In recent years, the narrative around how export credit agencies (ECAs) support trade has undergone a marked shift. But how much of this talk translates into action? Eleanor Wragg reports.


From the Covid-19 pandemic to Russia’s invasion of Ukraine, the European energy crisis and the ongoing rumblings of trade tensions between major global powers, the current decade has been characterised by a series of epoch-defining economic and geopolitical shocks. Throughout these challenges, ECAs have played a vital role in safeguarding trade flows, stepping in to keep exports moving during the toughest of times.

But beyond straightforward support for trade, public discourse around the role of ECAs is increasingly focusing on their use as tools to achieve the wider aims of their sponsor governments.

In its latest Competitiveness Report, the Export-Import Bank of the US (US Exim) says: “The ECA sector as a whole is no longer made up of the ECAs of old. Increasingly, ECAs are becoming national security instruments of their home governments in both their foreign and domestic policy priority areas. ‘What’s in the national interest?’ appears to be the question of the day more so than at any time in ECA history, where actions taken in pursuit of deals appear more macroeconomic in nature than, say, transaction by transaction as had been the case for a long time.”

Putting these assertions to the test is challenging. ECAs do not publish details of every individual transaction, and while OECD data exists on details such as the value of official export credits extended by ECAs by broad industrial sectors, the latest data available is for 2021, which pre-dates the Ukraine conflict as well as major policy shifts such as the implementation of the US Inflation Reduction Act (IRA).

However, by analysing publicly available information provided by a broad sample of ECAs, GTR has been able to uncover the extent to which these government-backed agencies are undergoing a transformation – as well as which policy areas they are prioritising.


Tracking the shifts in ECA activity

To get a representative picture, GTR took the content of the latest available ECA annual reports as of October 2023, including financial statements, information on clients and sectors, and the types of support being provided, and compared it to the reports published by the same ECAs in 2019, just prior to the Covid-19 pandemic.

Beyond the core ECA activity of mitigating risks for domestic exporters in emerging markets, six broad policy-led areas for ECAs emerged: addressing macroeconomic challenges, providing support to small businesses, delivering on foreign policy objectives and addressing geopolitical disruption, advancing ESG and sustainability goals, securing the supply of critical resources, and increasing domestic and untied financing.

To gain an understanding of the amount of disclosed ECA activity that is being carried out related to each theme, and whether this has changed over the past four years, GTR developed a library of typical terms for each thematic area – for example, words including “climate”, “carbon”, “net zero” and “cleantech” were categorised under the theme of sustainability. Using natural language processing, text analysis was carried out to identify the mention frequency of these terms across each of the publications.

A representative selection of OECD Consensus ECAs was chosen for the analysis, and only those ECAs whose annual reports were both comprehensive in scope and published in English were included in the sample. The ECAs studied were: Export Development Canada, US Exim, UK Export Finance (UKEF), Credendo, Export Finance Australia, Danish ECA EIFO (formerly known as EKF), Swedish ECA EKN, and Norway’s Eksfin.

The results (see figure 1) were striking. Since 2019, the mention frequency across all the six new themes has increased, indicating that, across the board, ECAs are giving more weight to these policy objectives.

Terms related to macroeconomics and geopolitics received the most mentions in both 2019 and 2023 – unsurprisingly given the upheaval of the past few years. Macroeconomics were top of mind for the ECAs of 2019, as this was the year in which a sharp slowdown in international trade flows and manufacturing activity pulled world economic growth down to the lowest level thus far since the global financial crisis.

Among ECA reports in 2023, geopolitics is in first place, as the Russian invasion of Ukraine, increased sanctions activity and the lingering effects of the Covid-19 pandemic all continue to disrupt trade and supply chains.


Securing supplies in a volatile environment

While ECA activity related to all of the six key themes has risen between 2019 and 2023, the biggest increase – of 341% – is in critical resources, an area that encompasses securing and diversifying the supply of energy and food as well as components necessary for the green and digital transitions, such as rare earth elements and semiconductors.

This more than threefold growth coincides with the introduction of national strategies that aim to shore up vital supply chains, such as the EU’s Critical Raw Materials Act, unveiled earlier this year, and the Biden Administration’s IRA, launched in August 2022.

Both initiatives seek to ensure domestic manufacturers have a steady supply of metals and minerals, combat supply chain and energy supply disruptions in the wake of the pandemic and Russia’s war with Ukraine, and mitigate over-reliance on countries such as China for strategic resources.

In 2022, German ECA Euler Hermes Aktiengesellschaft rolled out a programme to secure the long-term delivery of strategic commodities, which it used to support two large commodity transactions with Trafigura: an US$800mn deal to deliver up to 500,000 tonnes of non-ferrous metals, and a US$3bn syndicated loan for the inbound supply of natural gas to Securing Energy for Europe – the gas business formerly known as Gazprom Germania and now under the long-term administration of the German government.

Meanwhile, EKN, Sweden’s ECA, launched an import guarantee product to help local businesses struggling to secure raw materials. The programme marked the first time it has provided cover for imports, rather than exports, and required obtaining a new ordinance from the government.

Also in 2022, Export Finance Australia’s critical minerals facility saw its first outing, with two loans worth a total of A$239mn (US$170mn) to two companies developing graphite processing projects for the supply chains of electric vehicle batteries.


A push for sustainability

The second stand-out area from the research is ESG, where ECA activity has risen by 281% since 2019. This aligns with actions such as those taken to end international public finance for fossil fuels in the run-up to the 2021 Cop26 commitment by dozens of countries and public institutions.

As at the OECD data cut-off of 2021, OECD Consensus ECAs had slashed their support for fuels such as oil, gas and coal, and increased their activity in supporting renewables (see figures 2 and 3). More broadly, in its most recent State of the Industry report, the Berne Union – which includes multilateral financial institutions and private insurers alongside ECAs – says its members have almost doubled the value of new clean energy transactions they are supporting annually over the last four years.

More recently, ECAs have broadened the scope of their ESG-related activity, introducing sustainability-linked products to deliver on climate objectives. In 2022, Denmark’s EKF rolled out its first sustainability-linked direct lending product, an US$800mn loan to Italian energy firm Enel tied to supply contracts with Danish exporters to support a 1.5 GW buildout of Enel’s global wind portfolio. The loan’s margin was linked to Enel’s existing target of keeping its direct greenhouse gas emissions, also known as scope 1 emissions, equal to or below 140g of CO2 equivalent per kilowatt hour by 2024.

Meanwhile, Belgium’s ECA Credendo has introduced its Green Package, which includes sustainability-linked incentives for insurance, buyer credit and guarantee products, and the Netherlands’ Atradius has set up a Green Cover Investment Loan, which seeks to expand domestic production capacity for green capital goods or projects.

Other ECA activity in this space includes that of Spanish ECA Cesce, which launched a Green Export Policy to advance climate-friendly exports in 2022. Recent deals under the framework include a strategic agreement with French transport company Alstom to provide an annual maximum of €500mn for export activities focused on green projects.


Turning inwards: the rise of untied and domestic finance

Many of the new products that ECAs are rolling out to target these strategic interests are untied – which is in line with GTR’s findings of a 44% increase in mentions of this type of financing across the reports.

The 2020 launch of UKEF’s export development guarantee, which helps companies who export from, or plan to export from the UK access high-value loan facilities for general working capital or capital expenditure purposes, was hailed as a “landmark” by respondents to a US Exim survey, due to the far greater flexibility it offered versus standard financing under the OECD Arrangement.

Since then, a growing number of ECAs are pivoting to offer more support aimed at boosting the competitiveness of domestic exporters over the longer term – most notably US Exim, which approved the Make More in America Initiative last year. Under the programme, the ECA can now finance domestic projects with an export connection that represents as little as 15% of total production, while traditional local content requirements have been scrapped in favour of the number of jobs supported by the financing.

In addition, some ECAs are now turning their focus towards promoting inbound investment from multinational firms, such as Poland’s ECA Kuke, which last March signed a €1bn strategic partnership agreement with Alstom to encourage it to invest and develop technology in the Polish market.


Supporting small businesses

Although the initial rush of pandemic relief lending schemes – which were behind a large amount of recent ECA support to small businesses – has now died down, ECAs are still focusing on stepping up their SME support initiatives, with mentions of terms related to this theme rising by 44% across annual reports in 2023, as compared to 2019.

In November 2022, UKEF, which says SMEs made up 81% of its clients last year, launched a new product to guarantee payments made by overseas buyers of UK goods. “The support that UKEF provides is crucial for firms, especially for small businesses while they grapple with the current economic headwinds. That’s why our new bills and notes guarantee is so welcome. It’s the latest in our support for SMEs and provides a faster and more streamlined process to get money in businesses accounts,” said then-minister for exports Andrew Bowie, introducing the new scheme, which is aimed at contracts valued between £500,000 and £30mn.

In a similar vein, following parliamentary approval of an act relating to publicly supported export credits in January this year, Finnish ECA Finnvera is now offering credit directly to foreign customers of exporting SMEs, although the minimum transaction size, at €1mn, is larger than that set out by UKEF.


Out with the old

As the content of their annual reports shows, ECAs are taking a broader and more tactical approach to international trade than in the past, recalibrating their activity to address more strategic demands – and this hasn’t gone unnoticed.

“The characteristics of a competitive ECA are morphing from an ECA winning specific, one-off deals with standard terms, based on the OECD Arrangement, to an ECA that meets multiple national objectives by offering case-by-case cover that meets the specific needs of an export transaction; a spectrum of support in order to develop and expand national export capacity; and support that facilitates financial access in priority areas,” says US Exim in its Competitiveness Report.

Deployed to strengthen foreign policy objectives, advocate for sustainability goals, ensure the supply of essential inputs, and enhance domestic firms’ competitiveness against international rivals, today’s ECAs bear little resemblance to the ECAs of the past.

These modern agencies have evolved beyond their traditional role as lenders of last resort, which historically intervened solely when private sector financing was inaccessible for supporting export transactions – and this trend shows little sign of abating.