In Canada, the Federal Export Credit Agency (EDC) will partially guarantee loans of $ 1 billion for companies in the carbon industry Bank of Montreal (BMO) to help them reduce emissions.
The three-year guarantee agreement will provide financing to medium and large Canadian companies, informs The Globe and Mile.
EDC will guarantee up to half of BMO term loans of up to $ 60 million for each borrower for up to seven years.
The partnership aims to reduce the risks of financing investments in technology at an early stage, which can be crucial to reducing greenhouse gas emissions, including carbon capture and hydrogen fuel.
The pilot program aims to help banks and companies achieve their goals and achieve net zero emissions by 2050. In addition, the Canadian oil and gas sector will require a 42% reduction in emissions by the end of the decade compared to 2019 levels, according to a plan Ottawa made public in March.
Justin Hendrix, the agency's chief corporate sustainability specialist, said the guarantee agreement with BMO was the result of continued discussions between the bank and EDC, rather than a federal government directive.
BMO is the first large bank to work with EDC to ensure stable financing, but other banks are expected to join the initiative.
"We recognize that working with banks is key, as trillions of dollars are likely to be needed to finance the transition to pure zero," Hendrix said.
She also described the billion-dollar program as a start and a chance to raise capital. The program will also have the potential to scale if will succeed.
Jonathan Hackett, head of BMO's stable finance department and co-head of the energy transition team, explained that BMO will provide full credit and the EDC agreement will guarantee half the amount. This will allow the bank to expand its lending, while reducing the amount of capital on its balance sheet and providing larger loans, and in some cases to take riskier forms of collateral to secure them.
Yet no loans using the EDC guarantee were provided.
Hackett noted that the bank could finance, for example, the energy company's efforts to install carbon capture and sequestration technology in chimneys.
"We know that today it is difficult for a company to deploy this capital, which does not contradict their core operations. I think this is a really great example of how cooperation between government agencies such as EDC and the private sector can accelerate what is happening, "he added.
Banks face close attention from investors and environmentalists on lending to the carbon industry, and sometimes set limits on their own influence in the industry or individual companies, such as oil and gas, mining or electricity, and utilities. EDC-funded funding is targeted at nine areas, including hydrogen, renewable infrastructure and grid modernization.
BMO has promised to deploy $ 300 billion in lending and underwriting for companies by 2025.
Also in the fall of 2021, Canada's largest banks joined the UN-convened Net-Zero Banking Alliance , and in March BMO announced that it seeks to reduce emissions from oil and gas customers, which it finances by 33% by 2030.
We will remind, in Canada offer tax credits, as an incentive to capture carbon.