able to support.
Senator Martin: Before
approval, or at the pre-approval stage, would you have all of that
information in front of you as to what companies would be involved and how
much impact the Canadian company would have on the overall project?
Mr. Pullen: We strive to
have all the information available to us at the time of our assessment and
take into account gaps and information at that time. It's a fluid world with
lots of different stages of project development and we try and account for
that in our monitoring of project support.
Senator Martin: I would
like to see an example. However, in terms of monitoring a project from
beginning to end, how closely do you follow? If there were significant
changes in the acceptability of a project that made it less acceptable, how
would you approach such a situation? How closely do you monitor projects?
Mr. Pullen: In the case of
project finance or direct support to a project development, we are very
active. It is one of our key priorities, in that particular case, to
actively monitor projects. We call it throughout life of the loan, and it's
particularly active through the construction phase.
So this not only includes EDC's
oversight from here, but we also undertake visits to the site. We engage
independent experts to advise the lenders — because remember that EDC is
usually part of a group of lenders in these cases — on the project's
conformance to the international standards that we apply.
In terms of how EDC implements our
ability to have a say when issues go awry, that will be structured right
into the loan agreement through covenants, reps
and warranties. What we typically call the environmental and social action
plan becomes a schedule to a loan agreement, and it actually becomes a
So if a company does have an issue
that they cannot resolve or goes beyond what we deem acceptable standards
and they are unable to bring the project back into compliance, for lack of a
better term, they would be in a situation of a potential call of default.
Those are the mechanisms that EDC
and other financial institutions can use to implement environmental and
social elements right into loan agreements. I can say that that is a topic
that has progressed significantly in the short time period of the last eight
to ten years and will continue to evolve as we become more sophisticated in
how to incorporate these right into the financial mechanisms governing our
Senator Martin: I have one
last question on that.
The Chair: I was going to
follow up on that. I was curious about the EDC. Do you have a mechanism to
simply withdraw your support if this happened? Following up on what Senator
Martin was saying, do you have the ability to withdraw? You used the word
Mr. Pullen: In
straightforward terms, there are mechanisms in agreements for any lender,
including EDC, to withdraw if the company is failing to perform financially
and, as I said, as we continue to evolve the sophistication of getting
environmental and social covenants into loan agreements, they would have the
In terms of whether it happens the
next day, there are lots of legal elements around loan agreements, but the
mechanisms are in place for any lender who deems a default that can be
determined to be true to leave and exit a loan agreement. That is either
directly or through accelerated repayment, depending on what stage of the
project is at.
Senator Martin: My question
was actually on monitoring the progress. You say you do that very carefully
Mr. Pullen: We do. In brief
detail, once EDC signs an agreement and the borrower gets their money to go
off and build their project, we have very active engagement, as I said,
through the construction phase, and it's all scoped to the scale of the
undertaking. For large-scale projects, we have our representatives, through
our independent experts, there as much as often as four times a year, and
they report back to lenders, and there is obligation on the borrower to
report to lenders. So there's very active monitoring. EDC ourselves, through
that time period, depending on the scope and scale of the project, will
undertake visits as well to verify what we are interpreting both from the
company and our independent evaluator. And our engagement will go through
the life of the loan. So once the facility is over and the project is off,
then EDC's monitoring obligations will step back.
The Chair: Just to follow
up on the monitoring and to be clear about this, if you find out through the
monitoring that there have been human rights violations, do you have the
ability in these contracts to withdraw support to these companies or
Mr. Pullen: There are
mechanisms within the facility for any lender to withdraw. If it can be
demonstrated that a derogation to the standards that the lenders and the
companies have agreed to has happened — and that would include anything from
environment through the social spectrum all the way to human rights — there
is a process under which to determine whether the issue has occurred, and
there are other mechanisms that are also coming in to play if that situation
should become apparent.
Senator Ngo: In your
country risk quarterly release letter this spring, human rights concerns did
not appear to be a major issue. I was happy to read about your concern about
ongoing territorial disputes in the South China Sea and terrorism. Do you
think that the nature of human rights is a source of volatility that could
affect Canadian companies, or is this a factor taken into account that could
affect our export and economic confidence?
Mr. Pullen: I'll frame my
response within my world of looking at environmental and social performance
What we do observe — and hopefully
companies who are operating internationally are becoming more aware of this
— is that environmental and social human rights risks are tangible risks to
their operations. There has been much work done to demonstrate that
companies who fail to adequately understand the context in which they're
operating, and put measures in place to address those, can undergo
significant delays in their operations. It is becoming a financial risk for
them, and that is definitely something they need to become more aware of.
In the context of our business,
that is what we are trying to educate our customers in when they are
operating abroad. It is not just the financial agreement between the
counterparties that's of importance. They need to clearly understand the
context in which they operate because it can be, at the end of the day, a
financial risk to their business.
From our perspective, the benefit
ensures there is constantly evolution in the area of environmental and
social risk management because to perform well in those cases, in this day
and age, is of critical importance not only for their ability to operate
sustainably financially, but also sustainably in the area of social licence
In terms of specific issues around
the world, I can't speak specifically to an issue at this time, but that is
our observation and the context in which we engage with companies and
Senator Ngo: I will put you
on the spot right there. What country do you consider as a higher risk? And
what criteria are used to determine that a country is a high risk?
Mr. Pullen: The development
of that list is not within my day-to-day work. I have folks on my team who
look at that. But we have very standardized criteria in which we develop
high-risk country lists. That list exists and is based on standardized
guidance from international experts and forums to inform the development of
lists that are considered higher risk countries. That will be taken into
account in any undertaking that EDC considers and would trigger a specific
risk assessment in terms of our ability to even go forward.
Senator Ngo: Can you tell
us if Saudi Arabia, China or Vietnam are on this list?
Mr. Pullen: I don't have
the list with me and, with the risk of misquoting it, I won't speak to it
specifically here, but we can get you that information.
Senator Ngo: I would like
that, Mr. Chair.
The Chair: We'll get that
Senator Andreychuk: I'll
try to make this short. I didn't think I got the full answer that I was
trying to get.
We set discretionary guidelines;
that's basically what they are. You work with OECD. You look at the UN
guidelines. But the companies are going out and competing. My concern is,
how are we going to get some international standards that companies will to
have to adhere to and how do we get the receiving countries that are
involved to understand the importance of these guidelines? Do I have to go
to the Canadian government to get those answers, or are you actively engaged
in trying to get more adherence to international standards on human rights
and environmental concerns?
When I go out in the field, I get
this answer that we're doing it, but company A, B, C from all these other
countries — and some of them are OECD countries — are not adhering to them.
Then the receiving country that's looking for this development, whether it's
in the extractive industries, is saying they only have limited dollars so
they took the best deal we could. How do we move the agenda forward?
Mr. Pullen: Thank you for
that. It's definitely something that I spend a lot of time thinking about. I
can only answer from the context in which I operate, which is the financial
sector. In that context, EDC is very active in ensuring that the
international standards that all the lenders use — who participate together
either as members of the OECD within the Export Credit Group
or the Equator Principles
— are forums in which we strive to ensure that
there is consistency in the implementation of the international standards,
and in this context it's the International Finance Corporation performance
standards, as our benchmark to try and create a level playing field, so at
least in the transactions that we are considering, we are all upholding the
From our lever as a business in
the financial sector, that is how we strive to promote consistency amongst
the businesses that we operate in. In terms of striving to raise the bar at
a more international level, that is out of my purview and other governmental
forums would have to provide observations and recommendations on that. But
from the context in which EDC operates, that is the approach we take. We
actively engage in all the international forums that we can feasibly attend
to share ideas and at least exchange our observations of the success and the
challenges in areas for evolution of standards that we use, but within that
I understand what you're saying
about the inconsistency and the competitiveness of the market. The objective
is that if companies are adhering to the standards, they become more
competitive in seeking financing from lenders who use these standards. That
is one mechanism in which we can try and move the bar slightly in those
Senator Andreychuk: So we
should go to all the governments.
Senator McPhedran: I have
what could be considered a three-part question picking up on previous
questions to which, if I heard you correctly, you responded by indicating
that you have what lawyers would call a boilerplate clause that goes into
your agreements that relate to the human rights aspects as well as climate.
Would I be correct in understanding this standard clause that goes into your
agreements is an EDC customized clause drawing from the various sources of
standards that you referenced in your presentation as opposed to repeating
each of those three sources verbatim? I'm assuming there's a clause that
EDC uses that then allows for effective monitoring. Yes or no? And if so,
could we see it, please?
For the second part, you made
reference to the existence of this clause as essentially a mechanism that
allows action to be taken where there's derogation from the standards. Has
it ever been done? Have you ever taken that action and if so, could we have
more details on that, please?
The third part of the question is
in relation to this concept of monitoring built on the clause and the
standards and staffing that links to it, so there is an effective
implementation and it's not just window dressing. If I heard you correctly,
you have three staff that focus, on a regular basis, on the implementation
and respect for these standards among your collaborating client base. Of
those staff, do you have anyone of indigenous origin who is working on this
and applying the standards that have been accepted by EDC that derive from
the United Nations Declaration on the Rights of Indigenous Peoples?
Mr. Pullen: To summarize
the three questions that you've asked me, one refers to the clauses that we
put in our agreements. The second was if we ever called a loan based on a
deviation from the agreement. And you had a question about the composition
of my staff.
In terms of the first part, in the
project finance scenario, there is standard guidance that we use as a
starting point. I can direct you to the Equator Principles' website, and
there is a document there on standard loan agreements, clauses, to provide
guidance to lending institutions.
There is a bare minimum that we
always seek, which is in terms of compliance with host country law. Among
other things, it’s their management systems, commitments they've made in the
environmental and social impact assessment monitoring those things. Beyond
that, it does get quite customized down to the specific transactions. To
your question of boilerplate, it is not always standard in a project finance
scenario that is the same across. The objective is that minimum standard, as
well as defining clauses that are specific to that particular undertaking.
In my world, that is handled through a specific document called an
“Environmental and Social Action Plan,” where all the commitments and any
things that need to be followed up on or represented will get included in a
What I can say is EDC has not
specifically called any project finance loan on an environmental and social
issue to date, so I'll answer that definitively. In terms of my staff, no
one has represented to me that they are of a First Nations origin.
Senator Omidvar: I will
follow the elegance of Senator McPhedran. I, too, have a three-part
question. That's a very elegant way of getting three questions into one.
My first question is this: Has
there ever been an external audit or review of your assessment and
monitoring process? Have you conducted that?
My second question is this: What
is your liability under Canadian law for international human rights
violations by client companies, and have you ever been penalized or named in
My third question is around your
own governance. I've looked on your website at your board of directors. It's
a matter of a different concern. I don't think they represent the diversity
of this country. Leaving that aside, I want to know whether your board of
directors requires you to report on a regular basis on your performance in
terms of monitoring and assessing human rights issues, the same way as you
probably report to them on how much business you have done. Is there an
indicator in your own reporting to the board on this matter?
Mr. Pullen: In terms of
your question to external audit, EDC is subject to the Auditor General of
Canada, and our environmental and social review policy is audited on a
four-year basis, I think is the schedule. That is specifically to come in
and audit the implementation of our environmental and social risk management
policy, and they report back to Parliament on the findings. In terms of the
development and implementation of the policy, that is one of the external
audit mechanisms of our performance.
In the area of human rights, EDC,
as part of our ongoing process of making sure that we are as up to date as
we can be within the financial context of accounting for human rights
issues, has brought in a consultant to effectively audit our procedures and
took their recommendations to bring forward and continue to evolve our
processes, which have undergone yet another step forward in the last number
Senator Omidvar: Consulting
on human rights?
Mr. Pullen: Yes.
Senator Omidvar: Excellent.
Mr. Pullen: Could you
repeat the question on liability?
Senator Omidvar: Can you
describe your liability under Canadian law for international human rights
violations by your client companies? Have you ever been named, penalized or
charged for a violation?
Mr. Pullen: For a human
Senator Omidvar: By your
Mr. Pullen: In terms of
overarching liability, I'll defer that to my legal department. We have had
companies who have been named in various reports and, when they are, we
Senator Omidvar: Have you
Mr. Pullen: Not to my
knowledge, and again I will defer to my legal department to say yes or no.
Senator Omidvar: Finally on
Mr. Pullen: The reporting
to our board is on a quarterly basis in terms of what we call our CSR report
to the board. Does it currently contain specific indicators on specific
areas of our undertaking? Not to that level of detail. But as we go forward,
those are the types of things we are considering in terms of increasing our
internal transparency and bringing things forward, as well as how we will
handle transparency more broadly.
To your specific question, we do
not get down to that specific level of detail in our reports to the board,
but I'm always available to respond to questions, which the board asks
Senator Omidvar: Perhaps
you'll take a recommendation from an individual senator back to your board,
that since you are doing so much business with the rest of the world and
human rights is such a big issue, as we know in this country and by the
people in Canada, perhaps you should have an indicator that is reported on a
quarterly basis on how many companies you dealt with — it's a success
indicator, I think — were dropped from your horizon because they did not
meet certain standards.
Mr. Pullen: Thank you for
that. I will take that recommendation on board. In our CSR reporting, we are
continuing to develop the reporting on human rights issues.
Senator Martin: This is
more of a statement to put on record than a question, because I'm sure the
answer will be yes. Recently the Minister of International Trade,
François-Philippe Champagne, told media that this year Canada has enormous
interest in markets such as China, Japan, India, Indonesia and Malaysia, and
some of these countries are on record for human rights abuses, as we are
Regardless of the government of
the day's interest or priorities in countries for Canadian exports, would
EDC maintain your very strict standards and assessment for any future
projects that may come to light? I know the answer is yes, but I was looking
at the list of countries, and there are some countries that will have
concerns for Canadians in terms of how they do business in those countries.
Like I say, it's a statement for the record more than anything else.
Mr. Pullen: Beyond “yes,”
EDC, under our mandate, is seeking to help Canadian customers export abroad,
but underpinning all EDC's activities is a fundamental priority to ensure
that we are operating in line with our standards and commitments, which we
take extremely seriously and implement across our business as we track our
customers as they go abroad.
The Chair: We're curious,
and you've been very informative today, but Senator McPhedran wants a
clarification, and we would like you to tell us either in writing or
Senator McPhedran: I'm
feeling somewhat confused, and I am potentially disappointed if indeed there
is no substantive obligation on the part of witnesses to report back to us
with the information we've requested. I would like to have a clear agreement
between us that this is something that you are willing to do and that we
will receive information from you following today.
Mr. Pullen: Thank you for
that. I'm going to look over my shoulder for a nod.
Building on that, on behalf of
Senator Pate and myself, we'd like to make it clear it's not only one
senator that's making the request from you to convey a message to the board,
but it is all three of us who would very much appreciate it if that would
happen, please. If we could get a report when that has happened, and if
there's any response from the board, if that would also be shared with us.
Mr. Pullen: I will commit
to bringing the recommendation forward and will follow on the ability to
The Chair: Just before we
go, I'll throw out a softball question for you. There was a lot of
information today, and it is very important for this report. We've learned a
lot. If there are any university classes that stay up late at night to watch
this program, they should pay attention. They will now know what EDC is all
Keeping in mind that this is a
human rights committee, what would you consider success at EDC?
Mr. Pullen: From my
perspective, sitting as the Director of Environmental and Social Risk
Advisory Services, ongoing success is to ensure that we continually keep up
to date with the evolution of thinking around human rights and how human
rights risk management can be incorporated into financial institutions, and
ultimately that we see the bar rise amongst our customers and their
customers in terms of how they address and understand human rights risks
within their business.
The Chair: With that, we
thank you very much, Mr. Pullen. Mr. Pullen is the director, Environmental
Advisory Services at Export Development Canada. We appreciate your time
here. It's been very important for our study.
Mr. Pullen: Thank you very
much, and thank you for your attention.
The Chair: With that, we'll
suspend for a moment and come back to the public.
(The committee continued in
(The committee resumed in public.)
The Chair: We have a motion
on the floor for adoption of a budget, and possible changes could be made by
the committee as we take a look at this short trip. The motion is:
special study budget application for public hearings and fact finding in the
Brockville, Kingston and Montreal Areas, part of the committee's study on
issues pertaining to Human Rights of Prisoners, for the fiscal year ending
March 31, 2018, be approved, with the changes as we discussed today; and
subcommittee on agenda and procedure be authorized to approve the final
version of the budget, for the Chair to submit to the Standing Committee on
Internal Economy, Budgets and Administration.
All those in favour?
Hon. Senators: Agreed.
The Chair: It's unanimous.
(The committee adjourned.)