Limiting temperature increases to 1.5 °C above pre-industrial levels requires massively re-directing financial flows away from carbon-intensive and towards low-carbon activities. However, despite commitments made under Article 2.1(c) of the Paris Agreement – in which Parties agreed to make “finance flows consistent with a pathway towards low greenhouse gas emissions […]” (UNFCCC, 2015) – many countries still provide significant financial support to fossil fuel value chains, among others, through their export credit agencies (ECAs). This contributes to a global lock-in of carbon-intensive infrastructures and hampers the ability of many developing countries to leapfrog the fossil fuel stage of development (see section 2).
ECAs and officially supported export finance are often considered key to promoting the competitiveness of domestic companies in foreign markets. ECAs, as government-backed finance institutions, typically support larger and riskier projects that would not have been insured otherwise (such as fossil fuels) and can crowd in significant public and private finance, often improving the lending conditions of banks that finance export transactions. Historically, ECAs’ portfolios mostly reflected the composition of the national export industry (e.g., Export Finance for Future [E3F], 2022), but also strategic foreign policy interests of their countries, including economic, geopolitical, or military interests. In times of climate crisis and increasing geopolitical tensions, it is particularly important that ECAs as public finance institutions (PFIs) are aligned with their governments’ international commitments, such as those made under the Paris Agreement.
In this light, this best practice guide aims at helping ECAs and their respective governments to formulate and implement policies for aligning export finance with the Paris Climate Agreement. It summarises best practices from extensive research and stakeholder engagement on ECAs’ Paris alignment in twelve countries conducted by Perspectives Climate Research since 2020. More specifically, this best practice guide pursues three main objectives:
Provide a practical toolkit to governments to formulate roadmaps and policies that seek to align national export finance systems with the Paris Agreement;
Provide a practical toolkit to ECAs in designing and sharpening their in-house climate policies considering international best practices;
Contextualize ECA climate action in the broader context of economic transformations required by climate objectives.
The guide is structured as follows: Section 2 discusses the critical role played by ECAs in supporting energy infrastructure investments and the importance of shifting this support from fossil fuels to clean energy. Section 3 provides a deep dive into best practices by ECAs across five Paris alignment dimensions, based on research by the authors since 2021 (Perspectives Climate Research, 2024). Section 4 concludes this guide and summarises best practice examples for Paris alignment. The Annex details and visualises Perspectives’ previous work on the ‘Paris alignment’ of ECAs (see Figure 3). For further details regarding the ECA Paris alignment methodology, please refer to Shishlov et al. (2021).