Source: TXF

The ECA CEO Panel: Sustainability, decarbonisation, project pipelines and policy

“Many countries in the Indo Pacific region are going to need help with energy transition”
Swati Dave, Managing Director and CEO of Export Finance Australia

In September 2021, the ICC white paper on Sustainability in Export Finance (which went on to win a TXF award for innovation at the Lisbon event) made the point that ECAs “were once leading the way on the topic of sustainability” but in recent years “had fallen behind”. The call to action does seem to have been taken on board and in the first packed full plenary session of the conference, ECA CEOs discussed “Sustainability, decarbonisation, project pipelines and policy”. All shared their different approaches to support energy transition. “We are financing critical minerals projects needed for clean technologies, we finance critical Indo Pacific infrastructure and are actively looking for more renewable projects,” said Swati Dave, Managing Director and CEO of Export Finance Australia (EFA, pictured third from right). “Many countries in the Indo Pacific region are going to need help with energy transition, and our role is to help them,” she added. Australia has an abundant resource of critical minerals, and EFA supports the Australian government’s critical minerals strategy around their extraction, processing and export.

Louis Taylor of UKEF (pictured fifth from left) explained how the UK ECA’s policy is not to provide any support at all for overseas fossil fuel projects – not even natural gas. “We are not spending our time trying to do fossil fuel projects in a responsible way but are focussed very cleanly on green projects,” he said. Taylor made the point that prioritising sustainable overseas projects should not get in the way of supporting business (a point echoed by Mairead Lavery, Export Development Canada’s President and CEO – pictured far left). The British ECA has a £2bn direct lending facility for “clean growth”. It has also developed a Transition Export Development Guarantee which, he said, “allows us to provide large amounts of capital to companies domestically who are going to export through a transition plan away from fossil fuel-based revenues towards cleaner and greener sources of revenues.

Reta Jo Lewis, who took up the role of President and Chair of US Exim Bank 80 days before coming to Lisbon (pictured fourth from left), reiterated how her agency supports the government policy on financing sustainable projects. “Last year President Biden committed to supporting US$11bn from public financing agencies for projects that will move the world forward in climate adaptation and energy transition.” American solar panels exported to Peru, India and Guatemala are just some examples of how US Exim Bank is contributing.

ECA CEOs outlined their respective financing and guarantee products in place to support and encourage energy transition projects, and many confirmed their reporting in line with frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD). They agreed there was a huge opportunity to support each other by working together on updating the OECD Consensus. They also called for a common approach about how projects could deliver what was needed to create new energy sources such as transport projects and metals and minerals that could used for batteries. As Sweden’s Anna Karin-Jatko (pictured third from left) put it, “We need to move jointly”.

Carlos Gomes da Silver, MCA Group

Carlos Gomes da Silva, CEO of EPC corporate MCA Group, came back to the point made by the Australian ECA head Swati Dave that security of critical commodity supplies is an area of concern that they are concentrated in a small number of countries. “We are moving from intensive oil and gas exploration to mining exploration in what relates to cobalt, nickel, lithium and cobalt and rare earths.”

Making the point that “what we are embracing for the future is the fact that the level of concentration of these new energy transition requirements are completely different from what came before” and that typically, more than 75% of those metals are in the hands of the top three tier countries in the world. He asked, “So how can we secure the supply of those metals in a new tech frontier where the deglobalisation comes to the table again and where the safety of supply is one of the key components?” Europe has a key role to play, he reflected. These were issues that Deutsche Bank’s Head of Lending Hauke Burkhardt had raised in the white paper, How to ensure commodities security in a volatile world (April 2022) and on Trade Finance TV with TXF’s Aife Howse.

“Complexity is a key challenge in the context of risk management,” added Deutsche Bank’s Global Head of Structured Trade and Export Finance, Werner Schmidt (pictured left, above). In his view, what amounts to a “transformation crisis” creates increased risk. “We are used to working with models and methodologies with data input but if you input what you see right now the model blows up.” A key solution, he said is to look at risk from all the perspectives – client, bank, ECA/governments and then “see how we can slice and dice and put things on different shoulders to manage the complexity.”

Having emerged from, as Dufour recalled, the global financial crisis (liquidity), the Arab Spring (sovereign) and, most recently Covid-19 and the Russia/Ukraine war (supply chain), with the requirement for ESG transformation added in, new thinking is required, agreed the panel. “There are a lot of opportunities,” concluded Schmidt.

TXF Global 2022, Export, Agency & Project Finance was held 7–8 June 2022 in Lisbon, Portugal