UK Export Finance (UKEF) announced on Finance Day at COP27, November 8, that it will become the first export credit agency (ECA) to offer Climate Resilient Debt Clauses (CRDC) in its direct sovereign lending.
UKEF helps overseas buyers access financial support to make their projects happen, provided they commit to sourcing goods and services from the UK. This helps open new doors for world-class British suppliers to trade overseas.
How UKEF’s CRDCs will help
The new clauses will offer low-income countries and small island developing states the ability to defer debt repayments in the event of a severe climate shock or natural disaster.
This announcement is part of the UK government’s wider objective to help improve the financial resilience of vulnerable countries in the face of severe climate shocks.
The CRDCs will provide the ability to defer debt repayments in the event of a severe climate shock or natural disaster.
This is part of UKEF’s broader ambition to embed climate change into its decision-making in line with its Climate Change Strategy and net-zero 2050 target.
Speaking at COP27 Finance Day, Tim Reid, UKEF’s director of the business group will say, “Some countries are now facing tough choices between protecting their citizens as they respond to climate shocks or paying down their debts.
“By suspending the debt service payments, UKEF will enable borrowing countries to focus on responding to and recovering from a crisis.”
Exchequer Secretary to the Treasury, James Cartlidge, said, “Climate shocks are increasing in frequency and severity which is why we are supporting countries hit hardest. In the wake of a disaster, they face painful trade-offs between rebuilding their communities and making debt repayments.
“Building on our COP26 legacy, we are committed to climate-resilient development, as the UK continues to play a leading role in reducing carbon emissions to Net Zero by 2050”.
The new CRDC are part of UKEF’s commitment to a greener, more sustainable future following the launch of its Climate Change Strategy in 2021, where it committed to net-zero greenhouse gas emissions by 2050 across its portfolio and operations.
Additional UKEF measures
This initiative is part of the UK Government’s wider objective to improve the financial resilience of vulnerable countries around the world in the face of severe climate shocks.
Alongside UKEF, the Private Sector Working Group chaired by the UK Treasury will also launch today a ‘model term sheet’ to embed climate-resilient debt deferral into standard bond and loan contracts.
Multilateral development banks will also agree to form an informal working group to further explore CRDCs and other approaches, building on the Inter-American Development Bank’s leadership in this area.