Greenhouse Gas Footprint of the Export Credit Guarantee Portfolio
Promotion of Climate-Friendly Export
Monitoring the Progress of the Climate Strategy for Export Credit Guarantees
To support the German export industry in its transformation, the export credit guarantee (ECG) portfolio is geared towards a 1.5-degree pathway. To this end, climate-friendly projects can qualify for improved cover conditions while projects that are not compatible with a 1.5-degree pathway will be excluded from cover.
Progress in aligning the ECG portfolio with the 1.5-degree target is measured by its greenhouse gas (GHG) footprint. For projects in advanced economies, the GHG footprint shall be reduced to net zero by 2045, and for projects in developing and emerging economies, by 2050.
Methodology
In accordance with the climate strategy for export credit guarantees, the GHG footprint is calculated for all investment projects supported by single transaction guarantees, making it a valid measure of the effectiveness of the climate strategy criteria. The footprint captures the GHG emissions associated with the projects and the use of the goods and services covered by the federal government.
There is currently no international standard for calculating the portfolio emissions of a promotion instrument such as the ECG. Therefore, an approach for calculating the GHG emissions of the ECG portfolio was developed based on the recognised ‘Financed Emissions’ standard for banks defined by the Partnership for Carbon Accounting Financials (PCAF).
In accordance with the PCAF standard, the federal government is allocated the project emissions of all coverages in the portfolio, in proportion to the share of the current outstanding risk as a percentage of the total financing project value.
Fig.: General formula for calculating the GHG footprint
For renewable energy projects, the PCAF standard also allows for the calculation and reporting of so-called avoided emissions. This is a hypothetical calculation of the emissions saved by replacing fossil-fuel generated energy.
The GHG footprint and the avoided emissions are calculated and published annually. The footprint is determined based on the emissions of the coverage portfolio as of December 31st of the respective reporting year.
Since the amount and composition of new coverage fluctuates annually, as do the repayment profiles of individual export credits, no linear trend in annual GHG emissions is expected. Reliable conclusions on the effectiveness of the ECG climate strategy can only be drawn after several years.
Accounted Emissions
All significant greenhouse gases in accordance with the United Nations Framework Convention on Climate Change are considered. This includes both direct Scope 1 emissions and Scope 2 emissions from purchased energy for the covered projects. For those sectors where corresponding data or emission factors are available, upstream Scope 3 emissions resulting from the supply chain of a project are also calculated. Additionally, for projects involving the extraction, processing, transportation, and storage of fossil fuels, downstream Scope 3 emissions are calculated.
Data Sources and Data Quality
In accordance with the OECD Common Approaches, all projects involving fossil fuel power plants or those with annual emissions exceeding 25,000 tonnes of CO2 equivalents (CO2e) must calculate their GHG emissions. Where such emissions data or other project-specific GHG-relevant data is available, they are used for the footprint calculation. Otherwise, the emissions are determined using so-called emission factors. Emission factors are sector-specific and/or country-specific and are expressed in CO2e/euro asset value. For example, for a covered paper machine in Mexico without specific project data, the outstanding risk in euros would be multiplied by the average GHG emissions of the paper industry in Mexico in CO2e/euro.
The use of various data and calculation approaches is in line with the PCAF standard and is transparently documented through the classification and disclosure of different data quality levels. The PCAF data quality scale is used for this purpose, with Score 1 representing verified emission data and Score 5 representing emission estimates based on emission factors.
Baseline
The GHG footprint of the ECG portfolio was calculated for the first time for the year 2022. These results serve as a baseline against which future progress and changes in emission levels can be measured. Scope 1 & 2 emissions form the baseline for the net zero target of the ECG climate strategy.
Should changes in data sources or the calculation approach become necessary in the future that have a significant impact on the results, the baseline would also be recalculated to ensure comparability of the results over time.
Results
As of December 31st, 2023, the use of goods and services covered by the federal government resulted in Scope 1 & 2 emissions of 30.7 million tonnes of CO2e for the year 2023. The amount of partially determined Scope 3 emissions for 2023 is 26.2 million tonnes of CO2e. This represents a reduction from the previous year, when Scope 1 & 2 emissions were 35.6 million tonnes of CO2e, and Scope 3 emissions were 29 million tonnes of CO2e.
Since the outstanding risk can fluctuate significantly at the reporting date each year and thereby influence the absolute sum of Scope 1 & 2 emissions, emissions intensity is a more significant indicator of the progress of the climate strategy. The emissions intensity puts the GHG emissions in relation to the outstanding risk.
The intensity of Scope 1 & 2 emissions has decreased year on year. In 2023, one million euros of outstanding risk was associated with an average of 604 tonnes of CO2e, compared to 703 tonnes in 2022.
In 2023, renewable energy projects avoided emissions of 9.2 million tonnes of CO2e – a significant increase compared to the calculated 4.2 million tonnes of CO2e of avoided emissions in 2022. This increase is mainly because the outstanding risk related to renewable energy projects more than doubles in 2023. The emissions avoidance intensity (emissions avoided per euro covered) also increases in 2023 due to the inclusion of three new large-volume projects with high annual energy generation.
The data quality weighted by emissions share for Scope 1 & 2 emissions in 2023 according to the PCAF score is 3.6.
Shares of the key sectors in the total emissions of the ECG portfolio
in the years 2022 and 2023
The current cover portfolio consists mainly of transactions that were covered long before the climate strategy came into effect. Consequently, the share of emissions from fossil fuels remains very high at 55% in 2023 (and 58% in 2022). Overall, the emission shares confirm the selection of key sectors for the sector guidelines of the Climate Strategy: only 17% of emissions in 2023 (and 14% in 2022) originate from coverages that do not fall (or would not have fallen) in a key sector. These include mainly coverages for machinery in the manufacturing industry (e.g., plastics production) and machinery for paper, wood, leather, and textile production.
GHG footprint, emissions intensity, and outstanding risk according to the key sectors of the climate strategy in the reporting years 2022 and 2023 (reporting date: 31st December)
2022 | 2023 | |||||
|---|---|---|---|---|---|---|
Absolute | Outstanding risk | Scope 1 & 2 | Emission intensity | Outstanding risk | Scope 1 & 2 | Emission intensity |
| Fossil energy | 6.5 | 20.9 | 3,195 | 5.8 | 17 | 2,932 |
| Civil aviation | 3.4 | 4.2 | 1,246 | 2.9 | 3.5 | 1,193 |
| Chemical industry | 5.4 | 1.6 | 311 | 5 | 1.9 | 388 |
| Civil shipping | 14.4 | 2.8 | 194 | 11.6 | 2.1 | 184 |
| Metal | 1.6 | 1.2 | 746 | 1.6 | 1.1 | 680 |
| Other | 14.5 | 4.9 | 337 | 16.3 | 5.1 | 303 |
| Total | 50.6 | 35.6 | 703 | 50.8 | 30.7 | 604 |
GHG emissions | Outstanding risk | Avoided emissions | Emissions avoidance | Outstanding risk | Avoided emissions | Emissions avoidance |
| Total | 4.9 | 4.2 | 856 | 7.5 | 9.2 | 1,235 |
1 The compensation risk analysed relates to the (residual) exposure of individual cover. Interest is not taken into account here (capital amount only). The total value also includes renewable energy transactions totalling EUR 7.6 billion (2023) and EUR 4.9 billion (2022), whose greenhouse gas emissions (Scope 1&2) are assumed to be negligible (zero).
Notes and assumptions
- A conservative approach has been taken for the GHG footprint of the ECG portfolio, leading to an overestimation of emissions. For instance, no distinction is made between the construction and operational phases of projects. From the moment a project is covered, full operational emissions are assumed, even if the covered facility only becomes operational later. In the absence of clear information on transactions, higher emission factors are chosen. For example, it is not automatically identifiable whether coal power plants operate on lignite or hard coal. In line with the conservative approach, the higher emission factor for lignite is therefore used.
- The sectors and sub-sectors of the emission factors do not correspond 1:1 to the sectors and type of goods of the ECG portfolio. Assumptions and approximations were therefore made in some cases.
- The latest known reporting data is used as reporting data. These may be delayed (e.g. using reported data from a project’s 2022 report year for the 2023 GHG calculation).
- The results are not comparable with those of other financial institutions or export credit agencies, as the methodology and underlying promotion instruments may differ. The results and their development should only be considered in the context of monitoring the ECG climate strategy.
