We must scale up sustainable finance in the age of Covid
UKEF has financed three offshore wind farms in Taiwan | Alamy
4 min read
Given the difficulties we have all faced in the past year, it has been reassuring to see some normality returning to the UK in recent weeks. However, the devastating effects of the pandemic have left many developing nations in their most economically challenging position in decades.
Private sector financiers have retreated from perceived riskier markets, with a shrinking pool of capital available for critical infrastructure projects such as new hospitals, transportation systems and schools: facilities which are essential to the wellbeing of millions.
The International Monetary Fund’s April 2021 World Economic Outlook estimates that the global economy contracted 3.3 per cent in 2020 – a larger recession than any year since the Second World War.
An extraordinary level of economic intervention by governments has mitigated some of these impacts, with stronger than expected growth now forecast as a result. But while we often focus on the unprecedented package of Covid support measures the government has put in place to protect UK jobs at home, our export credit agency UK Export Finance (UKEF) has been ensuring critical work can also continue overseas.
UKEF exists to ensure that no viable UK export is lost for lack of finance or insurance from the private market, ensuring exporters can win, fulfil, and get paid for export contracts. Once UKEF support is secured, not only is a fee paid to cover the risk undertaken but British expertise is guaranteed to be brought into the supply chain as part of the arrangement. So UKEF not only covers all its costs but supports thousands of British jobs and helps drive sustainable growth at home and abroad.
It’s an important element in delivering the government’s vision of Global Britain, acting to drive trade with the developing world and putting UK businesses at the heart of delivering sustainable infrastructure.
To that end, in 2020 UKEF backed £2.4bn worth of sustainable projects overseas – more than doubling the amount provided in 2019. This financing helped UK businesses build new hospitals, produce clean energy and develop critical infrastructure in markets devasted by Covid.
We have mandated UKEF to go further and faster so that we can capitalise on global demand for clean growth solutions
In Ghana, for example, UKEF helped bring clean drinking water to rural areas. Thanks to a UKEF-support project, five litres of water a day will cost less than a quarter of a penny to local residents. UKEF also supported major new healthcare projects in Africa, including two hospitals in Ghana and more than 100 rural healthcare clinics and a hospital in Zambia.
Tackling climate change is a key priority for the government, and the UK is helping to accelerate the transition to clean growth and renewable energy abroad. I met with the President of Taiwan on a visit two years ago and a government-to-government agreement was signed on offshore wind. Since then, UKEF has financed three offshore wind farms in Taiwan, helping grow the UK supply chain and bolster Taiwan’s green grid. Not only do these projects bring sustainable energy to millions of people in these markets, they are also creating trading opportunities for UK businesses as the country builds back better.
The UK is now providing more export credits for sustainable projects than almost any other country in the world.
We are, however, just getting started. We have mandated UKEF to go further and faster so that we can capitalise on global demand for clean growth solutions and, by doing so, help others get on the right path to meet ambitious climate change targets ahead of this year’s COP26 climate summit in Glasgow. UKEF is growing its domestic and international teams so it can identify more overseas projects with robust fundamentals and long-term growth potential and take advantage of opportunities as they arise.
Recovery from the pandemic is not going to be easy, either at home or abroad. But such is the UK’s restless ingenuity, such is the energy and drive of our entrepreneurs, such is the demand for UK products and services, that we know we can grow back better, greener and stronger. Having the world’s best export credit agency will be a big help and UKEF stands ready to ensure that export opportunities are taken, not missed, and that developing countries benefit from UK capability in a truly sustainable way.
Graham Stuart is Conservative MP for Beverley and Holderness and minister for exports
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