A group of European and North American export credit agencies (ECAs) has launched a UN-backed initiative to drive public finance away from fossil fuels and towards more environmentally sustainable business sectors.

The Net Zero Export Credit Alliance (NZECA) was established during a session at the Cop28 climate change conference in the UAE by agencies from the UK, Denmark, Sweden and Canada alongside the United Nations Environment Programme Finance Initiative (UNEP FI).

Founding members pledged that by 2050 their activities will generate net-zero greenhouse gas emissions.

And in the meantime, they will set intermediate targets – for 2030 or sooner – for the highest-emitting sectors in their portfolios.

Under the plan, UK Export Finance, Sweden’s SEK and EKN, the Export and Investment Fund of Denmark (EIFO) and Export Development Canada have also vowed to end new direct support for unabated fossil fuels by the end of 2024.

“All levers need to be pulled, and all sectors need to transition,” says Peder Lundquist, CEO of EIFO. “Policymakers and CEOs can set the direction – however we need scientific and well-documented advice on how to implement.”

The initiative is the first UN-convened alliance to cover public financial institutions and follows in the footsteps of the Net Zero Insurance Alliance (NZIA), as well as the Net Zero Asset Owner Alliance and Net Zero Banking Alliance.

As with these initiatives, the participating ECAs will be required to disclose their performance on an annual basis, including their progress in reducing absolute greenhouse gas emissions, a UNEP FI spokesperson tells GTR.

NZECA will be managed by a UNEP FI-based secretariat and is supported by Oxford University and the Future of Climate Cooperation.

“We do expect the Alliance to grow, however, we can’t predict the exact timeline for any new members to join,” the UN spokesperson says.

“The secretariat as well as project partners (Innovation and Knowledge Hub at the University of Oxford and the Future of Climate Cooperation) and founding members [are] communicating the concept of the alliance individually to a number of ECAs globally as well through collective platforms for ECA interaction on sustainability matters, such as the OECD export credit events, the Berne Union and the Export Finance for Future (E3F),” they say.

“We hope that the official alliance launch will trigger additional interest from ECAs,” they add.

KazakhExport, the UAE’s Etihad Credit Export Insurance (ECI) and Spain’s Cesce have joined as so-called “affiliate members” and according to the UN spokesperson agree to the “overall concept” of moving towards net-zero economies as well as the principle of transparency and “periodic” reporting.

In the build-up to the NZECA launch, civil society organisations expressed concern the initiative may simply overlap with existing schemes such as the E3F or the Clean Energy Transition Partnership (CETP).

Nina Pušić, OECD export finance climate strategist at Oil Change International (OCI), says the official NZECA text is “more ambitious” than expected and the founding ECAs’ pledge to end fossil fuel finance by 2024 is significant.

Similar industry initiatives, such as the E3F, are already playing a key role in driving changes within ECA portfolios, she says.

This week, the E3F published a 2022 transparency report showing a notable uptick in the volume of green energy financing provided by its members, a list which includes the UN-backed alliance founders as well as agencies from Germany, Italy, France, Belgium, Finland, the Netherlands and Spain.

In 2022, member agencies provided €5.6bn towards renewable energy and electric infrastructure and only €1bn towards fossil fuels.

This meant 84% of support provided by E3F agencies for energy projects last year went towards renewables, and only 16% to fossil fuels, a marked shift from 2021 when the ratio stood at 49% to 51%.

“That’s a huge leap in one year,” Pušić tells GTR. “It is really exciting as it shows how quickly these agencies can move when there are ambitious initiatives.”

Still, challenges lie ahead for the NZECA and it is unclear whether the UN and founding ECAs from the UK, Denmark, Sweden and Canada will be able to convince other agencies to sign up to the alliance.

The US and Italy have been accused of backsliding on commitments to end public finance for fossil fuels by the close of 2022.  

The latest E3F data shows that Italy’s Sace supplied €788mn towards fossil fuels and €193mn towards renewables last year.

South Korea and Japan may prove reluctant to sign up to the alliance, Pušić says, citing OCI data which shows the two countries together provided US$38.6bn to oil and gas transactions between 2019 and 2021.

In recent months, the private market NZIA has unravelled in the face of opposition from US Republican politicians who claim the group’s attempts to lower clients’ carbon emissions infringe anti-trust laws.

NZIA was launched in 2021 to much fanfare and is part of the Glasgow Financial Alliance for Net Zero set up by UN climate envoy Mark Carney.

At least five of the eight founding signatories including AXA, Allianz and Scor had quit the group by May 2023.