UKEF adds debt clauses for developing nations fighting climate shock

This is part of UKEF’s broader ambition to embed climate change into its decision-making in line with its Climate Change Strategy and net zero 2050 target, according to a press release by the UK government.

“Some countries are now facing tough choices between protecting their citizens as they respond to climate shocks or paying down their debts. UKEF can play an important role in helping governments navigate these decisions. By suspending the debt service payments, UKEF will enable borrowing countries to focus on responding to and recovering from a crisis,” Tim Reid, UK export finance’s director of business group, said in a statement. “We encourage other official creditors to consider including similar provisions in their own lending to countries most vulnerable to climate change.”

UKEF helps overseas buyers access financial support to make their projects happen, provided they commit to sourcing goods and services from the UK. This helps open new doors for world-class British suppliers to trade overseas.

This announcement is part of the UK Government’s wider objective to improve the financial resilience of vulnerable countries around the world in the face of severe climate shocks.  Alongside UKEF, the Private Sector Working Group chaired by the UK Treasury has also launched a ‘model term sheet’ to embed climate resilient debt deferral into standard bond and loan contracts. Multilateral development banks will also agree to form an informal working group to further explore CRDCs and other approaches, building on the Inter-American Development Bank’s leadership in this area.

“Climate shocks are increasing in frequency and severity which is why we are supporting countries hit hardest. In the wake of a disaster, they face painful trade-offs between rebuilding their communities and making debt repayments. Today is a significant milestone in our work to find innovative solutions to these global challenges, and I am proud that UK Export Finance is the first export credit agency in the world to offer loans which suspend debt service payments for countries hit by climate catastrophes and natural disasters,” said exchequer secretary to the treasury James Cartlidge. “Building on our COP26 legacy, we are committed to climate-resilient development, as the UK continues to play a leading role in reducing carbon emissions to Net Zero by 2050.”

The new CRDCs are part of UKEF’s commitment to a greener, more sustainable future following the launch of its Climate Change Strategy in 2021, where it committed to net zero greenhouse gas emissions by 2050 across its portfolio and operations. UKEF has provided over £7 billion of support for green and sustainable projects since 2019, and it has a £2 billion direct lending facility dedicated to financing clean growth projects overseas.

ALCHEMPro News Desk (NB)