Export Development Canada has agreed to partially guarantee $1 billion in loans the Bank of Montreal plans to provide to companies in carbon-intensive industries to help them reduce their emissions.

The three-year agreement provides funding for large and medium-sized Canadian exporters. EDC, the federal export credit agency, will guarantee up to half of BMO’s term loans to a maximum of US$60 million per borrower for seven years.

The partnership is an early example of how the government intends to help reduce risk for financial institutions as they lend to big carbon emitters trying to make a rapid transition to greener technologies. Funding provided under the program is intended to help banks and businesses meet their goals of reaching net zero emissions by 2050. In late March, Ottawa released an ambitious plan to reduce greenhouse gas emissions emissions that would require a 42% reduction for the oil and gas sector by the end of the decade, compared to 2019 levels.

BMO is the first major bank to sign EDC’s Sustainable Financing Guarantee, although other lenders are expected to follow suit. The funding is for sustainable initiatives in areas such as hydrogen, renewable infrastructure and grid modernization, targeting nine particularly carbon-emitting industrial sectors.

“Helping customers adapt and thrive through this transition requires a thoughtful, balanced, and accelerated approach informed by science, common sense, and bold yet practical solutions,” said Jonathan Hackett, Chief BMO’s sustainable finance and co-head of its energy transition group, in a press release.

EDC claims to be one of Canada’s largest cleantech financiers. And BMO has pledged to deploy $300 billion in sustainable lending and underwriting to businesses by 2025. Last fall, Canada’s major banks joined the UN-convened Net-Zero Banking Alliance and, in March, BMO announced a target to reduce the emissions intensity of oil and gas customers it finances by 33% by 2030.

“By working with Canadian financial institutions like BMO, we can support Canadian businesses’ access to the financing they need to be part of this important transition in Canada and around the world,” said Justine Hendricks, Chief Executive Officer. of EDC’s sustainable development, in a press release.

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