Index for February 2022

Volume 21, Issue 2

  • (Perspectives Climate Group, Freiburg, 15 February 2022) Perspectives Climate Group has launched a new 41 page report which finds that despite commitments made at and after COP26, Export Development Canada's activities are not aligned with the Paris Agreement's 1.5 degree objective. In total, the  exposure  of  EDC’s  portfolio to carbon-intensive activities stood at 26% – equalling a total exposure of about USD$16 billion – by the end of 2020.  Support for ‘cleantech’ activities, the Canadian label for climate- or sustainability-related activities, was small compared to fossil fuel-related support standing at about USD 2.33 billion per year. Total portfolio exposure is not reported for ‘cleantech’ and a definition of ‘cleantech’ based on a positive list of activities does not exist. Currently, negative emission technologies like carbon capture and storage (CCS) are eligible for the cleantech definition. While there are reasons to justify CCS in some cases, we deem it as misleading to classify them as ‘cleantech’ because they can lead to prolonging fossil fuel infrastructure lifetime and to spurring fossil fuel demand. EDC's  official  exclusion  policy  for  fossil  fuels  only  applies  to  thermal  coal, not mettalurgical coal, another high-carbon intensive and important Canadian export good. Limiting temperature increase to 1.5°C above pre-industrial levels requires massively re-directing financial flows away from carbon-intensive activities and towards low-carbon activities. However, despite commitments made under Article 2.1(c) of the Paris Agreement ... many countries still provide significant financial support to fossil fuel value chains, among others, through their export credit agencies (ECAs). Canada's National Observer notes that EDC needs to clean up its act on climate.

  • (Wall Street Journal, Berlin, 25 February 2022) Berlin has stopped the approval of export credit and investment guarantees for Russia, the Economy Ministry said. With the so-called Hermes cover credit export guarantees, the German government protects companies against the insolvency of foreign customers. Germany issued such guarantees for trade with Russia to the tune of 1.49 billion euros, equivalent to $1.67 billion, in 2021, the ministry said. The instrument has been in use since 1949. ECA Watch Italian member ReCommon has asked SACE to clarify its position given its EUR 4.3 billion exposure in Russia. Numberous other international sanctions have been imposed on Russa.

  • (Deccan Chronicle, Secunderabad, 28 February 2022) The Export Credit Guarantee Corporation (ECGC) [of India] has decided to withdraw coverage for shipments to Russia with effect from February 25. ECGC in a communication had said: "based on the near-term commercial outlook, it has been decided to modify the country risk classification of Russia under the short-term and medium-and-long term with effect from February 25." Indian exporters to Russia and CIS countries face uncertainty over goods worth $500 million due to the withdrawal of credit guarantee cover on items bound for the region, sanctions on Russian banks and feared disruptions at ports in the Baltic region.

  • (Sherrod Brown, Washington, 10 February 2022) U.S. Sen. Sherrod Brown (D-OH), Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, applauded Reta Jo Lewis’ confirmation as President of the Export-Import (EXIM) Bank. Lewis was confirmed by a vote of 56-40. Lewis currently serves as a Senior Fellow and Director of Congressional Affairs at the German Marshall Fund, where she leads bipartisan efforts to strengthen transatlantic cooperation. Before joining the German Marshall Fund, Ms. Lewis served in the Obama Administration as the State Department’s first-ever Special Representative for Global Intergovernmental Affairs. Reuters noted that EXIM starts a new era as Lewis takes office as the first person of color and the first Black woman to lead the agency, facing challenges on competing with China’s massive export financing, climate change and racial equity.

  • (NationofChange, Costa Mesa CA, 8 February 2022) Campaigners have for years opposed the proposed pipeline and associated oil projects. They say that EACOP – which is set to be electrically heated to keep the oil at the right temperature – would cut through vital rivers and forest ecosystems. If the pipeline is built, over 100,000 people across Uganda and Tanzania would lose agricultural land, and thousands could lose their homes. TotalEnergies and partner China National Offshore Oil Corporation (CNOOC) signalled a public intention to proceed with the project last week. They pledged to invest more than US$10 billion in developing crude oil production in East Africa, in addition to the estimated $3.5-$5 billion cost of the pipeline. However, a coalition of environmental and human rights groups opposing the pipeline, Stop EACOP, says the announcement is thin on detail and the project is not yet assured. Last month, HSBC, Mizuho and the United Overseas Bank all confirmed they are not supporting the project. The statements bring the total number of banks that have distanced themselves from the project to 11, including ANZ, Barclays, BNP Paribas, Crédit Agricole, Credit Suisse, Royal Bank of Canada, Société Générale and UniCredit. After announcing the final investment decision, the shareholders of the East African Crude Oil Pipeline (Eacop) now turn to looking for money.

  • (This Day Live, Lagos, 10 February 2022) The African Continental Free Trade Area (AfCFTA) Secretariat and the African Export-Import Bank (Afreximbank), yesterday in Cairo, signed an agreement on the management of the AfCFTA Adjustment Fund (ADF) that would require $10 billion over the next five to 10 years. The base fund is a facility that would support African countries to cope with the loss of revenues from import tariffs and the private sector to effectively participate in the new trading environment established under the AfCFTA. Already, Afreximbank has committed $1 billion towards the ADF, which is made up of a base fund, a general fund and a credit fund.

  • (Construction Review, Nairobi, 7 February 2022) AfreximBank Trade Centre will house the bank’s southern Africa regional office, that it is part of a bigger strategic plan to transform the bank’s regional offices and headquarters into a network of AATCs. The entire project cost is now estimated to be close to $100 million; however, precise figures are still being finalized. The Harare AATC will include 30 000 square meters of built space, including prime corporate office space, a four-star hotel, conferencing facilities, trade information services, a tech incubation lab, and other amenities. The African Export-Import Bank Africa Trade Centre (AATC), often known as Afreximbank, head office in Harare is taking form, with full drawings already sketched and building set to begin in the third quarter of this year. The project, which is anticipated to be completed by 2025, will make Harare a critical hub for delivering the African Continental Free Trade Agreement’s promise (ACfTA).

  • (TXF News, London, 2 February 2022) The volume of sustainable deals within the export finance sector is growing. But to take this forward positively across all industrial sectors requires a sensible debate with a clear pathway to ensure business is not lost. Widespread sustainability within export finance is something which has come relatively late to the framework of export credit agency-backed financing, particularly when compared to development bank financing activity. For some time there has been a wide perception that export financing is lagging behind DFI financing in terms of overall sustainability. But its here now and is on the agendas of ECAs and most international commercial banks alike. This has not been easy and will still be tough for ECAs going forward. Why? Because ECAs are there to support and service their exporters, and many of these companies are going to be involved in some way and in some part of the energy transition for decades to come. This is a big debate which will no doubt rage for some time to come. The issue of sustainability within the export finance industry grew last year with the publication of the International Chamber of Commerce White Paper on Sustainability in Export Finance.

  • (Reuters, Rome, 25 January 2022) Italy approved a long-awaited decree needed for the Treasury to buy credit insurance agency SACE from state lender Cassa Depositi e Prestiti (CDP) in a deal expected to be worth around 4.25 billion euros ($4.81 billion). The Treasury wants to directly control the export agency, given its growing importance in supporting the economy. Rome supports SACE by partly sharing its risk exposure, which could potentially hurt public finances over time. SACE's governance will be in the hands of the Treasury, dealing a blow to Di Maio whose Foreign Affairs Ministry, according to one of the sources, is set to lose control over strategic decisions regarding the export credit. The deal reverses the divestment made during the 2012 sovereign debt crisis by the technocrat government of Mario Monti, which sold SACE to the CDP for around 6 billion euros.

  • (New African Magazine, London, 11 February 2022) Bpifrance Assurance Export, a department of the investment bank Bpifrance, administers French state export guarantees management, transfered from the the Coface Group in 2015. Bpifrance notes that it helps stimulate French business’ growth by offering loans, providing guarantees and awarding buyer credit and supplier credit to encourage business abroad. It finances over 80 000 companies and provided over 6000 investment loans and 50000 short term loans in 2018 with a total production of 19 billion euros. Bpifrance is also the innovation agency for entrepreneurs with 1,3 billion euros of innovation soft loans distributed to 6000 companies every year.

  • (New Age Business, Dhaka, 8 February 2022) The governments of Bangladesh and Canada are working on signing a free trade agreement and a foreign investment promotion and protection agreement to increase bilateral trade between the two countries. Masud Rahman, president of the Canada-Bangladesh Chamber of Commerce and Industry, said that Export Development Canada (EDC) can play a role in increasing investment through the formation of ‘Bangladesh Fund’.