Max Schmidt (top left image) and Dr. Igor Shishlov (bottom left image). Max Schmidt presented Perspectives’ best-practice guide at the Nordic Pavilion during COP29. Photo: Nordic Council of Ministers

Around five years ago, Igor Shishlov, Head of Climate Finance at Perspectives, stumbled upon a database from the NGO Natural Resources Defense Council. It showed how international public finance institutions – such as multilateral development banks (MDBs), bilateral development banks (BDBs) and export credit agencies (ECAs) – were financing fossil fuels. This was the starting point for Perspectives’ work on ECAs and climate finance.

“I was really surprised to see that the amount of support provided to fossil fuels by ECAs was comparable to that of MDBs. This was an elephant in the room, a subject that nobody was really talking about, at the annual climate COP meetings and climate finance conferences. So together with my colleagues, we started digging into the topic”, says Igor Shishlov.

Finance flows must become climate compatible

Igor Shishlov notes that ECAs often are much less transparent than, for example, MDBs. One reason is that ECAs are linked to national economic interests. That is also why many ECAs played a key role historically in the rollout of fossil fuel infrastructure such as coal-fired power plants, oil refineries, or gas pipelines around the world.

In recent years, fossil fuel support by ECAs started to drop. Before the pandemic, support by the 20 biggest economies (also known as the G20), for fossil fuels was ten times greater than support for renewable energy sources. By 2022, this figure had decreased to six times more, according to data from the NGO Oil Change International (OCI).

However, there is still a huge imbalance, which remains a concern for climate alignment under the Paris Agreement, explains Igor Shishlov’s colleague Max Schmidt, Research Associate at Perspectives.

“Six times more support for fossil fuel than for renewables is still money that is missing elsewhere. The Paris Agreement clearly says that all finance flows must become climate compatible”, says Max Schmidt.

Three Nordic countries are top performers

Last year, Perspectives assessed the Paris alignment of Sweden, Denmark, and Finland. The results shows that the countries are top performing in terms of Paris alignment compared to other OECD countries. For instance, both Swedish ECAs, SEK and EKN, have consistently decreased the share of fossil fuels in their portfolios. Since 2021, 100 per cent of their energy-related transactions are within renewable energy.

This makes Sweden the fourth biggest financier of renewable energy in the Export Finance for Future alliance (E3F), an international climate coalition of governments to “harness public export finance as a key driver in the fight against climate change”. Max Schmidt points out that the Nordic countries and E3F can serve as a case that other countries can learn from.

“The idea is that other countries can join international alliances to ensure that the shift to cleaner finance doesn’t remain limited to early movers but becomes a broader, more global effort”, says Max Schmidt.

Transparency is having effect on portfolios

Igor Shishlov concludes that one of the big achievements of E3F is that its members are at the forefront in terms of shifting finance flows to renewable energy projects, but also in terms of transparency.

“All members of the E3F coalition publish data on their energy finance and they are quite detailed in their disclosures, differentiating between renewables and the three fossil fuels – coal, oil, and natural gas, as well as different steps of the value chain – upstream, midstream, downstream. It is nice to see that they follow what we recommended in our reports and that is having an effect on their portfolios”, says Igor Shishlov.

Read more:
Perspectives’ assessment of the Swedish export credit system: Paris Alignment of Export Credit Agencies: Sweden

Perspectives’ Best practice guide: Paris Alignment of Export Credit Agencies: Best Practice Guide

Perspectives webpage for Export Credit Agencies:
Export Credit Agencies – Perspectives Climate Group

E3F’s LinkedIn page: (34) Export Finance for Future (E3F): Posts | LinkedIn