NEXI: Initiatives towards the climate and sustainability

Yuichiro Akita, General Manager, Planning and Policy Department at NEXI discusses the Japanese agency’s support for climate and sustainability issues as it marks its 20th anniversary year

NEXI was established in 2001 as an independent organisation by separating its insurance business from the Japanese government for more efficiency, transparency, and higher quality of its services. Since then, we have done our best to support Japanese companies to expand their business abroad through our trade insurance.

In 2020, while the world was facing the severe economic crisis due to COVID-19, NEXI introduced various countermeasures for the pandemic, such as extending working capital support for overseas Japanese affiliated companies and prepayment import insurance for the import of medical supplies. While we are finally seeing positive signs of the normalisation of economic activities through the spread of vaccines, the year 2021, at the same time, marks the 20th anniversary of the foundation of NEXI.

In the post-COVID-19 era, Japanese companies are expected to play an important role in addressing climate change and sustainable development issues in emerging and developing countries through ESG investment. Under the current situation, the role of NEXI should be to respond flexibly and swiftly to such global changes in trade, investment and financing. Here, I introduce NEXI's latest efforts for ‘carbon neutrality’ and the ‘contribution to solving social issues and achieving SDGs’ in developing countries as a response to the post-COVID-19 era.

Efforts for carbon neutrality

NEXI has been making efforts to support global net carbon neutrality. Here are some of our recent endeavours:

• In Taiwan, NEXI supported an offshore wind power project through underwriting the loan insurance in Taiwan dollars. This project was also supported by six other ECAs in Europe and Asia, and thus was marked as our effort to contribute to the global spread of renewable energy by strengthening cooperation with partners across the world.
• In Sweden, we supported the financing of a project to build a lithium-ion battery manufacturing plant together with the European Investment Bank (EIB) and ECAs in Europe and Asia. In addition to the fact that lithium-ion batteries are an essential product for the manufacture of electric vehicles and are expected to become increasingly important in the carbon-neutral era, the project is expected to strengthen our economic ties with Europe in the future as it marked NEXI’s first project after the conclusion of the MOU with the EIB, signed in October 2018.
• The Emirate of Dubai in the United Arab Emirates is promoting the introduction of renewable energy sources for environmental protection under the ‘Dubai Clean Energy Strategy,’ a policy goal to combat climate change. NEXI underwrote the loan insurance for the project, which is positioned as our contribution to the long-term decarbonisation initiative for the Middle East.

Contribution to solving social issues and achieving SDGs

The spread of COVID-19 has been devastating particularly for emerging and developing countries. Weak healthcare infrastructure, a large informal sector, and limited government fiscal capacity have made it difficult to continue strict control measures in those countries. Vaccine dissemination has been progressing globally, but equal access to vaccines as a global public good is still a matter of concern.

The African Export-Import Bank, a Pan-African multilateral financial institution, is providing facility support called the Pandemic Trade Impact Mitigation Facility (PATIMFA) to African countries suffering from the effects of COVID-19. NEXI underwrote the loan insurance, approximately $520 million, arranged by a Japanese bank and funded by Japanese institutional investors. It will be sub-loaned to government agencies in Africa and is expected to be used to support medical care, sanitation, environment, education, and imports and exports to combat this economic hardship.

In Southeast Asia, NEXI underwrote the overseas investment insurance to support a Japanese venture company that provides credit enhancement services through its fintech technology. The company enables people, who have limited access to loans from traditional banks, to have cars as a means of work by tracking their work performance and analysing their payment history. In other words, through its service the company provides access to employment and creates a system where people who work diligently are positively evaluated. This initiative strengthened our mission to help Japanese venture companies working to achieve the SDGs by covering the country risks that they are exposed to.

The importance of ESG investment is becoming increasingly crucial as the global move to combat climate change and achieve the SDGs accelerates. According to IEA in its latest analysis in May, global energy sector investment will more than double by 2030 to achieve Net-Zero Emissions by 2050. However, the financing needs are much greater than those currently available. The financing gap to achieve SDGs in developing countries by 2030 is $2.5 trillion per year by the estimation made by UNCTAD in 2014. But this number is further exacerbated, says UNCTAD in its recent report in 2020, as private investment in SDG-related sectors fell by about one third in 2020 because of the pandemic.

Under these circumstances where additional private and public spending is required, we recognise our mission to attract both Japanese equity and debt capital from various sources is not only limited to traditional capital providers, but also from start-ups, institutional investors, etc. At the same time, it is also critical to collaborate in co-finance and/or reinsurance with other ECAs, MLAs and private insurers. We will continue to make our best efforts to tackle climate change and SDGs issues by establishing a system to actively support projects that contribute to the global goals with such partners in Japan and across the world.