UK credit export agency launches debt help for climate shocks
Plans to suspend debt repayments from low-income countries and small island developing states while they recover from climate shocks have been unveiled by the UK’s credit export agency.
UK Export Finance (UKEF) is set to become the first export credit agency in the world to offer Climate Resilient Debt Clauses (CRDC) in its direct sovereign lending. The clauses aim to offer low-income countries and small island developing states the ability to defer debt repayments in the event of a severe climate shock or natural disaster. It is also part of UKEF’s broader ambition to embed climate change into its decision-making, in line with its Climate Change Strategy 2021-24.
“Some countries are now facing tough choices between protecting their citizens as they respond to climate shocks or paying down their debts,” said business group director Tim Reid. “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.
UKEF says it will “encourage other official creditors to consider including similar provisions in their own lending to countries most vulnerable to climate change”.
Meanwhile, the Treasury has unveiled plans to launch a “model term sheet” to embed climate resilient debt deferral into standard bond and loan contracts. As part of the move, multilateral development banks will also agree to form an informal working group to explore CRDCs and other approaches.
The credit export agency has provided more than £7bn of support for green and sustainable schemes since 2019, and has a £2bn direct lending facility dedicated to financing clean growth projects overseas.