As the climate crisis intensifies, trade is a powerful agent of change
Louis Taylor, Chief Executive of UK Export Finance, reflects on efforts to end overseas support for fossil fuel financing and how this can help build toward a global effort to combat the climate crisis.
Climate diplomacy is working but pledges alone are no longer enough to fight the climate crisis we face. For the global community to have a tangible response to the climate emergency, the world-leading sustainability goals made last year by governments, financial institutions and corporates must quickly become reality.
UK Export Finance (UKEF) is determined to continue pushing this frontier through the provision of export finance. We provide guarantees, insurance, and loans to support UK export activity, often financing major projects across the globe to bring trade to the UK. We know what we do impacts the environment and that we have a responsibility to operate sustainably.
As the energy transition gathers pace, exporters have a significant opportunity to play a pivotal role in offering their goods, services, skills, and ideas around the world. Export credit agencies (ECAs), like UKEF, can help make this a reality by financial supporting where the private sector is unable to.
It is why we have refreshed our mission statement and put this ambition at the heart of our businesses. Our message is clear – there is life after fossil fuels for businesses, international trade and for ECAs. And we are setting a course for others to follow.
UKEF ended its support for overseas fossil fuel projects in March 2021 – the first such agency worldwide to do so. Since then, 33 countries and five public finance institutions have joined us in pledging to end support for fossil fuel projects. It means that rather than working out how to get a fossil fuel deal done responsibly, ECAs are now more focused on prioritising clean energy projects.
Last year, UKEF underwrote £7.8bn of transactions without a single penny going into fossil fuel projects. And that volume is the second largest ever. This is a real pivot from the years before.
This is already supporting real investment that is driving sustainable change. At UKEF, we delivered our largest-ever guarantee for a civil infrastructure project in Türkiye, providing a £1.7bn loan for a high-speed rail line. This will provide a faster, lower-carbon alternative to current air and road routes, helping to fulfil Türkiye’s commitments made at COP26.
In total, UKEF committed £3.6bn to sustainable projects in 2021, ranking as the top export credit agency for sustainable financing.
But ECAs and financial institutions must also commit to reducing the negative sustainability impacts associated with our financing activities.
At UKEF, we have created a blueprint in our latest climate disclosure report which others can follow – particularly ECAs that primarily act as a guarantor of finance, rather than providing the actual finance themselves.
Our new disclosures have allowed us to set a measurable target to reduce the absolute emissions of our oil and gas sector exposure by 75% by 2030, and to reduce the economic emissions intensity of our exposure to the power sector by 58% by 2030. This is a cornerstone of our plan to operate on a net-zero basis by 2050.
I believe these important steps position UKEF as a world leader in sustainable finance. But our progress can be replicated by our peers to support global change – which is what is needed to fight the crisis we face.
With COP 27 just around the corner, UK Export Finance is committed to continuing international climate leadership, so that others can learn from our experiences as we encourage them to join us on the journey to a low-carbon future.
But it does not end there. To maintain momentum, the private sector must also turn its commitments into tangible outcomes and be ready to capitalise on the opportunities the energy transition presents. Across the spectrum of international trade and export financing, more needs to more done to standardise our approach to break down the barriers to financing sustainable deals.
Trade has a huge role as an agent of sustainable change and sustainable growth. We must all play our part in making it a reality.