Order Fixing the Day after the Day on which this Order is made as the Day on which Division 3 of Part 5 of the Act Comes into Force: SI/2018-29

Canada Gazette, Part II: Volume 152, Number 8

Registration

April 18, 2018

BUDGET IMPLEMENTATION ACT, 2017, NO. 2

P.C. 2018-344 March 26, 2018

Order Fixing the Day after the Day on which this Order is made as the Day on which Division 3 of Part 5 of the Act Comes into Force

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 179 of the Budget Implementation Act, 2017, No. 2, chapter 33 of the Statutes of Canada, 2017, fixes the day after the day on which this Order is made as the day on which Division 3 of Part 5 of that Act comes into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

Pursuant to section 179 of the Budget Implementation Act, 2017, No. 2, this Order in Council fixes the day after the day on which the Order is made as the day on which sections 177 and 178 come into force.

Objective

Division 3 of the Budget Implementation Act, 2017, No. 2 (the Act) transfers the powers, duties, and functions of the Minister of Finance for three agreements Canada holds with the World Bank’s International Finance Corporation (IFC) to the Minister of Foreign Affairs. The Act also authorizes the Minister of Foreign Affairs to hold equity investments (by way of the IFC) in the course of the administration of these agreements. These legislative amendments did not come into force upon royal assent, which occurred on December 14, 2017, in order to provide sufficient time to amend the agreements to reflect this change in the responsible minister. This Order brings these legislative amendments into force on the day after the day on which the Order is made.

Background

These three agreements being transferred govern initiatives at the IFC that provide concessional loans for climate change mitigation and agriculture projects in developing countries, with principal, interest, or proceeds earned from investments flowing back to Canada over time. These agreements, described below, were entered into in 2011 by the Minister of Finance (on behalf of the Government of Canada), under the Bretton Woods and Related Agreements Act.

Two of the agreements concern the Canada Climate Change Program (CCCP), established in 2011 as a partnership between the Government of Canada and IFC to promote private sector financing for clean energy projects, through the use of concessional loans^footnote1 to catalyze investments in renewable, low-carbon technologies. The Government of Canada contributed CAD $291.6 million to the CCCP as part of a contribution to the Copenhagen Accord^footnote2 fast start financing to support climate change action in developing countries.

An additional CAD $60.3 million was contributed in 2013 as part of Canada’s investment in the IFC Catalyst Fund, which invests in private equity funds focused on providing capital to renewable energy projects and to companies that develop resource-efficient, low-carbon products and services in emerging markets. Canada’s contribution to the CCCP is managed through the Administration Agreement for the Financial Support of the Financial Mechanisms for Climate Change Facility — Concessional Finance, and the Administration Agreement for the Financial Support of the Financial Mechanisms for Climate Change Facility — Technical Assistance.

The third agreement concerns the Global Agriculture and Food Security Program (GAFSP), a multilateral mechanism used to assist in the implementation of pledges made by the G20 in 2009. The GAFSP Private Sector Window (PrSW), established in 2010, is implemented and managed by the IFC to provide innovative financing aimed at increasing the commercial potential of small and medium-sized agri-businesses and farmers by connecting them with local, national, and global value chains. Canada’s contribution to the GAFSP is managed through the Administration Agreement for the Financial Support of the Private Sector Window of the Global Agriculture and Food Security Program.

In 2012, the Department of Finance Canada publicly released a report on an internal audit and evaluation of its International Trade and Finance Branch. In the report, it was recommended that the Department of Finance Canada limit taking on international development program administration responsibilities, to the extent possible, as this type of programming is outside its core policy mandate and responsibilities.

One of the key findings of the report was that the program administration that occurs through the three aforementioned agreements (in particular, ongoing monitoring and long-term development results and effectiveness) is better aligned with the core mandate and responsibilities of the Canadian International Development Agency, which now forms part of Global Affairs Canada. It was recommended that these agreements be transferred to Global Affairs Canada, as that department manages international assistance programming in both food security and climate finance areas and is better suited to administer these programs.

Since the internal audit, the Department of Finance Canada has been working to finalize the transfer of these agreements to Global Affairs Canada. A required step in this process was to provide, through the Budget Implementation Act, 2017, No. 2, the Minister of Foreign Affairs with the necessary authorities to hold equity investments in the course of administering these agreements. These authorities were required because, in certain exceptional circumstances, the CCCP may receive equity in the context of the restructuring of a defaulted concessional loan provided by the CCCP. In the case of the restructuring, the IFC (as implementing entity of the CCCP) may choose to negotiate receiving equity in a borrower company in exchange for writing off a defaulted loan. With the passage of the Act and negotiation of amended agreements with the IFC, the transfer is ready to proceed.

One of the agreements, Financial Mechanisms for Climate Change Facility — Concessional Finance, includes funding for the Catalyst Fund. This specific initiative within that agreement will not be transferred from the Department of Finance Canada to Global Affairs Canada, as it is not considered Official Development Assistance and is not within the mandate of Global Affairs Canada.

Implications

The Order in Council brings into force legislation that enables the planned transfer of the three agreements from the Minister of Finance to the Minister of Foreign Affairs. The transfer does not represent a material change in Canada’s relationship with the IFC and does not substantially change the terms and conditions of the three agreements. The result of the transfer will be that these agreements will be managed by the appropriate entity within the Government of Canada, consistent with the recommendations of an internal audit within the Department of Finance Canada.

Consultation

The IFC has been consulted on this administrative transfer and has raised no concerns. As the legislation would not represent a material change to the three initiatives, it is not anticipated to have an impact on other external stakeholders.

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