Sweden is carving out sustainable policies to ensure a greener nation and trading system. Nevertheless, the country and its export credit agency EKN face challenges in incentivising the buyers of Swedish goods, such as gas turbines, to use greener fuels to power them, writes Maddy White.


In 2017, the Swedish government legislated a net zero greenhouse gas emissions by 2045 goal, making it the first country to pledge such a target. In the time since, only Scotland has committed to as ambitious a goal, with other countries, including the UK and Japan, promising to decarbonise by 2050 onwards.

When it comes to supporting trade and exports, Sweden has taken steps to ensure a sustainable future. Export finance for the extraction and exploration of fossil fuels will cease after 2022, with EKN and SEK, a government-owned entity, developing a plan for the phasing out of finance for such activities. As of December, EKN stopped issuing new guarantees that support coal mining.

However, as Sweden has generally tended to avoid financing these exports, the share of fossil fuel transactions relating to coal and oil in EKN’s guarantee portfolio and SEK’s credit granting is already low compared with other countries’ official agencies. Support for gas projects takes a larger share.

Export credit agencies (ECAs) around the world that continue to support coal power plants or large-scale extraction projects of oil and gas will be exposed to both increased financial and reputational risk, Marie Aglert, director of large corporates at EKN, tells GTR. “There is a lot of focus on ECAs to stop supporting these projects because they must adapt.”

New fossil fuel plants are becoming harder and riskier to finance as banks and other stakeholders withdraw from the sector as concerns grow about whether or not they will make the returns required. “Global capital is adopting the moral high ground on environmental, social and governance (ESG), but mainly because it is the economically sensible thing to do,” reads a blog post by the Institute for Energy Economics and Financial Analysis (IEEFA), a US-based non-profit company.

In terms of reputational risk, ECAs are being criticised for not aligning their export finance activities with their respective governments’ domestic emissions goals. UK Export Finance (UKEF), for one, has made headlines for its strong support of overseas fossil fuel projects, despite the UK passing a law requiring the country to reach net zero emissions by 2050.



Sweden is “very well positioned” when it comes to sustainable trade, says Aglert. At its facility in Finspång, Siemens Industrial Turbomachinery manufactures gas turbines that produce electricity and heat for export all over the world. While most gas turbines operate using natural gas, these turbines can run on a fuel mix of up to 60% hydrogen and 40% natural gas.

“Our R&D department is dedicated to developing the technical solutions to operate turbines on 100% hydrogen by 2030. So, our gas turbines are future-proof as they can be shifted to fossil-free fuels,” said Åsa Lyckström, head of global product positioning at Siemens Energy, speaking at the GTR Nordics 2020 Virtual conference in November.

However, many of the turbines made at the factory in Sweden that use finance support from EKN are exported to developing countries, which are unable to power them using greener alternatives to natural gas because of cost issues and availability. How to incentivise buyers to use greener fuels is something EKN and Siemens are now in discussion about.

Lyckström added: “One of the areas that we need to help each other with is sharing risks. In sharing the risk, I think it would lead to more companies with the confidence to take the step to start producing green fuels and to use greener fuels on a bigger scale.”

A similar situation has arisen with an EKN-backed public transport deal. Karin Wessman, director of sustainability at EKN, explains to GTR: “We have recently supported a bus rapid transit system project in the Ivory Coast. When it becomes affordable and available locally, biogas can power those buses instead of fossil fuels.

“But production of green fuels in low-income countries – where many of our buyers are – requires large investments and political will.”

One question this issue raises is whether or not such a project – and transaction – can be labelled as sustainable, if technology can be fuelled using more environmentally friendly fuels but where that is not a reality for the buyer. This is compounded by the fact that a lack of guidelines on sustainability for export and trade finance makes it difficult to define and measure what is truly sustainable.

“In some instances, where they [goods] are not inherently green or sustainable, there is the question about the application areas of the good or product,” said Tomas Zimmermann, head of the sustainable finance team in the client coverage unit at Swedbank, during the same session at GTR Nordics, referring to the example of the Siemens turbine.

“How should we relate to that as a bank in order to ensure that we are following our own sustainability strategy and commitments?”


Rewrite the rules

The OECD Arrangement is yet to factor in the goals of the Paris Agreement, which only reinforces the view that it is outdated and not fit for purpose in guiding the use of export credits among its participants.

Aglert says that there needs to be more within the OECD guidelines to promote green and sustainable export finance while also regulating and restricting export finance for basic fossil fuel-based infrastructure.

“There are compelling arguments for the international export finance system to play a complimentary role to the Paris Agreement by assuming larger financial risk in projects with the potential to contribute to the climate transition that the private sector finance market is not prepared to assume currently,” she says.

But any changes in OECD regulations would have to be decided on a consensus basis, which could be difficult to achieve. The US, for example – an OECD Arrangement member country – officially left the Paris pact in 2020 under the leadership of Donald Trump, although President Joe Biden has pledged to rejoin the deal during his first term.

Wessman suggests that an easier path would be to reach a consensus on promoting green exports more generally. But with the OECD Arrangement itself up for modernisation, and ECAs often supporting programmes outside of the scope of their guidelines, Aglert believes that a good starting point would be simply to “get ECAs on the same page”.

Beyond the OECD Agreement, Wessman says that there are “different regulations being established that are trying to, in a qualitative way, clarify what is sustainable or green finance”.

She points to the EU taxonomy, which is primarily focused on banks and private entities but will have an impact on ECAs. This development is “very good”, she says, but making it operational will be key.

The EU taxonomy, which came into force in July last year, is a tool to help investors understand whether an economic activity is environmentally sustainable and navigate the transition to a low-carbon economy. It will establish a common language for assessing whether investments meet environmental standards consistent with policy commitments such as the Paris deal.

At a regional level, Wessman says that together with her colleagues at GIEK, Norway’s export credit agency, and SEK, EKN is developing models for how to benchmark projects and measure them against the UN’s sustainable development goals (SDGs) and other established financial sector standards to help reduce greenwashing.

“In the last four or five years, there has been quite a lot of labelling of things as sustainable or green. Now, there is an ongoing and very strong movement on defining what you can call sustainable or green, or contributing to the SDGs. This is going to help with credibility, making it easier for us and for the exporters we support to assess what is sustainable and what is green.”