A group of global export credit agencies (ECAs) have set out how they plan to reach net-zero greenhouse gas emissions by 2050, saying that their efforts could form a template for other public export finance bodies.
The plans form a protocol for setting “ambitious” science-based targets for trimming emissions, as well as guidelines on transparency and reporting, and will be binding on members of the United Nations-facilitated Net Zero Export Credit Agencies Alliance (NZECA), which was launched last year.
ECAs have come under pressure from climate campaigners and, in many cases, their own governments’ climate policies, to help keep global warming in check by not backing exports to projects linked to carbon pollution and boosting support for renewable energy.
“ECAs and Exim banks are essential to climate action, because they have significant influence in global markets and the resources to support large-scale projects worldwide”, says Eric Usher, head of the UN Environment Programme finance initiative.
The NZECA’s nine members are mainly in Europe, in addition to agencies from Canada, Kazakhstan and the UAE. While European ECAs have taken the lead on curtailing export credit support for fossil fuel projects and boosting green finance, they have yet to be joined by heavyweight agencies from countries such as the US, China and India.
But the NZECA hopes that the protocol could be adopted by other ECAs that are seeking to achieve a net-zero goal. “By establishing clear target setting approaches and promoting transparency, the protocol aims to level the playing field for ECAs and Exim banks on the path to net zero,” the document published today says.
The NZECA announcement comes as global leaders and financiers gather in Azerbaijan for Cop29, the annual meeting designed to advance progress toward the 2015 Paris Agreement goal of limiting global warming to 1.5 degrees Celsius over pre-industrial levels.
Despite progress in Europe, “the shift of export finance from fossil fuels to renewable energy has been slow, inconsistent and not in line with the estimated needs for the energy transition”, according to the Perspectives Climate Group think tank.
Perspectives has released what it describes as a best practice guide for agencies that want to align with the 1.5 degree target.
The “practical toolkit” draws on positive examples the organisation found through 12 case studies it conducted on ECAs’ alignment with the Paris Agreement. Max Schmidt, a Perspectives researcher and consultant, tells GTR he has noticed growing interest in climate strategies from non-OECD ECAs that have not typically been involved in multilateral efforts.
European ECAs near fossil phase-out
Recently released data shows a separate alliance of European ECAs has continued to slash financing for fossil fuel projects, although several agencies are yet to fulfil a pledge to completely phase out such support by the end of 2022.
The 10 Export Finance for Future (E3F) members supported fossil fuel deals worth €1.1bn in 2023, compared to €13.6bn for “climate positive” deals such as renewable energy and rail transport. 13% of the agencies’ new support for energy deals during 2023 was for fossil fuel transactions, compared to 69% in 2015, the year the Paris Agreement was signed.
All the alliance’s members agreed in 2021 to end all public finance for fossil fuels by the end of 2022, but Germany, Italy, the Netherlands and Denmark reported providing support for fossil fuel transactions last year.
Italy’s ECA Sace provided the most, at €584mn, which the E3F report says was for oil sector projects in Brazil and Indonesia. The request for the Brazilian project was received before Italy’s climate policy came into effect, and the Indonesian project was deemed “eligible” under the policy, according to the report. Sace did not respond to a request to comment.
Germany’s €238mn of support was for the modernisation of a gas-fired power plant in Iraq. A spokesperson for the economic affairs and climate action ministry says the cover was granted just before Germany’s export credit climate strategy came into effect and would not be eligible for support under the current policy.
But overall, growth in climate-friendly cover is outpacing overall growth in ECA transaction volume, the report says. “There is a clear shift of E3F public support from fossil fuels to renewable energy,” the alliance says.
“This promising but still emerging trend is informed by a ramp-up in incentives to promote climate neutral or resilient transactions at the level of each E3F member,” the alliance says, as well as last year’s revamp of the climate approach within the OECD Arrangement on Export Credit, the rules on export credit cover that apply to ECAs in most wealthy nations.
The jump in financing for climate-friendly deals was largely down to soaring support from Euler Hermes, Germany’s ECA, which disclosed €6.2bn of cover for climate-positive deals in 2023, almost as much as it provided in the previous eight years combined.
The spike was driven by two €1bn-plus renewable energy projects in Angola, the German government spokesperson tells GTR, adding that Euler Hermes has also established a “green deal team” tasked with seeking out new business to “spur the demand for export credit guarantees for green exports”.
The EU, UK and Canada are seeking to broaden the shift of export credit away from fossil fuels by tabling a ban on oil and gas support at the OECD level, with negotiations set to resume over the proposal later this month.
