In accordance with the Cabinet Directive on Strategic Environmental and Economic Assessment, this public statement of environmental and economic effects has been prepared for the Funding to implement Natural Resources Canada’s functions under the Indigenous Loan Guarantee Program.
Summary
As part of Canada’s efforts to advance its economic reconciliation commitments, in 2021 the Prime Minister directed the Minister of Energy and Natural Resources to develop a National Benefits Sharing Framework to ensure Indigenous groups directly benefit from natural resource activities on and near their territories.
Input received during a national engagement process that facilitated discussions with more than 130 Indigenous organizations, governments, industry associations and economic development corporations, as well as non-Indigenous industry and provincial and territorial governments, emphasized that the Government of Canada should prioritize:
- tools that facilitate Indigenous ownership of energy and natural resource projects
- capacity supports that could support meaningful participation in the natural resource sector
Access to affordable capital was identified as a key barrier to meaningful economic participation. Feedback from engagement affirmed that Indigenous groups have historically faced challenges accessing capital at affordable borrowing rates due to mechanisms like the Indian Act, which prohibits the use of reserve lands as collateral for borrowing. Additionally, investment decision making capacity within and among Indigenous groups has also been cited as a barrier to Indigenous economic participation in projects, which was a key lesson shared by the US Department of Energy’s Tribal Energy Loan Guarantee Program.
As a result of this engagement process, the Indigenous Loan Guarantee Program was proposed in Budget 2024 and formally launched in the 2024 Fall Economic Statement. This program, delivered by the Canada Indigenous Loan Guarantee Corporation, provides loan guarantees for Indigenous groups to purchase equity stakes in commercially viable natural resource and energy projects. Associated Investment Analysis and Due Diligence funding, delivered by NRCan, will support Indigenous groups in making sound investment decisions.
The Strategic Environmental and Economic Assessment found that the overall environmental impacts of the Indigenous Loan Guarantee Program are undetermined.
Strategic environmental analysis
The strategic environmental analysis undertaken for NRCan’s role under the Indigenous Loan Guarantee Program found that the program represents concrete, meaningful actions in support of aligning interests to advance investment in natural resource projects critical to Canada’s net-zero energy transition and associated positive environmental impacts.
It should be highlighted that the Indigenous Loan Guarantee Program does not provide funding for projects. The associated Investment Analysis and Due Diligence funding will only be used to hire advisory services and supporting investment analysis. It is not meant to support loan guarantee applications or project feasibility studies. Therefore, the analysis found that any potential links to greenhouse gas emissions, or potential effects on nature and biodiversity would indirectly stem from the delivery of federal grants, contributions and loan guarantees.
As potential investments that will be supported are not yet known and could be a mix of clean energy and fossil fuel, the greenhouse gas, biodiversity, environmental and climate implications are undetermined. Similarly, the proposal may or may not support investment in the development of infrastructure or initiatives that are intended to be “net-zero”. Any emissions-producing projects that are invested in through the program will still have to meet Canada’s other greenhouse emissions reduction strategies and policies.
Overall, the Indigenous Loan Guarantee Program aims to improve Indigenous access to capital to address historic and systemic barriers and laws that have previously contributed to higher borrowing rates for Indigenous groups. The analysis concluded that the program will work to advance economic reconciliation and advance Indigenous climate leadership in the natural resource and energy sectors.
Federal Sustainable Development Strategy considerations
Supporting Indigenous equity ownership in natural resources projects through improved access to capital is aligned with 2 goals of the 2022 to 2026 Federal Sustainable Development Strategy, specifically:
- Goal 7: Increase Canadian’s access to clean energy indirectly through the issuance of loan guarantees and investment analysis and due diligence capacity funding for investment in natural resource and energy projects
- Goal 10: Advance reconciliation with Indigenous peoples and take action to reduce inequality through the co-management of natural resources. This proposal advances economic reconciliation by providing increased access to capital for Indigenous groups to invest in natural resource projects
In accordance with guidance under the Cabinet Directive on Strategic Environmental and Economic Assessment, this proposal’s economic assessment did not include a strategic economic analysis due to the nature and scope of the proposal.