Sustainable development is in the DNA of export finance
"Export finance plays a big role in sustainable development and will be a key enabler to unlock financing for the energy transition"
We are very proud to rank number one in the export finance sustainability league tables for 2020! Our teams are very much focused on sustainable development and have been for a few years now, which is why this recognition means a lot to all of us.
If you think about it, sustainable development is in the DNA of export finance as a great deal of our activity translates into the development of infrastructure with tangible social impact in emerging countries. And we are very proud when we look back at the hospitals, water treatment plants, roads and bridged, rail infrastructure, etc that we have been financing.
More than SDG classification, which is good but not precise enough, concrete impacts are what we are aiming at. We analyze the impacts of our projects, using the UNEP FI Positive Impact Finance methodology. If a project generates impacts on one of the pillars of development (economy / social / environment), and if you have identified negative impacts that can be properly mitigated, then the project can be labelled Positive Impact Finance.
Innovation drives us. Innovating is key and will be more and more so. We are convinced that we need to broaden the scope of our mainstream buyer credit offer with a tool box fit for development : local currency facilities, innovative structures with DFIs, join forces with our colleagues developing impact based models, venture in new types of technologies with our project finance team to contribute to the energy transition.
We started to transform a few years ago after the shift occasioned by the various events which took place in 2015 : the millennial goals transformed into the SDG, the Paris Agreement on climate and the blended finance manifesto “from Billions to Trillions” to name key ones. Understanding how to best serve exporters by meeting importers’ evolving needs is at the center of our strategy, and the orientation towards sustainability is tangible in our achievements. The proportion of deals in our origination that can be considered as sustainable finance (positive impact, green loans, transition loans, etc) has grown from 31% over 2015-2017 to 46% over 2018-2020.
Going forward, the energy transition will keep us very busy. The Export Credit Agencies will be key to unlock financing for the energy transition, which is a mega trend with no precedent in terms of size and timing. All sectors are concerned, in all geographies. The technical challenge is huge and the investments needs for each year to come are in trillions.
The risk appetite of the financial community has to adapt to new actors, new structures, new trade patterns. Some start-ups and SMEs will become emerging champions in the energy transition and will require special support to invest in R&D and grow. Usual "OCDE to emerging world" export transactions will evolve. Mega factories start developing again in Europe, while mini decentralized projects will be much needed in emerging countries. As relocalization becomes a key question for some sectors, we see a growing need for domestic solutions to build the future.
It becomes obvious that the export finance mission tomorrow will not look like todays. Obvious as well is the fact that ECAs will play a key role: enablers, unlockers, catalysts. The very good news is that the ECAs are ready to be flexible, to take frontier risks, to put weight on social and environmental benefits when deciding to insure a new transaction with specific risk features.
ECAs have started to shift their portfolios, are keen to consider incentives to develop sustainable business, to work on sustainable chains to help smaller actors develop.
We have a great ecosystem contributing to sustainable development and export finance is definitely an exciting place to be!
Article published in the TXF Intelligence report on sustainability in Export Finance 2020.