The climate crisis is impacting all parts of the world, and everyone has a responsibility to help mitigate its impact.
The U.N. Secretary-General described the most recent IPCC report as a “code red for humanity”, as it was revealed that the last decade was the hottest period in 125,000 years, with scientists predicting that warming will reach 1.5°C by 2050.
These reports are startling, but by working together and tackling these challenges head-on, we can reduce our emissions and work towards our net zero goal by 2050. As we edge closer to COP26 in November, businesses across the country are announcing their commitments to achieving a low-carbon economy.
So far, almost one in three of the UK’s largest businesses has committed to UNFCC’s ‘Race To Zero‘ campaign – an important step, as businesses and the finance sector, have a vital role to play in this mission. It requires the financial system to adapt by transitioning away from high-carbon sectors to clean growth alternatives.
Of course, as a global challenge, it’s equally important that this effort goes beyond the UK – and that the skills and expertise of British businesses can help drive the transition overseas.
It’s equally promising that so many British companies are starting to realise the countless benefits and opportunities that can be realised with exporting across the globe.
In fact, green trade is set to be worth £1.8 trillion by 2030, so there are plenty of opportunities to capitalise on.
What role do Export Credit Agencies play?
Export Credit Agencies (ECAs) are in a unique position to support both domestic and international climate aims, helping to realise economic opportunities for the UK and facilitating our international partners to lower-carbon economies.
UK Export Finance (UKEF), the UK’s Export Credit Agency, has increased its support to the clean growth, climate adaptation and resilience sectors. Following its £2 billion direct lending facility for clean growth and renewable projects, and its launch of a Transition Export Development Guarantee to help UK exporters access high-value loan facilities for general working capital or capital expenditure purposes, businesses are more empowered than ever to transition to clean alternatives.
How UKEF plans to be net zero by 2050
It doesn’t stop there: UKEF has just announced its commitment that its portfolio and operations will be net zero by 2050. Through its new Climate Change Strategy, UKEF has pledged to decarbonise all its operations and financial portfolio. This means our £50 billion capacity to support exports needs to be carbon-neutral on a net basis by 2050 – a major undertaking.
To help UKEF get there, the strategy is based on five pillars that will help UK exporters prepare for a net-zero world. To end its contribution to climate change, UKEF will:
- increase its support for green exports
- reduce greenhouse gas emissions from its financial portfolio
- improve understanding and mitigation of its climate-related financial risks
- report against climate-related commitments, enhancing transparency and discourse
- lead internationally, encouraging others to follow UKEF’s lead and set ambitious climate targets.
This all follows an announcement at the end of last year that, in line with UK Government policy, that the UKEF will no longer provide new direct financial or promotional support for the fossil fuel energy sector overseas – the world’s first ECA to do this.
A new, 20-person-strong Renewables and Transition Underwriting Team has also been established in anticipation of the increased demand from businesses looking to play a part in the green industrial revolution. A dedicated team allows UKEF to look more widely at renewable opportunities across the board, ensuring a fuller understanding of what the UK can offer in the green supply chain.
Over the next four years, the UKEF will provide more detail on emissions for its most carbon-intensive projects, establish new climate change stress-testing of its portfolio, and increase its financing for green projects. The department will then publish another strategy to detail progress on its path to net zero in 2024.
Companies are already embracing the change
Already companies are taking advantage of these changes. One such company is FoundOcean – based in Livingston, Scotland – a business that provides specialist materials for seabed foundations to host large structures in the sea. In the last decade, the company has transitioned away from oil and gas applications to renewable energy projects. In June, FoundOcean received UKEF financial support to build the foundations for a 100-turbine wind farm in Taiwan.
The deal means the wind farm will be able to produce over 1GW of power – equivalent to 20% of the level the UK already produces. FoundOcean now has clients spanning the globe – in Southeast Asia, the Gulf of Mexico, and in the Netherlands – as it anticipates that over half of its contracts will be overseas this year. On top of that, 80% of its business now comes from renewable energy projects.
This is a brilliant success story of a British business understanding what it can bring to tackling climate change, and the potential for business growth – and jobs – that can be achieved by taking advantage of green export opportunities.
The science is clear, and we must take urgent action to respond to the threat of climate change to have a chance of limiting global warming. While many businesses are taking advantage of the opportunities, many others are still unaware of the benefits that ECAs can provide in this respect.
As a collective, we need to make the most of support like UKEF’s for the UK’s supply chain, and to save our planet.