We must discuss the impact of Swedish export on the climate
Debate: Money has a great potential to limit climate emissions and drive sustainable development forward. Therefore, SEK and EKN have considerable opportunities to influence investments, writes Swedish Export Credit Corporations’s CEO Magnus Montan and the Swedish Export Credit Agency's Director General Anna-Karin Jatko.
How Swedish export finance is contributing to climate transition
The Swedish Export Credit Corporation (SEK), which finances the Swedish export industry, together with the Swedish Export Credit Agency (EKN), which insures banks and companies against default risk, form the Swedish export finance system. Our primary task is to strengthen the competitiveness of exporters and their subcontractors in order to increase Swedish exports. Sweden is a leading export nation, and a world leader in innovative and climate-smart solutions. This offers enormous potential when this is exactly what the whole world is demanding.
The debate on climate change is much about how we can reduce carbon emissions within the Sweden’s borders and less about how we reduce emissions globally. That is why we call for a discussion about the effects Swedish exports has on the climate. We are convinced that a successful Swedish export industry with innovative solutions is a crucial contribution to the global climate transition. The size of the Swedish exports, which account for more than 70 percent of their annual turnover, indicates the scope of the contribution.
Money could well be the world’s greatest incentive, a powerful and universal instrument with enormous potential to reduce carbon emissions and drive sustainable development forward. SEK and EKN therefore have considerable opportunity to influence investments. Reduced financing costs and lower risk are powerful incentives for investments in fossil-free energy. Investments could be crucial for emerging economies.
The Swedish export finance system was among the first in the world to halt export finance for coal mining and transportation. Now we are continuing to lead the way. All government-backed lending for Swedish exports, representing SEK’s entire lending portfolio, shall achieve net zero emissions by 2045. In addition, the share of green loans on SEK’s balance sheet shall increase to 50 percent by 2030.
In line with the Swedish strategy, SEK and EKN are pursuing a joint policy for sustainable finance that states our position on fossil fuels and our ambition to contribute to the climate transition and a sustainable world. The following applies to lending that is financed and guaranteed by the Swedish export credit system.
- Based on science. SEK and EKN have appointed a scientific climate council, which is a specialist advisory body with the aim of aligning the Swedish export finance system with the Paris Agreement’s goal of limiting global warming to 1.5 °C. The climate council provides support in the form of expertise and serves as a discussion partner in relation to principled positions, such as whether new natural gas projects are compatible with the Paris Agreement.
- Restrictive position on lending with a negative impact on the climate. We do not finance coal mining, coal-fired power or coal transportation. As of December 31, 2022, we will no longer finance hydrocarbon exploration or extraction. We do not finance new oil and gas-fired power plants that do not have a transition plan, except in exceptional cases in war-torn countries, or in poor countries in urgent need of development.
- Attractive solutions for a sustainable transition. SEK offers green, social and sustainability-linked loans to guide financing towards a sustainable transition, while also offering the borrower a more attractive price. EKN offers guarantees with a particularly attractive contribution margin ratio to companies that export green solutions or make a green transition in Sweden.
- Sustainable development requires collaboration. We engage actively with exporters, banks, authorities and other players at national and international levels in order to create institutional and business conditions for Swedish export solutions to contribute to the achievement of the UN Sustainable Development Goals and the implementation of the Paris Agreement.
- Openness and transparency are conditions for sustainable finance. Transparency must therefore increase further in the Swedish export credit system to the extent permitted by privacy law. In addition, we compile annual reports of climate-related financial risks and opportunities based on the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD) and the applicable requirements of the European Banking Authority (EBA).
But acting nationally is not enough, we must also promote a transition of the global export finance system, primarily within the OECD and at EU level. OECD regulatory policy needs to be reformed immediately to unleash the full potential of export credit institutions. Attractive incentives, such as adapted terms, are needed to stimulate exports of renewable energy and other transactions that promote the global climate transition. The world’s export credit systems generate USD 700 billion annually and therefore have enormous potential to contribute to the transition, provided the regulatory policy provides the right incentives and the right restrictiveness.
Our task is to strengthen the competitiveness of exports and lead the transition in the right direction. The Swedish export industry has a unique ability to find solutions for managing the climate transition.
Magnus Montan, CEO of the Swedish Export Credit Corporation (SEK)
Anna-Karin Jatko, Director General of the Swedish Export Credit Agency (EKN)