Sweden’s government-backed export credit institutions have formed a council of climate, policy and development experts as they seek to slash greenhouse emissions generated by their export finance portfolios.
The Swedish export credit agency, EKN, an insurer, and the Swedish Export Credit Corporation (SEK), a funder, expect the new Scientific Climate Council to help them navigate knotty policy questions on emissions. It will not have a say in operational decisions, such as approving individual transactions.
ECAs around the world are grappling with the question of how to adjust to the accelerating energy transition away from fossil fuels. The G7 group of rich nations and some individual ECAs have pledged to end financing for the thermal coal sector, but most have moved more slowly on nixing support for oil and natural gas.
In June Export Development Canada became the first ECA to lay out a roadmap to hit a target of net zero emissions by 2050.
A common theme in the questions that will be put by EKN and SEK to the four-member council is likely to be how Sweden’s export credit system balances its attempts to shrink emissions from the projects they support, while still backing developing countries that will be reliant on fossil fuels for longer than many wealthy countries.
“The world needs a quick transition. At the same time, low and middle-income countries need to develop their energy supplies and infrastructure to reach the Sustainable Development Goals,” said Anna-Karin Jatko, EKN’s director general, in an August 26 statement announcing the council’s formation.
“For us as financial institutions, this naturally entails the management of complex topics. As such, it is important that we base our strategic decisions on current science, in addition to the dialogue we already have with companies, banks and civil society organisations.”
Asked if EKN has a specific emissions reduction target for its portfolio, head of sustainability Karin Wessman says her agency and SEK will “strive to align” their business with the Paris Agreement target of limiting the rise in global average temperature to 1.5 degrees, “meaning global net zero emissions by 2050”.
Setting a more specific target for its portfolio would be a “blunt measure”, Wessman tells GTR.
“For example, rich countries need to do more than low and middle-income countries who need to develop their energy supplies and infrastructure,” she says, suggesting ongoing support for emissions-generating projects in developing countries that are struggling with the energy transition.
“Moreover, we can’t change our current portfolio, which partly contains long commitments,” Wessman adds.
“There are also the challenges around calculating the greenhouse gas footprint of our portfolio, and as a consequence, setting a meaningful target.” Instead, she says the agencies plan to focus on creating new products, such as green credits, and “clarifying where we do not participate at all”.
EKN has already stopped providing support for new oil and gas exploration projects and will do the same for existing oil and gas exploration after 2022.
At the end of last year the agency halted its support of exports to the coal mining sector. But the council, in its first meeting with the export credit agencies’ executives, held in late August, stopped short of recommending a similar policy on natural gas, which was the main topic under discussion.
“I think it’s an example of an area where it’s quite complicated to find the right footing and there are very different perspectives on natural gas and to what extent can certain types of countries use this type of energy source and still be aligned with the Paris Agreement,” council member Måns Nilsson, executive director of the Swedish Environment Institute, tells GTR.
“We don’t make specific discussions on particular investments, it’s more to reflect on what principles and criteria they would be advised to use for this type of asset.” Such criteria include whether there are cleaner and competitive alternatives available and whether there is scope for using cleaner fuels in the same infrastructure in the future, he says.
While support for coal sector exports was already negligible before EKN exited, Sweden is a major exporter of turbines used to generate electricity from natural gas in developing countries, produced by Siemens at a sprawling facility in Finspång and often backed by state export finance and insurance. EKN and Siemens are looking at ways to incentivise their use with greener fuels.
Council will ‘have an impact’
In addition to Nilsson, the council is comprised of Max Åhman, associate professor in environmental and energy systems studies at Lund University; Tomas Kåberger, professor at Chalmers University of Technology and former head of the Swedish Energy Agency; and Anna Krook-Riekkola, an associate professor in energy science at Luleå University of Technology.
The council will meet with the two organisations’ leadership, including their chief executives, four times a year to discuss questions or topics posed by EKN and SEK. Meetings of the minutes will be made public.
Wessman says rapidly evolving research, technology capabilities and reporting standards makes it difficult to say what issues the council will address in the future, but they could include “how commitments of countries and companies are updated and how the Intergovernmental Panel on Climate Change’s reports should impact the direction of both Swedish and international export finance systems”.
Nilsson describes the council as “a sounding board on strategy and policy questions” and says the involvement of senior management in the council’s meetings suggest its advice will be taken seriously.
“I strongly feel that their commitment to the issue of the climate transition, globally, is deep and sincere,” Nilsson says. “So particularly relating to future investments, I think we will be able to have an impact on their thinking.”
A previous version of this article said EKN will no longer support new oil and gas exploration projects after 2022. It has been corrected to show that EKN has already stopped support for new oil and gas exploration and will no longer back existing exploration projects after 2022.