3. Best practices in export finance for Paris alignment

This section of the guide outlines in detail the attributes of a fully ‘Paris aligned ECA’ and describes best international practices in this respect. There are various interpretations of what it means for a financial institution to be ‘Paris aligned’. The ECA Paris alignment methodology developed by Perspectives Climate Research (Shishlov et al., 2021) conceptually builds on existing approaches to ‘Paris alignment’ for other PFIs, e.g., MDBs. It includes the structure and rationale of the Public Development Banks’ Climate Tracker Matrix by the environmental think tank E3G, which, in turn, is based on the six building blocks of the Paris Alignment Working Group (PAWG) by major MDBs. The ECA methodology has already been applied to twelve country case studies (see Shishlov et al. (2021) for further details) yielding key lessons and best practices discussed in this section of the guide. Against this background, we suggest the following definition for a ‘Paris-aligned ECA’:

Text Box 1: Key elements of a Paris-aligned ECA.

A Paris-aligned ECA is one that fully integrates climate objectives into its core operations, making climate action a priority in all its financing decisions and across five dimensions:

Dimension 1: Transparency. Alignment with international GHG reporting standards for scope 1, 2 and 3 emissions such as the Greenhouse Gas Protocol or the Partnership for Carbon Accounting Financials (PCAF), a clear in-house definition of fossil fuel and clean energy finance (or adherence to international standards), together with annual disclosure fully in line with the IFRS S1 and S2 reporting standards that integrate all the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
Dimension 2: Fossil fuel exclusions. Adoption and implementation of policies to exclude support to new fossil fuel (coal, oil and gas) projects and related value chains (with very limited, clearly defined exceptions that do not prolong the lifetime of fossil fuel assets) while allowing support to decommission old fossil fuel infrastructure.
Dimension 3: Mitigation. Demonstrated consistent decline in GHG intensity, total emissions of the portfolio and of the share of fossil fuel financing over the total energy portfolio, together with the adoption of GHG emissions reduction targets for all emissions-relevant sectors (with increasing,
1.5 °C-aligned ambition over time).
Dimension 4: Climate finance. Adoption of and annual reporting on common climate finance earmarks, implementation of effective incentives for clean energy technologies and demonstrating a consistently increasing share of clean energy over the total energy portfolio.
Dimension 5: Engagement. Active membership in export finance-relevant clubs, initiatives and working groups, together with demonstrated climate leadership of the ECA and its government in international fora and engagement with domestic exporters on climate.

3.1 Dimension 1: Transparency - Financial and non-financial disclosure

The first dimension covers the transparency of financial and non-financial disclosures of ECAs. Transparency is not only a precondition for decarbonisation itself but a crucial prerequisite to evaluate the Paris alignment of ECAs in subsequent dimensions and to hold governments accountable for supporting businesses abroad against their commitments under international treaties, such as the Paris Agreement. Furthermore, it is especially important since ECAs were found to be particularly lacking transparency in the past (Shishlov et al., 2020). The table below summarises the best practices and provides country examples for this dimension.

Power from water, Vanhankaupunginkoski, Finland
Photo: Tapio Haaja/Unslash

Table 1: Best ECA practices on transparency.

Best practices for Paris Alignment	ECA examples
Alignment with international GHG reporting standards for Scope 1, 2, and 3 emissions (e.g., GHG Protocol or PCAF).	Finland’s Finnvera calculates and reports its produced (scope 1, 2) as well as financed emissions (scope 3) both domestically and internationally as well as by sector. Denmark’s EIFO (formerly EKF) reports its scope 1, 2 and 3 (financed) emissions for the years 2020 onward. US-EXIM has reported its actual (or projected) CO₂ emissions for pending and approved projects since 1999, but only for those above a high threshold.
Clear in-house definition of fossil fuel finance and clean energy finance based on international best practices such as by the Export Finance for Future initiative (E3F), multilateral development banks (MDBs), the OECD, and EU Taxonomy (excluding any investments that may prolong the lifetime of fossil fuel assets).	In 2020, the Dutch ECA Atradius DSB developed an in-house methodology to measure the share of fossil fuel-related activities over the total portfolio. E3F’s annual status reporting set a new standard for transparent reporting on the number of transactions, credit value and fossil/clean energy finance shares in value chains. The EU Taxonomy is increasingly used by ECAs and defines criteria for economic activities aligned with a net-zero trajectory by 2050, but falsely considers gas-related projects to be in line with a 1.5 °C-trajectory.
Annual disclosure fully in line with the newly developed IFRS S1 and S2 reporting standards that integrate all the recommendations of the TCFD.	Canada’s EDC was the first ECA to join the TCFD in 2018 and has been reporting on progress within the four dimensions governance, strategy, risk management and metrics, and targets ever since.

First, regarding GHG reporting, all emissions (scope 1 and 2, and 3) need to be reported according to international standards of financed or insured emissions and their attribution. Most prominently, Finland’s Finnvera has been reporting its produced (scope 1, 2) for several years and its financed emissions (scope 3) based on PCAF since 2022, both domestically and internationally as well as by sector. Denmark’s EIFO (formerly EKF) reports its scope 1, 2 and 3 (financed) emissions based on PCAF for the years 2020 onward. US-EXIM has also reported its actual (or projected) CO₂ emissions for pending and approved projects since 1999, but only for those above a threshold of at least 25,000 CO₂ tons per year. GHG emissions from projects below this threshold are not reported. There is no publicly available information on the type of methodology used or the standard of emissions accounting, which should always be disclosed. Ideally, no (artificial) GHG reporting thresholds should be applied (Censkowsky et al., 2022), every single transaction and its actual or projected GHG impact be reported.

Secondly, ECA should clearly define ‘fossil fuel finance‘, ‘clean energy finance’ and granularly report on them. For fossil fuel finance, this includes transparency on the number of transactions, credit value and share of fossil finance per fuel per stage of the value chain (up-, mid-, downstream and power generation), using unambiguous, exhaustive or near-to-exhaustive lists of activities, including all subsectors (see Table 2).

Table 2: Disaggregation of the fossil fuel sector into value chain elements.

	Upstream	Mid-stream	Downstream
Coal	Mining	Transport and storage	Power generation (combustion)
Oil	Exploration, field development, production operations	Transportation, processing, storage (crude oil)	Refining, distribution and marketing
Natural gas	Exploration, field development, production operations	Processing, liquefaction, transportation	Distribution and marketing

Source: E3F, 2022, p. 3, based on ISO, 2018

As early as 2020, the Dutch ECA Atradius DSB developed a dedicated in-house methodology to measure the share of fossil fuel-related activities (including their value chains) over the total portfolio. The results as well as the underlying methodology were disclosed in Atradius DSB’s 2020 Annual Report (Censkowsky et al., 2021). E3F countries, that the Netherlands are a member of, have been disclosing their fossil fuel and clean energy finance for 2015 onwards (see Text Box 1; E3F, 2023). Going beyond the E3F reporting modalities, Sweden’s EKN and SEK report annually the share of assets exposed to climate risks and fossil-related transition risks (Schmidt et al., 2024b). For this, the framework on ‘carbon asset risks’

Fossil fuel assets, fossil fuel-dependent infrastructure, high-carbon assets facing shift to low-carbon technologies, and high-carbon assets without low-carbon competitors.

by the World Resources Institute and UNEP-FI can be drawn on (Fulton et al., n.d.), as SEK already does.

US-EXIM was the very first ECA to report on ‘environmentally beneficial goods and services’ (since 1992), of which RE exports are part of. In recent years, the number of ECAs/countries with a methodology for labelling new transactions according to their potential climate impact more than doubled compared to 2021. This is largely due to the use of the EU Taxonomy which defines criteria for economic activities aligned with a net-zero trajectory by 2050 (Messenger, 2023). However, the EU Taxonomy allows to classify investments in gas (and nuclear) as ‘sustainable’ (European Commission, n.d.b), despite methane’s high global warming potential (see further section 3.2). Clean energy export finance can also be deemed eligible under international climate finance commitments, an established practice for MDBs (MIGA et al., 2022; see further OECD 2022a).

Thirdly and lastly, ECAs should fully adhere to newly developed IFRS S1 and S2 reporting standards that integrate all the recommendations of TCFD. Export Development Canada (EDC) was the first ECA to join the TCFD in 2018 and has been reporting on progress within the four dimensions (governance, strategy, risk management and metrics, and targets) ever since. In 2021, UKEF and Sweden’s EKN were other first-movers while other ECAs assessed by the authors started TCFD reporting more recently (Perspectives Climate Research, 2024). In addition to the TCFD recommendations, ECAs should also consider adhering to those of the Task Force on Nature-Related Financial Disclosure (IFRS, n.d.).

In addition to the examples discussed above, Text Box 2 provides an overview of what the authors identified as the most impactful best practice for this Paris alignment dimension.

Hellisheiði Geothermal Power Station, Hellisheiðarvirkjun, Iceland
Photo: Business Iceland

Text Box 2: E3F’s status and transparency reporting.

Founded in April 2021 by France and the UK, the E3F initiative has been a game-changer in ECAs’ clean and fossil finance reporting (French Ministry of Economy and Finance, 2021). E3F is an inter-ministerial initiative of ten major European economies: Belgium, Sweden, Finland, France, Germany, Italy, Netherlands, Spain, Sweden and the UK. E3F aims to promote and support a shift in investment patterns towards climate-neutral and -resilient export projects. Every year, E3F publishes joint energy finance transparency reports (E3F, 2022, 2023b). From 2022 onwards, all E3F members communicated their National Approaches to the implementation of the COP26 Statement on the CETP (OCI, 2024a). E3F countries also make transparent all energy finance-related figures going back to 2015, thus allowing to trace trends and assess the impact of export-related climate and energy policies (E3F, 2023). This includes assessments regarding the implementation of the CETP statement that all E3F countries have signed, but some (Italy, Germany) have not fully adhered to so far (e.g., OCI, 2023, 2024).

E3F members transparently report on the number of transactions, credit value and share of fossil finance per fuel per stage of the value chain (up-, mid-, downstream and power generation). In its 2023 Status Report, the alliance highlights that ECA support for ‘green’ projects goes beyond E3F reporting. Due to the expansion of the OECD’s Climate Change Sector Understanding (CCSU), E3F will expand the scope of the reporting to transactions related to transportation, manufacturing, and hydrogen (E3F, 2023b).

In 2023 and 2024, Denmark chairs the E3F’s rotating presidency. Most recently, Norway is considering joining the E3F and has already participated in events such as a workshop on how export finance can support climate finance goals in June 2024 (E3F, 2024c). Importantly, only governments can join the E3F, while other alliances and organisations can be joined by ECAs themselves anytime, for example, NZECA or the Berne Union Climate Working Group. We thus strongly recommend more countries to join E3F and similar initiatives to accelerate climate progress across the board.

3.2 Dimension 2: Ambition of fossil fuel exclusion or restriction policies

The second dimension covers the ambition of fossil fuel exclusions and/or restriction policies by type of fossil fuel (coal, oil and gas). Today, the most notable policies emerged from the signatories of the CETP Statement on International Public Support for the Clean Energy Transition and members of the E3F coalition discussed earlier. However, the majority of G20 governments only vaguely committed to climate- and or sustainability-related targets, which have substantive interpretative leeway. Indeed, it was found recently that a third of the 20 biggest fossil-fuel-producing countries make no mention of fossil fuel production in their international climate commitments, while six stated an intention to continue or even increase production (Jones and Parra, 2024). Full fossil fuel exclusion is particularly important given the key role ECAs have historically played in financing them (see further OCI, 2024d). The table below summarises the best practices and provides country examples for this dimension.

Table 3: Best ECA practices on fossil fuel exclusion.

Best practices for Paris Alignment	ECA examples
Existing policies exclude support for new coal projects and related value chains (with very limited, clearly defined exceptions that do not prolong the lifetime of fossil fuel assets).	OECD-ECAs have stopped all support to unabated coal-fired power plants in 2021, but loopholes remain for other coal uses, such as, for example, metallurgical coal. Chinese ECAs (CDB, CEXIM and SINOSURE) have stopped all support to newly built coal-fired power projects since 2021.
Existing policies exclude support for new oil projects and related value chains (with very limited, clearly defined exceptions that do not prolong the lifetime of fossil fuel assets).	Since March 2021, as an ECA first mover, UKEF implements the UK government’s policy ending new support for the fossil fuel energy sector overseas (coal, oil, and gas). In spring 2024, UKEF concluded its first deal for O&G decommissioning.
Existing policies exclude support for new gas projects and related value chains (with very limited, clearly defined exceptions that do not prolong the lifetime of fossil fuel assets).

ECAs need to have in-place policies excluding coal, and O&G with immediate effect or demonstrate their non-engagement in the entire value chains, with very limited exceptions that do not prolong the lifetime of fossil fuel assets. Such exceptions may include closing methane leaks and ending routine venting and flaring, decommissioning infrastructure and/or converting it to use for non-fossil energy infrastructure, as defined by Germany, for instance (E3F, 2023). As shown in the section 2, the OECD Arrangement is the best platform to fully restrict export finance to O&G (and previously coal). Opposition against its reform is often based on arguments about competition with non-OECD countries. Though some of them are considered ‘OECD Key Partners’ with joint programmes of work, these countries are not obliged to follow OECD rules (OECD, n.d.b). Like other non-OECD members, China has been operating under a different model and maintains great autonomy over the disclosure of transactions or (the absence of) restrictions (Liao, 2020). This explains why China was the largest financier of new overseas coal-fired power plants for many years (OCI, 2024a). This has stopped completely since 2021 (CDB, 2024; CEXIM, 2024; SINOSURE, 2024), at least in part because of intergovernmental bargaining such as within the OECD that also increased pressure on China (Wang et al., 2024).

For O&G, OECD-ECAs can still provide support, and loopholes remain even in some of the E3F’s National Approaches. Most notably, they have been used to continue support for fossil gas until the end of 2025 (Italy; Schmidt et al., 2024) or even 2029 (Germany; E3F, 2023). All loopholes must be closed, and fossil fuel exclusions must be implemented. This is possible via additional Sustainability or Sustainable Finance Policies, as in the case of Sweden (EKN and SEK), sectoral policies as in the case of Finnvera, or a climate policy as in the case of EIFO (Schmidt et al., 2024a; Schmidt et al., 2024b; Weber et al., 2024).

The relatively slow OECD progress on ending support to O&G has different reasons. In theory, it is correct to say that if individual or all OECD members were to withdraw from financing fossil fuel-related exports, it could create an opportunity for China and other non-OECD countries to fill the gap. However, close coordination with these countries should help overcome the increasing geopolitical fragmentation. For example, China’s SINOSURE has been a member of the export insurance industry’s Berne Union since 2009 but has not yet joined its Climate Working Group established in 2022 (Berne Union, n.d.).

Further, the OECD – ideally in partnership with China – should promote a pragmatic definition of Paris alignment for PFIs and ECAs, pioneering the entire financial sector. It should start with defining activities to be phased out, i.e., value chains that directly or indirectly undermine the Paris climate goals. Most notably, following the latest pathway defined by the IEA to achieve Net Zero targets, support for the development of all new fossil fuel fields should cease with immediate effect. For ECAs, this implies an immediate stop of underwriting contracts for the export of all fossil fuels-related equipment, technology and services, covering the entire fossil fuel value chain from exploration to consumption (upstream, midstream, downstream).

Needless to say, backtracking on previous climate commitments must be avoided, for which Switzerland’s ECA SERV (Schweizerische Exportrisikoversicherung) serves as the latest negative example (e.g. Basquill, 2024). The argument of fossil gas as a climate-friendly ‘transition fuel’ has been repeatedly proven wrong. Most importantly, leakage of methane – which fossil gas is mostly comprised of – is often underreported in official GHG accounts such as in the US (e.g. Volcovici, 2024) but occurs across the entire value chain, particularly for liquefied natural gas (LNG; Howarth, 2024). The only support to the fossil fuel industry by ECAs that should still be granted is for decommissioning old fossil infrastructure, but only if it is not replaced with new fossil infrastructure. UKEF, for example, recently provided for the first time a GBP 7.5 million loan guarantee to a Brazilian firm to secure cutting-edge equipment from Scottish companies to remove hundreds of kilometres of subsea cables and pipes from defunct O&G rigs (UK Government, 2024).

In addition to the examples discussed above, Text Box 3 provides an overview of what the authors identified as the most impactful best practice for this Paris alignment dimension.

Text Box 3: UKEF’s fossil fuel exclusion policy.

As the first-mover ECA, in September 2021 UKEF – a ministerial government department strategically aligned with the UK’s Department for Business and Trade (then Department for International Trade) – committed in its Climate Change Strategy 2021–24 to ending new support for the fossil fuel energy sector overseas. This was a result of the government-wide March 2020 policy ending new overseas support for the fossil fuel energy sector (e.g., UKEF, 2024). This policy is set out in a guidance note by the UK’s Department for Energy Security and Net Zero (2023) which spells out that all new support has to be ended for directly fossil fuel-related infrastructure and multipurpose transportation infrastructure (e.g., ports, roads) whose primary use is fossil fuel-related. Other (mainly European) countries joined this commitment at COP26 in Glasgow (Shishlov et al., 2022). In the case of coal, they built on the 2021 agreement of the Participants to the OECD Arrangement on Officially Supported Export Credits to end support for unabated coal-fired power plants (OECD, 2021). These commitments, in turn, were preceded by the Green Finance Strategy of the UK Government (2019) which committed UKEF to report in line with the TCFD (see further 3.3).

UKEF, which thanks to its mandate has a more active role in the policymaking process than other ECAS,

Clarified in an exchange between UKEF and the authors in September 2024.

highlighted implementing the UK government’s policy in its comprehensive Climate Change Strategy for 2021–2024. This strategy was published in the run-up to COP26 hosted in Glasgow. It consists of five strategic pillars (see Shishlov et al. 2022 for further details) that, overall, aim to scale up green investments (UKEF, 2021b). This strategy was developed by UKEF’s then Strategy, Policy and Climate Directorate (SPoCC), established at the end of 2020 (now the Strategy, Sustainability and Impact Group, SSIG). SPoCC was created to provide “greater senior-level influence and increased resources” on key climate-related policy areas (Shishlov et al., 2022, p. 59). Since then, UKEF has also established a Climate Change and Sustainability Division within SSIG, to lead on climate and sustainability policy formation and strategy across several areas. UKEF also redefined the roles of other strategy and policy personnel to incorporate climate-related considerations (ibid.).

Before 2020/2021, UKEF “[had] a history of support for oil and gas projects”, including as much as 96% of energy-related support between 2013 and 2018 (UK House of Commons, 2021). In 2020, prior to the introduction of the government’s policy ending support for the fossil fuel energy sector overseas, UKEF committed to support only one, but large fossil project: the Mozambique LNG project of the French multinational TotalEnergies, with more than USD 1 billion.

As of the time of publication, UKEF has still been considering supporting the Mozambique LNG project that has been embroiled in severe allegations of human right violations for many years.

This support was legally challenged but in 2023 was found to be lawful by a London court (e.g., Tobin, 2023). However, no new decisions on this project have been made by UKEF ever since the ‘force majeure’ was declared by TotalEnergies in 2021 (e.g., UKEF, 2021; TotalEnergies, 2023). In 2021, with the fossil fuel exclusion in place, UKEF withdrew its support for the East African Crude Oil Pipeline in Uganda (e.g., Gerretsen, 2021).

These developments illustrate that UKEF’s fossil fuel exclusion was a gradual process based on political decisions rather than unilateral, unpredictable policy innovation. Thus, ECAs within and beyond the OECD will have to consider national policymaking and legislative processes to design the best way of phasing out fossil fuel support. They should also start (or accelerate) building green project pipelines in parallel to make

3.3 Dimension 3: Climate impact of and emission reduction targets for all activities

The third dimension covers the climate impact and GHG emissions reduction targets for all ECA activities. To achieve the objectives of the Paris Agreement, not only rapid fossil fuel phase-out is required, but other sectors also need to drastically reduce absolute emissions levels (IEA, 2021). In the absence of comprehensive GHG accounting, we considered the second-best indicators to proxy the emission intensity of an ECA portfolio, e.g., fossil fuel-related energy sector finance (Perspectives Climate Research, 2024). The table below summarises the best practices and provides country examples for this dimension.

Table 4: Best ECA practices on mitigation.

Best practices for Paris Alignment	ECA examples
Consistent decline in GHG emission intensity and total emissions of the portfolio.	Many of the ECAs assessed have been reporting financed (scope 3) emissions only in recent years, often for the first time, with some time delay or even showing a GHG increase. This leaves Denmark’s EIFO as the only ECA that has already demonstrated a consistent declining trend in GHG emissions intensity.
Consistent decline in the share of fossil fuel financing and consistent increase in the share of clean energy over the total energy portfolio.	Of the E3F countries, Belgium, Denmark, Finland, Spain, Sweden and the UK have increased the share of RE support to 100% since they stopped all fossil fuel support in 2021. Denmark’s EIFO shows that some ECAs started intentionally phasing out fossil fuel support even before, not having approved a single fossil fuel transaction since 2018. This was made easier by the structure of the Danish economy and EIFO’s track record of supporting the wind industry – making up 75% of its entire portfolio.
Adoption of GHG emissions reduction targets for all emissions-relevant sectors (with increasing alignment with 1.5 °C pathways over time).	UKEF has set interim sectoral decarbonisation targets for approximately 85% of its financed emissions, i.e. exposures in the O&G, power, and aviation sectors, on the path to net zero by 2050. These targets will be kept under review and a UKEF Transition Plan will be developed.

First, ECAs need to demonstrate a consistent decline in GHG emissions intensity and total emissions of the portfolio over time. Full disclosure and monitoring of ECAs’ portfolio GHG intensity is crucial to ensure greater public accountability. In this regard, only the Danish ECA EIFO achieved the score ‘Paris aligned’ among all ECAs assessed by the authors. For many ECAs, financed (scope 3) emissions of outstanding commitments have only been reported in recent years, often for the first time, with some time delay or showing an increase in GHG intensity (e.g. Sweden’s SEK). Thus, all ECAs should increase efforts to make transparent and decrease the GHG intensity and total emissions of their portfolio, following the example of Denmark’s EIFO (Weber et al., 2024).

Secondly, ECAs need to demonstrate a consistent decline in the share of fossil fuel financing over the total energy portfolio. In this regard, EIFO exemplifies that ECAs can intentionally phase out fossil fuel support, not having approved a single fossil fuel transaction since 2018 (E3F, 2023b) and with an energy portfolio of 99.5% in RE. Admittedly, Denmark’s ECA has a different starting point as its total portfolio is dominated by wind energy support. Consequently, of all ECAs assessed, EIFO has the lowest risk of facing stranded fossil fuel assets

Stranded fossil fuel assets are coal, O&G investments that have lost value prematurely due to market shifts, regulatory changes, or technological advancements, particularly due to stricter climate policies and increased competition from RE.

(Weber et al., 2024). For most other ECAs, it will take years if not decades for the stock value of fossil fuel finance to reach zero, even if no new fossil fuel support is provided. That said, ambitious and targeted exclusion policies for all fossil fuels, ideally on the OECD level and beyond to ensure a level playing field are crucial.

In parallel to decreasing fossil fuel financing, ECAs need to demonstrate a consistent increase in the share of clean energy financing over the total energy portfolio. Various ECAs have achieved some progress regarding this metric but can often not demonstrate a continuous trend. Atradius DSB, for example, reported a sharp increase in ‘green finance’ from 2019 to 2020, using an in-house definition (before it adopted the EU Taxonomy). This was due to several large projects, stressing the need for multiple-year averages (Censkowsky, 2021). Similarly, besides Denmark, no other E3F-ECA has granted as much support to clean energy in a single year as EKN in 2021, before its share fell back to its historical average (E3F, 2023b).

From EUR 2 million for RE (EUR 100 million with electrical infrastructure) to EUR 1.22 billion (ibid.).

More broadly, the slow and inconsistent increase in RE financing is also because of CETP signatories’ underdelivering on their fossil-to-clean finance pledge (Jones et al., 2024).

Outside the OECD, China has become the largest exporter of RE and key clean technologies in recent years, especially the ‘New Three’ exports: Electric vehicles (EVs), lithium-ion batteries and solar photovoltaic (PV) have recently become China's new export pillars, with their export value over USD 150 billion in 2023, accounting for 4.45% of China’s total exports. Specifically, EVs reached USD 42 billion, lithium-ion batteries and solar PV respectively USD 65 and USD 44 billion (Zhang and Nedopil, 2024). SINOSURE has underwritten USD 39 billion in green trade in 2023 alone, while the outstanding balance of CEXIM’s international green loans reached USD 75.8 billion by the end of 2023 (CEXIM, 2024; SINOSURE, 2024). This shows that REs and other clean energy technologies are experiencing significant growth and export potential. To seize this momentum, ECAs should therefore prioritise and expand their support for future-proof export sectors. Ultimately, aligning ECAs with the Paris Agreement means allocating far more resources to climate-related activities. In addition, while clean energy figures are tracked and made transparent by E3F, all ECAs must strengthen monitoring and reporting modalities so that researchers can duly evaluate progress on ramping up RE and broader climate finance (see section 3.1).

Thirdly, and lastly, all emission-relevant sectors need to have GHG reduction targets in place that are in line with acceptable 1.5 °C pathways. NZECA members (chaired by UKEF)

Clarified in an exchange between UKEF and the authors in September 2024.

are developing a dedicated protocol for decarbonisation targets – a voluntary commitment (Prahm, 2024). This, however, will not necessarily result in new binding sectoral targets that are needed for a whole array of emissions-intensive sectors (and assets). The NZECA member Sweden’s SEK already has the voluntary goal of achieving net zero emissions by 2045 for the entire portfolio, with the medium-term target of 50% of green loans by 2030 (SEK, 2021). ECAs could further follow SEK’s lead and focus on increasing the proportion of new lending to companies with ambitious and credible transition plans (Schmidt et al., 2024b). This target-setting should start with the highest emitting sectors. Canada’s EDC, for example, committed to implementing the science-based targets (SBTs) under the SBT initiative (SBTi) for its entire portfolio (Censkowsky et al., 2022).

The example of UKEF is further illuminating. UKEF has been “working towards [its] interim decarbonisation targets set for […] oil and gas, power and aviation sector exposures” (UKEF, 2024), that have been published in previous Annual Reports and are in line with the TCFD recommendations (UKEF, 2022, 2023), covering approximately 85% of UKEF’s financed emissions.

Clarified in an exchange between UKEF and the authors in September 2024; no interim targets have been published for the remaining 15% yet.

This includes measuring and reducing financed emissions (scope 3) over time, besides developing a UKEF transition plan on the way to net zero by 2050, in line with the UK government’s target (ibid.). Currently, as part of its first-ever Sustainability Strategy 2024–29 (successor to its Climate Change Strategy 2021–24), UKEF is also “[exploring] the introduction of standards for other sectors that are key to delivering the global low carbon transition”. These remaining 15% include, among others, the sectors of construction, defence, (petro-)chemicals and transport which represent the next frontier for full decarbonisation after UKEF ended all new direct support for the fossil fuel energy sector overseas in 2021. More recently, UKEF committed to developing a Transition Plan, informed by the work of the Transition Plan Taskforce (UKEF, 2024).

In addition to the examples discussed above, Text Box 4 provides an overview of what the authors identified as the most impactful best practice for this Paris alignment dimension.

Text Box 4: Finnvera’s mitigation reporting and target-setting.

In its Annual Report 2023, Finnvera (2024) reported its financed (scope 3) emissions of all outstanding commitments (domestic and export) per sector and tCO₂e/EUR for the first time. This showed a big overall drop (35%) in emissions in 2022 compared to 2021.

This drop has been due to more accurate emissions data gathered, and due to higher inflation, which led to a sharp decline of 10% in energy sector financing in 2022. As clarified in an exchange between Finnvera and the authors.

Though a longer trend in declining GHG intensity cannot be observed yet, Finnvera highlights that for 2023, more data have already been collected on individual projects. Full disclosure and monitoring of portfolio GHG intensity is crucial to ensure greater public accountability. This is not least since Finnvera aims to develop its long-term emission pathways based on these emission intensity calculations, using a ‘Sectoral Decarbonisation Approach’ that allows the ECA to set intensity-based sector-specific targets and monitoring (see in detail Schmidt et al., 2024).

Since its fossil fuel exclusion policies entered into force (2021: coal; 2022: O&G), Finnvera has not been receiving many applications from the fossil fuel sector and has not provided any new fossil support, so all related GHG emissions have been falling over the last three years (see further Finnvera, 2024c). The stock value of fossil fuel finance in Finnvera’s energy portfolio (EUR 1.3 billion) is not zero yet (57%), but a continuous decline of the share of fossil fuel financing relative to the total energy-related portfolio can be expected.

As one of the first ECAs, Finnvera became a signatory to the Poseidon Principles, an initiative aimed at decarbonising the shipping sector, in 2021. All ECAs with a stake in shipping finance should become signatories to the Poseidon Principles, to start calculating financed emissions and bring them down to zero well before 2050. Beyond shipping, all ECAs should define absolute GHG reduction targets for all emission-relevant sectors in line with benchmarks of acceptable 1.5 °C pathways, together with setting fossil fuel exclusion policies.

3.4 Dimension 4: Climate finance: Positive contribution to the just climate transition

The fourth dimension covers ECAs’ positive contribution to the just climate transition and sustainable development. The table below summarises the best practices and provides country examples for this dimension.

Table 5: Best ECA practices on climate finance.

Best practices for Paris Alignment	ECA examples
Adoption of common climate finance earmarks such as the EU Taxonomy for Sustainable Activities and annual reporting on these earmarks.	Sweden’s EKN and SEK classify Paris-aligned transactions based on the EU Taxonomy which is far more granular and adaptable than the Rio markers or the MDB Joint Approach. Moreover, EKN’s and SEK’s in-house methodology prevents possible ‘carbon lock-ins’ from fossil gas that the EU Taxonomy classifies as ‘green’.
Implementation of effective financial incentives for clean energy technologies and sustainable business practices.	The Dutch Atradius DSB and Germany’s Euler Hermes introduced several instruments to make Paris-aligned exports more attractive in 2020. In 2023, OECD negotiations went further and now allow its ECAs: an extended maximum repayment period for climate and environmental loans, reduced minimum guarantee payments in the lower-risk categories, and more flexible repayment terms.
Consistent contributions to sustainable development goals (SDGs) and implemented safeguards against negative social and environmental impacts.	Most OECD-ECAs already have various international guidelines and sustainability policies in place. Their level of stringency varies, however, and historic shortcomings in safeguarding human rights and environmental due diligence show space for improvement. Denmark’s EIFO is mandated to generate social returns which are not simply limited to financial returns or climate aspects but encompasses its wider sustainability performance.

First, ECAs need to adopt and annually report on common climate finance earmarks. Paris alignment requires ECAs to align lists of eligible ‘green’ activities based on sector-specific thresholds of the specific economic end activity. Thresholds such as for GHG emission intensity have been defined by the EU Taxonomy for Sustainable Activities which is far more granular and adaptable than the Rio markers or the MDB Joint Approach (MIGA et al., 2022; Shishlov and Censkowsky, 2022; OECD 2022a). However, of all the ECAs assessed by the authors, only Sweden’s ECAs have been found to already classify green transactions in line with the EU Taxonomy. This excludes investments in retrofits of existing fossil fuel power plants that could extend their lifetime. However, a major shortcoming, the EU Taxonomy allows to classify investments in gas (and nuclear) as ‘sustainable’ (European Commission, n.d.b).

Preventing possible ‘carbon lock-ins’ is a key target of EKN and SEK’s new in-house methodology, which can be used for known and unknown end uses, complementing the EU Taxonomy. Of the two ECAs, SEK goes beyond EKN, and reports reduced GHG emissions from green loans. Based on the method stated in the International Financial Institution Framework for a Harmonized Approach to Greenhouse Gas Accounting, SEK sets targets concerning lending on green assets (SEK, 2024a). Outside the OECD, in 2022 China’s SINOSURE adopted the EU–China Common Ground Taxonomy

The EU-China Taxonomy serves as a bridge between the EU Taxonomy and China's green finance classification system, identifying areas of overlap in climate mitigation activities. While sharing some similarities in structure and objectives, it is not identical to the EU Taxonomy but rather a comparative tool that highlights common ground between the two systems (IPSF, 2022).

for identifying relevant projects and customers (Chen and Shen, 2022; SINOSURE, 2023). However, neither Swedish nor Chinese ECAs transparently define climate finance with activity-specific components and do not differentiate between domestic and international climate finance (see also section 3.1). In this light, we recommend to ECAs clearly defining climate finance in the export finance system and providing granular, project-level reporting (see also section 3.1).

Secondly, ECAs need to implement effective financial incentives for clean energy technologies and sustainable business practices. As one of the first ECAs to do so, the Dutch Atradius DSB introduced several instruments to make Paris-aligned exports more attractive. This included (1) relaxed underwriting criteria for small green transactions (<EUR 5 million) that otherwise would be assessed as ‘risky’ according to regular criteria, (2) longer repayment periods and (3) higher maximum insured amounts for green projects (up to 95%; standard 70–90% coverage; see further Censkowsky et al., 2021). The ‘Special Renewable Energy Initiative’ of Germany’s Euler Hermes works similar but also lowered the national content requirements for RE exports specifically (Darouich et al., 2021). In 2023, the OECD Arrangement negotiations broadened the possibilities of using export finance for Paris-aligned projects. This includes an extended maximum repayment period for climate and environmental loans from 18 to 22 years (but also for most other projects, from 8.5 and 10 years to 15 years); the minimum guarantee payments will be reduced in the lower risk categories and more flexible repayment terms will also be introduced (Finnvera, 2024b).

The type of ECA is another key factor determining which (non-) financial incentives can be implemented. The Dutch and German ECAs, for instance, are ‘pure-cover’ ECAs and thus cannot permit direct (lower interest) loans for Paris-aligned exports whereas ‘multi-purpose’ ECAs can. Varieties of sustainable finance loans have been common among the ECAs assessed: Bpifrance’ ‘Bonus Climat’ (Schmidt et al., 2023), UKEF’s Clean Growth Direct Lending Facility (Shishlov et al., 2022) or EIFO’s Green Future Fund and Green Accelerator for start-ups to help them expand into international markets. EIFO and Finnvera also have in place sector-specific incentives (see further Weber et al., 2024; Schmidt et al., 2024). Finland’s ECA allows the maximum export credit amount to be higher, up to EUR 40 million (instead of Finnvera’s usual limit of EUR 20 million), if other export credit preconditions are met (Finnvera, n.d.b), guided by international frameworks such as the EU Taxonomy (see Table 6).

Sectors that are subject to the EU Taxonomy (e.g., shipping, energy) must be compliant to it. In line with the taxonomy, besides RE and nuclear, energy projects are also eligible that include “[energy] production with fossil gaseous fuels” (Finnvera, n.d.b), but this is strongly restricted by Finnvera’s fossil fuel exclusion policies (see further Schmidt et al., 2024).

CopenHill, waste-to-energy plant, Copenhagen, Denmark
Photo: Kim Wyon/VisitDenmark

Table 6: Finnvera’s sector-specific climate criteria.

Sector	Climate criteria	International framework
Cruise shipping	A vessel uses 100% zero-emission fuel OR Its emissions reduction target is in line with the Paris Agreement or the revised IMO GHG emissions reduction strategy	IMO strategy on the reduction of GHG emissions from ships EU Taxonomy’s criteria for marine protection and measures to mitigate climate change in passenger water transport SBTi guidelines for the maritime transport sector Climate Bonds Initiative’s (CBI) criteria for shipping companies Poseidon Principles’ framework for responsible ship financing
Pulp and paper	All forest-based virgin raw materials are FSC and/or PEFC certified At least 50% of the energy used in the production is produced from RE Meet the climate change mitigation criteria set for bioenergy in the EU Taxonomy	CBI forestry criteria EU Taxonomy’s criteria for the mitigation of climate change in energy production
Tele-communications	Does the telecommunications network operate on RE or other low-carbon energy? Has the project estimated the carbon footprint of its telecommunications network or calculated the carbon intensity coefficient of the electricity it uses? Does the project have a positive climate handprint? Has the project estimated its positive effects with the quantity of reduced CO₂ emissions? Will the project introduce new technologies to replace older, more energy-intensive technologies?	Currently, the telecommunications sector is not covered by any international frameworks
Mining and metals	Comply with the international frameworks adopted	OECD Export Credit Agreement's CCSU on clean energy minerals and ores standard EU Taxonomy’s criteria for mitigating climate change in energy production (mine power plants)
Energy	Comply with the international frameworks adopted	EU Taxonomy’s criteria for mitigating climate change in energy production

Source: Schmidt et al., 2024, based on Finnvera, n.d.b

Similar to Atradius DSB’s higher coverage for Paris-aligned projects mentioned above, Sweden’s EKN introduced green export credit guarantees in 2023.

EKN’s first Green Credit Guarantee, launched in 2021, was developed for green investments and working capital needs within Sweden that are linked to Swedish exports (e.g., Atkins, 2022).

These guarantees go beyond the OECD Arrangement reform and offer up to 100% risk cover for Paris-aligned exports that comply with the EU Taxonomy (both climate mitigation and adaptation). This is 5%-points above EKN’s regular guarantees (EKN, 2023b), without any limits in terms of deal size for the new project (TXF, 2023).

Targeting not only large exporters but also small and medium-sized enterprises (SMEs) should also be considered crucial for aligning export-oriented sectors with the Paris Agreement. UKEF recently announced in its Sustainability Strategy 2024–29 that it will update its Transition Export Development Guarantee for large exporters. Notably, it aims to develop a transition offering aimed at SMEs, “putting customers’ needs at the heart of […] transition finance support” (UKEF 2024, p. 11).

Effective financial incentives can go way beyond RE and benefit a plethora of clean energy technologies and sustainable business practices. Sweden’s EKN, for example, has started supporting electric trucks and buses, electric mining equipment, transmission infrastructure for offshore wind farms and solar parks, and biofuel-run public transport (EKN, 2023c). Recently, SEK also supported the world’s first large-scale green and export-oriented steel plant, ‘H₂ Green Steel‘ with a green credit guarantee of over EUR 500 million SEK, n.d.). This illustrates that the clean energy sector is developing rapidly and ever-more business opportunities arise, which can be facilitated by various instruments. This also holds for countries that do not (yet) have clean energy champions but are willing to help create a pipeline of Paris-aligned export projects.

Thirdly and lastly, ECAs need to demonstrate consistent contributions to the SDGs and implement safeguards against negative social and environmental impacts. Most ECA assessed by the authors adhere to the requirements of the OECD’s Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (OECD, 2022b). As part of the OECD’s requirements, ECAs report on all transactions where a credit period of more than two years has been agreed and the contract value amounts to at least EUR 10 million, as well as on pending applications and approved Category A and Category B transactions (ibid.). The International Finance Corporation’s Environmental and Social Performance Standards, for example, comprise eight project standards on the rights of Indigenous People, risk management, labour, resource efficiency, community, land resettlement, biodiversity and cultural heritage (e.g., EIFO, 2024; SEK, 2024a; EKN, 2023c; Finnvera, 2024d).

Many ECAs also follow other international guidelines, such as:

Equator Principles
Global Reporting Initiative’s Standards for its Sustainability Reporting
OECD Recommendation of the Council on Bribery and Officially Supported Export Credits
OECD Recommendations on Sustainable Lending Practices and Officially Supported Export Credits
UN Guiding Principles on Business and Human Rights
UN Global Compact
World Bank Group’s Environmental, Health, and Safety Guidelines.

Moreover, some ECAs go beyond international standards and additionally screen all export financing applications for environmental and social risks. For example, Finnvera (2024a) recently started to use ESG reports, including an ESG traffic light model, as part of its risk management assessments that include climate risks (transition and physical; Finnvera, 2023e). The ECA has also defined key corporate responsibility themes,

Climate change, biodiversity and ecosystems, pollution and water consumption, Finnvera’s employees, conduct of business, workers in the value chain, affected communities (ibid.).

and has a project ongoing for reporting according to the new European Union Corporate Sustainability Reporting Directive.

As clarified in an exchange between Finnvera and the authors.

Such approaches can be complemented by a dedicated webpage related to human rights issues. Sweden’s EKN, for instance, makes transparent how it attempts to minimise the risk of negative impacts on human rights via its project assessments, with a focus on the operations where the product is to be used (EKN, n.d.c). Following this example, human rights and SDG alignment should be mandated and aimed for by all ECAs. Supposedly ‘sector-neutral’, and ‘non-discriminatory’ mandates can be changed if they are insufficient for adjusting to new priorities like the climate crisis (see Text Box 5 for the example of Denmark). Every ECA and government should consider adopting and regularly updating sustainability strategies, as best illustrated by UKEF’s roadmap for 2024–29 (UKEF, 2024). This is all the more important considering that ECAs have historically demonstrated significant shortcomings in safeguarding human rights and environmental due diligence (e.g., ECA Watch, 2024). This highlights the need for ECAs in the OECD and beyond to adopt and adhere to ever-stricter, internationally recognised standards.

In addition to the examples discussed above, Text Box 5 provides an overview of what the authors identified as the most impactful best practice for this Paris alignment dimension.

Text Box 5: EIFO’s climate finance.

Denmark’s ECA EIFO is a leading provider of export finance for wind energy (E3F, 2023b), with RE making up 75% of its export finance portfolio in 2023 (EUR 13 billion) (ENS, 2024). Due to its minimal exposure to fossil fuels and leading role in RE, EIFO stands out as one of the best-positioned ECAs for the green transition (Weber et al., 2024). EIFO’s focus on RE is driven by strong domestic demand for export finance for wind projects with Denmark being home to Ørsted and Vestas Wind Systems, two global leaders in the sector.

In addition to its strong focus on RE, EIFO is now developing measures to drive decarbonisation in other sectors. It is developing an in-house definition of climate finance to be applied across its entire portfolio, while already using the EU Taxonomy to identify sustainable projects under the Green Future Fund. EIFO is also creating a sustainability-linked financing scheme that rewards sustainable business practices, with an initial pilot program targeting the agricultural sector.

EIFO’s work on expanding its climate finance portfolio is based on its unique mandate to support social return not only by supporting Danish trade, export, innovation, and ultimately economic growth but also by “contributing to a sustainable and green transition” (Act on Denmark’s Export and Investment Fund, 2022). EIFO further has a dedicated sustainability policy(EIFO, 2023) focused on biodiversity targets (Kunming-Montreal Agreement), diversity and human rights.

3.5 Dimension 5: Engagement – Outreach and ‘pro-activeness’ of ECAs and their governments

The fifth dimension covers the engagement and ambition of climate and sustainability policies of ECAs and their governments in international fora as well as with national exporters and banks. The table below summarises the best practices and provides country examples for this dimension.

Table 7: Best ECA practices on engagement.

Best practices for Paris Alignment	ECA examples
Demonstrated engagement in relevant international fora such as export finance-relevant clubs, initiatives, and working groups promoting ambitious climate policies in the export finance system.	Many ECAs are already members of the Berne Union Climate Working Group, E3F, NZECA, and other groups.
Demonstrated engagement in relevant national fora promoting ambitious climate policies in the national export finance system.	Finland, France and Sweden have set up one-stop shops and networks of public organisations, agencies and companies that promote exports and investments. The Fossil Free Sweden initiative aims to make the country the first fossil-free welfare nation in the world. This requires government-wide engagement with companies, industries, municipalities and regions and already led to a dedicated finance strategy for fossil-free competitiveness.
Demonstrated engagement with domestic exporters on climate-related matters.	UKEF has been providing tailored export finance advice to ‘green’ SMEs with dedicated export finance managers across the UK. UKEF has conducted national-level surveying to better understand the attitudes of stakeholders towards ceasing its support of fossil fuel value chains and its implications. UKEF also developed guidelines for companies transitioning out of fossil fuel exports.

First, ECAs and their governments need to demonstrate engagement in relevant international fora, promoting ambitious climate policies in the export finance system. Most prominently, France and the UK were founding members of E3F while the UK also initiated the CETP as host of COP26, to which all government-owned ECAs in participating countries are subject.

Of all ECAs assessed by the authors, only US-EXIM argued that they are not subject to the CETP.

The Beyond Oil and Gas Alliance (BOGA) was launched by Denmark at COP26. Most recently, E3F and the Berne Union Climate Working Group have increased efforts to develop clean energy finance principles, and discussed how export finance can support global climate finance goals and climate strategy in export finance (e.g., Berne Union, 2024; E3F, 2024). All ECAs should consider joining ECA alliances, at least as affiliate members as the UAE’s Etihad Credit Export Insurance (ECI), Spain’s Cesce and KazakhExport in the case of NZECA (n.d.). In addition, presentations at COPs, other climate diplomacy meetings as well as bi-/multi-lateral agreements with other ECAs can further advance the sharing of best practices related to the Paris alignment of the global export finance system.

Secondly, ECAs and their governments need to demonstrate engagement in relevant national fora promoting ambitious climate policies in the national export finance system. To this end, Sweden, Finland and France have set up one-stop shops and networks of public organisations, agencies and companies that promote exports and investments (Perspectives Climate Research, 2024). Such networks can organise exchanges about ‘green’ export opportunities and set up sustainability groups to share information about the latest best practices, as recently demonstrated by ‘Team Finland’ (ibid.) whose structure is illustrated in Figure 2 below.

Figure 2: Team Finland’s ‘whole-of-government’ approach.
Source: Klasen, 2023, p. 5.

Thirdly and lastly, ECAs and their governments need to demonstrate engagement with domestic exporters on climate-related matters. UKEF, most prominently, has been providing tailored export finance advice to ‘green’ SMEs with dedicated export finance managers across the UK, and ran a dedicated marketing campaign in the UK and for buyers overseas. Moreover, UKEF has conducted national-level surveying with regards to (i) understanding the attitudes of stakeholders towards ceasing its support of fossil fuel value chains; and (ii) identifying the opinions, needs and opportunities that a complete phase-out of support for fossil fuel value chains would give rise to. UKEF’s efforts have been complemented by guidelines for companies transitioning out of fossil fuel exports and specific conditions under the so-called Transition Export Development Guarantee (Shishlov et al., 2022).

In addition to the examples discussed above, Text Box 6 provides an overview of what the authors identified as the most impactful best practice for this Paris alignment dimension.

Text Box 6: Sweden’s engagement.

For years, Sweden and its ECAs have been leading engagement for aligning export finance with the Paris Agreement. Internationally, since the inception of the Berne Union’s Climate Working Group in 2022, EKN has been a member and has been chairing it since 2023 (Berne Union, n.d.a). In June 2024, for instance, the Climate Working Group organised a webinar for all Berne Union members on climate strategy and function in export credit.

For the agenda and all speakers, see further https://berneunion.org/Events/Event/1174/Climate-101-Climate-Strategy-and-Function-in-Export-Credit.

EKN and SEK have participated actively in the last three COPs (Business Sweden, 2021; EKN, 2022, 2023a, 2024; SEK, 2023) and have been co-founding members at COP28 of NZECA (n.d.).

Together with the Danish EIFO, Export Development Canada (EDC) and UK Export Finance (ibid.).

Further, Sweden is a member of the E3F which recently hosted a two-day workshop on how export finance can support global climate finance goals.

“[Working] to expand the [E3F] transparency report to more accurately capture the E3F contribution to global climate finance goals.” See further https://www.linkedin.com/feed/update/urn:li:activity:7211311670051127296/.

Sweden is also a signatory to the CETP, a core member of BOGA (n.d.)

Co-launched by Denmark. Finland is only a ‘Friend of BOGA’ and Norway is not among the supporters yet (ibid.).

and a member of the Powering Past Coal Alliance (PPCA, n.d.), thus spearheading the phase-out of export finance for fossil fuels.

See further Government Offices of Sweden (2024) for an overview of other Swedish climate transition initiatives.

Regionally, in spring 2023 Sweden took over the Presidency of the Council of the European Union, chaired the Council Working Party on Export Credits and prepared the EU’s negotiating mandate in the OECD. Nationally, the Swedish Government aims to make it the world’s first fossil-free welfare nation via the Fossil Free Sweden initiative (n.d.). This includes government-wide engagement with companies, industries, municipalities and regions, and includes a dedicated finance strategy for fossil-free competitiveness that mentions EKN and SEK’s diverse roles in Sweden and abroad (Schmidt et al., 2024a).

Additionally, the ‘Team Sweden’ (of which EKN and SEK are members) publicly promotes Sweden’s climate and sustainability ambitions in a coordinated way (Business Sweden, n.d.).Other examples of engagement in national fora include quarterly meetings of EKN, SEK, Business Sweden and major exporters to discuss climate and sustainability topics. The International Council of Swedish Industry regularly brings together major exporters and banks to discuss challenges such as the climate crisis and co-founds initiatives such as the Sustainability Impact Accelerator. Lastly, EKN has held dedicated conversations to better understand the likely impacts on job and sales losses of fossil fuel phase-out policies (see further Schmidt et al., 2024).