Green trade: UK Export Finance pleges to align its financing with net zero by 2050
UK’s export credit agency vows to increase support for ‘clean growth, renewables and climate adaptation exports’ as it unveils new emissions goal
The UK’s export agency has pledged to achieve net zero emissions across its financing portfolio by 2050, setting out its plans to increase support for ‘green’ projects and improve its understanding of climate-related risks.
In a statement this morning, UK Export Finance (UKEF) said it would ensure that all loans, insurance, and guarantees it issues to businesses would be “entirely carbon neutral by 2050, on a net basis”, confirming it would also set “realistic” interim decarbonisation milestones that would guide its transition.
In addition, it vowed to provide more detail about the emissions produced by its most carbon-intensive projects and undertake “climate change stress testing” of its investments.
UKEF has faced intense criticism in recent years for its support of carbon intensive projects, with calls for the agency to align its activity with the UK’s climate goals increasing after its decision to invest in a natural gas pipeline in Mozambique last year that is expected to drive a 10 per cent increase in the sub-Saharan country’s emissions.
The announcement comes just days after a report into UKEF published by the International Trade Committee detailed how the largest awards allocated by the credit agency in 2020 went to sectors with high greenhouse gas emisisons. It noted that of the £12.3bn of support provided by UKEF last year, £3.3bn went to Rolls Royce, £1.9bn to British Airways, £1.2bn to EasyJet, £1.1bn to BAE systems, and £910m to the contentious natural gas project in Mozambique, a project spearheaded by Total.
Unveiling the agency’s new direction, International Trade Secretary Anne-Marie Trevelyan said the net zero plan was “among the most ambitious” unveiled by any national export credit agency.
“It puts UK Export Finance squarely in support of green exports to tackle climate change, level up the country and help us recover from the pandemic,” she said. “UKEF’s net zero pledge shows the UK’s climate leadership and is an encouragement for other countries to follow suit. Its world-leading financial products help British businesses capture billions of pounds worth of foreign deals, boost green exports and give hope that temperatures can be kept in check.”
UKEF said its strategy to reach net zero would be centred around five pillars, which would see it increase support for green exports, reduce greenhouse gas emissions from its financial portfolio, and enhance transparency and disclosure of the environmental impacts of its investments by reporting against climate-related commitments. It has also pledged to work to understand and curb its exposure to climate-related risks and to “lead internationally” by encouraging its counterparts in other countries to follow UKEF’s example.
The new Climate Change Strategy comes roughly 10 months after the government announced it would no longer directly invest any tax payer money in the fossil fuel sector overseas, be it export finance, aid funding, or trade promotions.
It is published the same week as the Prime Minister told world leaders at a climate round table at the United Nations General Assembly that “all great powers will be green powers” in the future.
UKEF’s net zero mission was welcomed by Dr Ben Caldecott, director of the UK Centre for Greening Finance & Investment and a member of UKEF’s export guarantees advisory council.
“This strategy is an important step for UKEF and sets out how it will systematically mitigate climate-related risks and take advantage of new opportunities,” he said. “UKEF will increasingly incentivise businesses in need of export finance to align with the Paris Agreement and will help to open new frontiers for UK companies seeking to expand green exports.”
Earlier this week, the International Trade Committee urged UKEF to take on an explicit mandate to embed environmental, social, and human rights considerations into its decision making, noting that the agency’s current mission to ensure than “no viable UK export fails” was out of step with the UK’s climate and human rights commitments.
The committee also recommended that UKEF publish “project supported” notifications for projects it has supported in a more timely fashion than it has in the past, in order to provide more time for scrutiny of projects’ risks, impacts and plans for mitigation. It noted that the government did not publish a “project supported” notification for the controversial Mozambique natural gas project until August 2021, more than a year after it agreed to support the project in June 2020.
The MPs welcomed the export finance group’s decision to set up a “clean industries team”, warning the reallocation of the historically high levels capital it had traditionally provided to fossil fuel projects remained a “challenge” for the credit export agency.
Angus Brendan MacNeil, chair of the parliamentary group, said the trade export group needed to put “serious thought” about how it planned to ramp up its investments in clean energy ventures over the coming years.
“UK Export Finance has an important role to play in backing exporters,” he said. “However, it’s clear that UKEF is at a critical juncture and changes will be required if it is to continue to meet exporters’ needs. UKEF should put serious thought into how it will increase support for renewables projects, or else its actions will continue to risk actively contradicting the government’s ambitions.”
Earlier this month, UKEF announced it had provided a £31m loan to environmental management consultancy Bee’ah to complete construction of its new ‘green’ headquarters in the city of Sharjah in the United Arab Emirates.
The UK government said the building – designed by the late British architect Zara Hadid – would be one of the “most sophisticated ‘smart offices’ in the world once complete, entirely powered by clean energy generated by solar panels and waste-to-energy systems. UKEF’s backing on the project would result in one-third of the value of the “green contract” being delivered by UK companies, it said.
UK export finance CEO Louis Taylor touted the arrangement with Bee’ah as proof that UKEF was “opening new frontiers for green exporters”.
