Financing

Respect for the Environment

Due Diligence

Over the years, EDC has supported a number of highly problematic mining, oil and gas projects. These include the following:

• the OK Tedi copper mine in Papua New Guinea that severely contaminated 1,300 km² of productive forest land and 1,200 km of fertile river bank with acid producing and metal leaching mine waste;⁵
• the Marcopper mine in the Philippines, where 200 million tonnes of metal laden mine tailings were dumped into a wide, shallow bay destroying the livelihoods of 12 fishing communities and, according to the Philippine government, leading to lead contamination of children from villages on the bay;⁶
• the Kumtor gold mine in Kyrgyzstan, where a company truck spilled its load of sodium cyanide into the Barskoun River, raising the cyanide concentration in the water to 50,000 times above permissible levels.⁷ Thousands of local residents were evacuated and several deaths were reported.⁸

In 2001, following public and political pressure, including harsh criticism from the Auditor General of Canada, EDC developed a framework to assess the environmental impact of those projects that it is asked to support. Subsequent reviews have led to improved environmental policies and greater disclosure. However, EDC still lacks sufficient levels of transparency to ensure accountability. The corporation does not disclose its due diligence process for proposed projects, or reveal the specific standards that a project is deemed to have met. Moreover, EDC does not require companies to consult with communities that would be affected by proposed investments.

Respect for Human Rights

Due Diligence

While EDC has made some progress on the environment, it falls drastically short in terms of human rights. EDC purports to "promote the protection of internationally recognized human rights."⁹ Indeed, as a public institution, it has an obligation to do so.¹⁰ However, current policies at EDC do not require it to assess the potential impacts of proposed investments on human rights. Instead, EDC focuses on how human rights violations could adversely affect a client company's investment.¹¹

This is particularly worrisome since EDC has made public its plans to explore options for expanding into the extractives sector in China. The Chinese mining industry is widely regarded as one of the worst in the world on worker safety and environmental performance. In 2004 alone, 6,000 Chinese mine workers died as a result of unsafe practices.¹² The Chinese government is also well known for its poor record on human rights.

Good Practices

Britain's Export Credit Guarantee Department (ECGD) expects projects to comply with six core UN human rights treaties and eight International Labour Organisation conventions when ratified by the host country. The ECGD reports that it assesses proposed projects against these standards as part of its basic human rights screening process.¹³ The British Parliament also prohibits ECGD from supporting projects that involve forced or child labour.¹⁴

In addition, several institutions have created, or are developing, models for screening the human rights impacts of proposed investments:

• The Danish Institute for Human Rights has developed a tool for companies that takes only 40 hours to implement;¹⁵
• Canada's Rights and Democracy is developing a tool for communities to assess the impact of projects on human rights;¹⁶
• The International Finance Corporation, the private sector lending arm of the World Bank, in collaboration with the International Business Leader's Forum, is developing a Human Rights Impact Assessment for companies.¹⁷

EDC could draw on this work to improve its due diligence regarding human rights.

Respect for Human Rights

Due Diligence

In October 2005, the CPPIB replaced its "Social Investing Policy" with a new "Policy for Responsible Investing." As part of the latter, the CPPIB now engages with companies to encourage improved performance and disclosure regarding their environmental, social and governance practices. However, the CPPIB does not screen its investments either to exclude companies or particular sectors with poor environmental and/or human rights performance or to preferentially invest in companies with strong records in these areas.

Good Practices

Other countries have responded to criticisms about the investment policies of their state-sponsored pension programs.³⁰

In France, investments through the Fonds de Réserve pour les Retraites (FRR) must reflect "certain shared values that promote economically, socially and environmentally sustainable development." The FRR has added four investment guidelines for fund managers: a) respect for international law and basic worker rights; b) job development through better management of human resources; c) corporate environmental responsibility; and d) respect for consumers and fair trade in local markets.

The Norwegian Government Pension Fund has two key operating principles: 1) ensure that its wealth (which derives largely from oil exports) benefits future generations through investments that create a "sound return" in the "long-term," and 2) ensure that the Fund takes no "unacceptable risk" by investing in companies with human rights violations or a record of environmental degradation.³¹