UK Export Finance Marks First Year of Fossil-Free Allocation and Sets New Emissions Targets
UK Export Finance (UKEF) published its annual results documents for the 2021-22 financial year this week, confirming that it has allocated a total of £7.4bn of support. Key sectors supported included manufacturing, healthcare and low-carbon energy. For the first time in the agency’s history, no allocation went directly to extracting fossil fuels or generating electricity from fossil fuels.
MPs began probing the environmental impact of UKEF’s activities in 2018, to determine whether it supported international activities that would undermine the Paris Agreement or contradict the UK’s national ambitions. NGOs have subsequently raised concerns about emissions from the fossil fuel projects they support, and how these projects could prevent developing and emerging economies from ensuring a just transition to clean energy.
At the start of 2020, the government refused to make the interventions recommended by MPs to move UKEF support away from fossil fuels. But a U-turn was made in December 2020, when Prime Minister Boris Johnson said the agency would end direct support for overseas fossil fuel projects with “very limited exceptions” for the 2021-22 financial year. .
New reports from UKEF confirm that there was no direct support for fossil fuel extraction at home or abroad during the financial year. He says that after forming a 20-person renewable energy and transition underwriting team at the end of 2021, he expanded his support to sectors such as electric vehicle (EV) manufacturing and production. clean energy, with 12 overseas projects specifically classified as “sustainable”. » supported during the exercise. One of them was a high-speed train system in Turkey.
UKEF has also provided ‘bridging’ funding, to help hard-to-mitigate and high-emission sectors change their technologies and processes and upskill staff to cope with their new roles. Sectors that will receive this type of funding include building materials manufacturing, road transportation, aviation and construction.
Other priority funding areas include healthcare and pharmaceuticals, with a particular focus on ending the global Covid-19 pandemic and, since February 2022, support for Ukraine.
UKEF said that “eventually” it wants at least half of new business to come from areas of sustainable finance with “pronounced social or environmental benefit”.
Emissions target and mission statement
Environmental Audit Committee (EAC) MPs say 96% of the £2.6bn UKEF spent on overseas energy exports between 2013 and 2018 went to fossil fuels.
Although the agency no longer supports new projects, it retains exposure to existing projects and those in the pipeline. New UKEF documents confirm that the body will aim to reduce absolute emissions from all exposures in the oil and gas sector by 75% by 2030. In some cases, this will involve engaging in projects to reduce production or reduce emissions. In other cases, an assignment may be necessary.
UKEF has also pledged to reduce the emissions intensity of its exposure to the power generation and distribution sector by 58% by 2030. It says these targets are appropriate to lay the groundwork for net-zero operations by 2050 across all funded businesses and projects. There are no sectoral emission requirements yet for other sectors.
Additionally, UKEF has updated its mission statement. It now reads: ‘We are advancing prosperity by ensuring that no viable UK export fails for lack of finance or insurance, doing so in a sustainable way and at no net cost to the taxpayer.’
The documents add that his definition of sustainability includes respecting national and international laws and striving to meet best practice standards regarding climate, nature, human rights, social sustainability, sustainability of debt and the elimination of financial crime.
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