Greening Dutch export finance: From policy to business case
Arjen Walbroek, Senior Lead Sustainability, Atradius Dutch State Business discusses the Dutch ECA’s financial support for green innovators in the export sector and its Green Label system
The private sector plays an important role in the sustainable transition of global trade. The consensus is clear: companies want to innovate and at the same time make a strong positive impact. But it is not always easy to attract financing and to access new markets. Atradius DSB, the Dutch ECA, is proactively giving green innovators favourable conditions to stimulate export and facilitate its financing.
Since the end of last year, exporters and financiers have had a set of financial instruments incentivising the sustainable growth of their businesses across borders at their disposal. And more measures are expected for this year.
The Netherlands is characterised by its entrepreneurship abroad. As a result, Dutch innovations in water, food, agriculture and logistics can be found all over the world. More recently this has also been the case in high-tech sectors, for instance, health robotics and semi-conductors. In the context of exporting capital goods and services, important contributors to the Dutch economy traditionally operate in the maritime and energy sectors such as shipbuilders and contractors, many of them frequent ECA clients.
We see many of these companies today transitioning towards sustainable infrastructure projects; servicing offshore wind energy instead of merely the oil & gas sector or aligning their own product offering with ambitious zero emission targets such as building electric vessels. Often this involves large international projects or investments by the companies themselves.
Supporting innovative SMEs
Less widely known, the Netherlands is also home to a growing group of start-ups and scale-ups that are taking part in the new green economy. This is potentially worth billions. However, their ambitions do not always come across to an established investor audience. Their financing needs might not be as extensive as those of the bigger firms but even obtaining seed capital can be difficult. In our daily work, we are seeing many passionate entrepreneurs developing proof-of-concept products but are piloting them with only one or two clients. At Atradius DSB we aim to support these often innovative SMEs and to pave the way to wider financial markets by unlocking their export potential.
Atradius DSB has been the official ECA of the Netherlands since 1932. Traditionally, we insure projects that are generally not serviced by regular credit insurance providers due to their size, duration or destination. We believe that green innovations such as biogas installations, waste recycling projects or off grid solar systems have high growth-potential with global reach, and where publicly backed ECA facilities can also be very helpful – specifically when they can apply special incentives and conditions for important yet underserved sectors. For the Dutch government and Atradius DSB, climate ambitions have become a strategic focus. This has been translated recently into an increase in staff capacity at Atradius DSB essential for greening our portfolio in order to accelerate business development, broaden expertise and to keep developing new incentives.
With all of this technical expertise now in-house we can deal with the risks involved and service our clients with a new suite of green instruments. These include more favourable insurance conditions for green exports such as larger coverage of green project finance transactions, relaxed acceptance of underwriting criteria for small green transactions up to €5 million and making an exception for domestic trade for capital goods with export potential.
In 2021 we expect to announce another set of incentives under our green instruments. Atradius DSB is developing green export guarantees aiming to help companies to attract financing for setting up production lines for green products and stimulate R&D for innovative capital goods. The idea behind this is to support innovation from the start, enabling these companies to grow organically and eventually do business with international clients. At that point, naturally, export credit insurance will again come in handy. We are also looking at making our investment guarantee facility more attractive for green investments of Dutch companies abroad.
Green Label classification system
To help us determining which transactions are green, we have developed a classification system called the Green Label. This identifies three categories of green: climate mitigation, climate adaptation and non-climate related green business. Climate mitigation means actively combating climate change by avoiding or reducing greenhouse gas emissions for example through renewable energy solutions or energy efficiency in existing industrial operations. Climate adaptation is focused on customising human environments to the impact of climate change, for example by building resilient infrastructure. The last category includes businesses that contribute to other footprint reduction for example through Cradle2Cradle solutions in waste management. Atradius DSB is one of the first ECAs to have implemented such a green label methodology. The Green Label also gives us insights into the progress of our green portfolio. From 2021 onwards, results will be published in our annual report.
At Atradius DSB we feel a shared responsibility that drives our current efforts. We are proud to be part of this transition while being able to support the greening of Dutch exports and export finance. We strongly believe that supporting green innovations are key in achieving global climate goals. We also see that sustainable businesses have literally moved down, from the ‘sky’, focusing on wind and solar, towards the ‘ground’, with integral solutions on a ground level. Actively contributing to the green economy is becoming mainstream as companies are truly seeing the business case. We hope that our green instruments and our Green Label could be a source of inspiration for the global export finance community as well. We invite you to join us and share our ambitions.
More information on our green instruments can be found here.