UK Government issues first ‘green transition loan’ for business
The UK Government has issued its first state-backed 'green transition loan' for a business, providing engineering and energy consultancy Wood Group support to scale up low-carbon product and service offerings.
UK Export Finance (UKEF), the UK’s credit agency, is providing 80% of the loan amount through an Export Development Guarantee (EDG) – a loan provided to UK businesses that export globally, to cover operational or capital expenditure.
The loan has a five-year tenure and, during that time, Wood Group will use the money to accelerate the growth of its business offerings that enable customers to reduce their carbon emissions. The firm has notably committed to doubling its client support by 2030, with all growth coming from projects related to the energy transition and sustainable infrastructure.
Some of the funding will also support Wood Group’s R&D efforts in sectors that could enable the low-carbon transition, including wind, solar, wave and tidal power; bioenergy; energy storage; hydrogen and carbon capture, usage and storage (CCUS).
Under the loan agreement, Wood Group has pledged to “significantly reduce” its own emissions during the five-year period. The company is targeting a 40% reduction in its Scope 1 (direct) and Scope 2 (power-related) emissions by 2030, against the baseline of the 2018-2019 financial year. Wood Group has also pledged to create more green jobs in the coming years.
Wood Group’s chief executive Robin Watson said: “We recognise the unstoppable momentum behind the energy transition and are committed to providing the practical solutions to help deliver a net-zero future. We are already well advanced with our own transition, deliberately broadening our portfolio across energy and supporting our clients to achieve their own carbon reduction goals.
“UKEF’s support will allow us to accelerate this journey and capitalise on the many opportunities emerging as we build the low-carbon energy systems of the future.”
UK Government Minister for Scotland, David Duguid, added: “It’s fantastic to see the UK Government’s first Transition EDG going to a Scottish-based company, helping support low carbon jobs right across the whole UK.
“As we prepare to host COP26 in Glasgow later this year, this announcement marks another important milestone in the UK’s energy transition, showing how free trade will help deliver on our net zero targets.”
The UK Government last year pledged to stop financing fossil fuel projects overseas, through UKEF and otherwise. Overseas fossil fuel projects are being phased-out of the EDG eligibility criteria ahead of COP26 in November. By some estimates, the redirected funding could support more than 40,000 jobs in green sectors by 2035.
Export opportunity or business-as-usual in disguise?
To Duguid’s point on free trade, the Board of Trade this summer published a report cautioning against “green protectionism” – measures that would make it harder for the UK to export and import low-carbon technologies.
It calls for the UK to encourage other countries to cut tariffs on technologies for sectors such as renewable energy, energy efficiency and electric vehicles (EVs). At the same time, the UK should not implement a carbon border adjustment tax, the report argues.
Green groups have called this approach “cavalier” and called for the UK Government to bolster its own policy approach to net-zero, domestically and internationally.
For the latest on how the UK Government, other nations, and the private sector, are preparing for COP26, read the latest edition of edie’s COP26 Action Tracker.