The International Credit Insurance and Surety Association (ICISA), founded in 1928, is the first and leading trade association representing trade credit insurance and surety companies internationally. Its current members account for the great majority of the world’s private credit insurance business. The Schiphol, Netherlands headquartered Association also serves as an important platform for collaboration and the development of best practices in the industry. Today, with almost USD3 trillion in trade receivables insured and billions of dollars’ worth of construction, services and infrastructure guaranteed, ICISA members play a central role in facilitating trade and economic development on all five continents and practically every country in the world. In an exclusive interview, Richard Wulff, Executive Director of the International Credit Insurance and Surety Association (ICISA), discusses the current state of the credit and investment insurance landscape, the potential impact of manifold risks emerging in the global geopolitical, trade and investment landscape, the significance of the recent strategic collaboration signed between ICISA and the AMAN UNION to advance credit and investment insurance initiatives in member states common to both, and despite talk of deglobalization and fragmentation, why he maintains that trade and credit insurance remains one of the binding factors of our world and the way to bring people together.

ICIEC Newsletter: What is the current state of the credit and investment insurance landscape especially in an era of polycrises and growing uncertainties and risks? Is there room for much greater collaboration between government insurers through state-owned insurers and ECAs, and private sector re/insurers?

The current landscape of credit insurance is marked by significant uncertainty and heightened risks due to a multitude of overlapping crises, often referred to as polycrises. These include geopolitical tensions, such as trade wars and regional conflicts, economic instability characterized by fluctuating markets and recession threats, and environmental challenges like climate change and natural disasters

In this complex environment, there is indeed substantial room for enhanced collaboration between government insurers, including state-owned entities and Export Credit Agencies (ECAs) and Development Financial Institutions (DFIs), and private sector re/insurers. Such collaboration can lead to the development of more comprehensive risk mitigation strategies by leveraging the strengths of both sectors

Government insurers and multi-lateral institutions bring stability and regulatory support, while private insurers contribute agility and innovative risk management solutions. By sharing expertise, pooling resources, and engaging in public-private partnerships, the industry can better address the increasing complexity of global risks, improve market penetration, and provide more robust support for businesses navigating these diverse challenges.

Another example of public-private partnership is found on the reinsurance market. Government and multi-lateral institutions utilize the reinsurance market to increase the capacity that these institutions can bring to their clients. Reinsurers tend to be inclined to reinsure projects insured by the public market because of the government-to-government relations the public institutions have.

Trade Credit Insurance – Premiums, Claims and Claims Ratio ICISA Members (excl reinsurance members)

Given the manifold risks and tensions in the global geopolitical, economic, trade and investment, climate-related and catastrophic events landscape, how is this affecting the business side of credit and investment underwriting in terms of premiums, claims, claims ratio, and insured exposure?

The myriad of risks and tensions in the global landscape—ranging from geopolitical and economic upheavals to climate-related and catastrophic events — may have profound effects on the credit underwriting business. ICISA members, in response to heightened risk levels, have had to adjust their premiums upwards to adequately reflect the increased uncertainties.

This risk-sensitive pricing ensures that insurers can maintain solvency and continue providing coverage. We have seen over the past years since COVID, that the insured exposure has increased by more than 25% since 1-1-2022. This has led to the claims ratio stabilizing at a sustainable levels, comparable to the level before COVID. This is also due to insurers continuously reassessing their risk models and pricing strategies, incorporating more sophisticated data analytics to stay financially stable and responsive to client needs in this dynamic environment.

Credit and investment insurance provision is rightly or wrongly perceived as operations largely prevalent in the developed and in high-and-middle-income emerging markets. The culture of credit insurance in developing countries for manifold reasons at best is fragmented, underdeveloped and perhaps undervalued. What is ICISA and other industry bodies doing to ‘democratize’ credit and investment insurance and its reach beyond traditional markets?

ICISA and other industry bodies are undertaking concerted efforts to democratize credit insurance, extending its benefits beyond traditional high-income markets to developing countries where the sector is often fragmented and undervalued. A prime reason for this is the well-publicized financing gap in the developing world.

One of the major reasons why (especially small and medium-sized) companies in the developing world have issues in getting financing from financial institutions to support their business is that they have little “hard collateral” to offer to the financier as security. A credit insurance policy written by a highly rated credit insurance company is the collateral that is needed so badly.

Initiatives Include:

Providing resources to local insurers to enhance their understanding of Trade Credit Insurance. This includes sharing best practices to improve the overall quality of insurance services offered in these regions.

Working closely with regional organizations and financial institutions to increase awareness about the value of trade credit insurance. By partnering with these entities, ICISA aims to foster a better understanding of credit insurance among businesses and policymakers, highlighting its role in facilitating trade and investment.

Conducting educational campaigns and workshops to inform businesses in developing markets about the benefits of credit insurance. These efforts are designed to dispel myths and misconceptions, demonstrating how credit insurance can protect against non-payment risks and support business growth. An example of these campaigns is the Trade Credit Insurance Week, which is a yearly celebration of trade credit insurance sector. This year, the third edition will be hosted, between 7 – 11 October, with 8 online sessions with free registration. Find out more about this initiative on www.icisa.org.

Through these strategies, ICISA aims to create a more inclusive and accessible credit insurance market, helping businesses in developing countries to manage risks effectively and participate more fully in the global economy.

ICISA recently signed an MoU with the AMAN UNION to advance credit and investment insurance initiatives in the latter’s member states. Can you expand on how you see this collaboration unfolding? What are the priorities and expectations under the MoU?

The MoU signed between ICISA, and the AMAN UNION represents a significant step towards enhancing credit and investment insurance initiatives within the member states of both organizations.

This collaboration is expected to unfold through several key avenues:

i. Exchange of Best Practices: Facilitating the exchange of best practices and experiences between ICISA and AMAN UNION. This knowledge-sharing will help both organizations enhance their operational efficiencies and service offerings, benefiting member states.

ii.Market Development Initiatives: Identifying and promoting opportunities for market development and expansion. By working together, ICISA and the AMAN UNION can help with the promotion of TCI products in developing countries.

iii. Policy Advocacy: Collaborating on policy advocacy efforts to create a better regulatory environment for credit and investment insurance, by working together with policymakers to highlight the importance of supportive regulations and incentives that can drive the growth of the insurance sector.

This partnership between ICISA and the AMAN UNION aims to create a more resilient and inclusive insurance market that supports economic growth and stability.

How do you see the prospects for the credit and investment insurance industry over the near-to-medium term? What are the most challenging evolving and future risks the industry is faced with especially in relation to trade and FDI flows and disruptions, financing infrastructure, climate action and food supply chain gaps?

We see trade credit insurance remaining an essential part of the landscape. Short-term credit insurance covers just shy of 15% of the annual value of world-wide trade. It is an essential part of doing business and affording (end) customers credit terms and offering security to financiers.

Whereas there is much talk of deglobalization, trade remains one of the binding factors of our world and the way to bring people together. Credit insurance is one of its facilitators, and therefore here to stay.

Sometimes the devil is not in the detail but lurking in the divergent metrics of the global gatekeeper organisations supposed to stabilise them. When it comes to global trade metrics – finance, digitisation, insurance, and partnerships – it is no exception. Perhaps the ‘Steady but Slow: Resilience amid Divergence’ banner of the IMF’s World Economic Outlook (WEO) unveiled at the Spring 2024 Annual Meetings in Washington DC in April was no coincidence.

The Fund projects world trade growth at 3.0% in 2024 and 3.3% in 2025, with revisions of a 0.3 percentage point decrease for 2024 and 2025 compared with its January 2024 projections. Trade growth is expected to remain below its historical (2000–19) annual average growth rate of 4.9% over the medium term, at 3.2% in 2026. This projection implies, in the context of the relatively low outlook for economic growth, a ratio of total world trade to GDP (in current dollars) that averages 57% over the next five years, broadly in line with the evolution in trade since the global financial crisis in 2008.

However, warns the IMF, even as world trade-to-GDP ratios remain relatively stable, significant shifts in trade patterns are taking place, with increasing fractures along geopolitical lines, especially since the start of the war in Ukraine in February 2022, leading to greater trade protectionism even among allied blocs in an increasingly fragmented global economic ecosystem. Indeed, says the IMF, growth in trade flows between geopolitical blocs has declined significantly since then compared with growth of trade within blocks. “This reallocation of trade flows is occurring in the context of rising cross-border trade restrictions, with about 3,200 new restrictions on trade in 2022 and about 3,000 in 2023, up from about 1,100 in 2019, according to Global Trade Alert data, and increased concerns about supply chain resilience and national security,” added the IMF.

In contrast, according to the World Trade Organisation (WTO), the volume of world merchandise trade should increase by 2.6% in 2024 and 3.3% in 2025 after falling by 1.2% in 2023. Similarly, regional conflicts, geopolitical tensions, and economic policy uncertainty pose substantial downside risks to the forecast. The expectation is that inflationary pressures in many countries will abate in 2024 leading to a recovery in demand especially in the developed economies. There is the issue of fiscal, and policy drag, which can take years to work through – hence the feeling of an ongoing cost-of-living crisis despite the claims of remedial actions.

In contrast still, the UN Trade and Development’s (UNCTAD) latest Trade and Development Report Update in April 2024, reiterates that the contraction of international merchandise trade in a context of global economic expansion in 2023 is unprecedented in recent times. But since then, “two further negative shocks have hit maritime routes, the backbone of international merchandise trade. Both relate to shipping disruptions in key arteries of maritime transport: the Panama Canal and the Red Sea. The first one affected by a prolonged drought which forced the reduction in crossings, and the second one affected by attacks on shipping in the wake of the war in Gaza which compelled major ocean carriers to suspend Suez transits and to reroute through the Cape of Good Hope, adding between 12 and 20 days of transport and therefore freight costs and rising consumer prices.

The growth of merchandise trade, overall, is expected to remain subdued in 2024, albeit prospects for trade in services in 2024 look brighter even if a slowdown in some of its components cannot be ruled out. Trade like any other sector is beholden to a range of interlinked risks and uncertainties – sovereign debt levels, higher global interest rates, inflation management, calls for protectionism, continuing trade tensions and rising political uncertainty. This suggests meagre improvement in 2024 for trade in goods and services.

Total goods and services trade was only down 2%. An encouraging development for services was the global exports of digitally delivered services, which reached USD4.25 trillion in 2023, up 9% year-on-year, accounting for 13.8% of world exports of goods and services.

The value of these services — meaning services delivered digitally across borders through computer networks and encompassing everything from professional services to streaming of music and videos and including remote education — surpassed pre-pandemic levels by over 50% in 2023.

GDP Growth and Trade – a Volatile Relationship

The relationship between trade and GDP growth (output) is well established, although it can be tempestuous, volatile, unpredictable, and even stable depending on the prevailing and looming national, regional, and global macroeconomic indicators and trends.

UNCTAD expects a further growth deceleration in global GDP growth in 2024 to 2.6%, slightly slower than in 2023. This makes 2024 the third consecutive year in which the global economy will grow at a slower pace than before the pandemic, when the average rate for 2015–2019 was 3.2%.

The UN body remains very critical of the obsession of the G7 countries with containing inflation. “Policy discussions continue to centre on inflation, conveying confidence that anticipated monetary easing will heal the world’s economic woes. Meanwhile, the pressing challenges of trade disruptions, climate change, low growth, underinvestment, and inequalities are growing more serious,” it lamented in its April Trade and Development Report Update.

It remains concerned that growth was largely driven by private consumption funded largely by debt in both private and public sectors. This, says UNCTAD, has led to a mismatch “between seeking financial market stability and attaining other macroeconomic goals.” Prioritizing the stability of the financial markets tends to have a negative impact on funding for the public sector, as government deficits are frequently chastised by bond markets and international financial institutions. Fast value creation by the financial markets benefits the holders of financial assets while crowding out fixed investment. Not surprisingly, observes UNCTAD, private investment globally in 2023 performed dismally and a worse one is projected for 2024.

In contrast, the IMF’s April 2024 WEO estimates global growth at 3.2% in 2023, which is projected to continue at the same pace in 2024 and 2025. The forecast for 2024 is revised up by 0.1 percentage point from the January 2024 WEO Update. “The pace of expansion,” notes the Fund, “is low by historical standards, owing to both near-term factors, such as still-high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and Russia’s invasion of Ukraine, weak growth in productivity, and increasing geo-economic fragmentation.

At the same time, the WTO in its April “Global Trade Outlook and Statistics” report estimates global GDP growth at market exchange rates will remain mostly stable over the next two years at 2.6% in 2024 and 2.7% in 2025, after slowing to 2.7% in 2023 from 3.1% in 2022. The contrast between the steady growth of real GDP and the slowdown in real merchandise trade volume is linked to inflationary pressures, which had a downward effect on consumption of trade-intensive goods, particularly in Europe and North America.

Forecasts for Global GDP and GDP per Capita (Percent; five-year-ahead projections)

Regional Trade Outlook

If current projections hold, Africa’s exports will grow faster than those of any other region in 2024, up 5.3% according to WTO. But this, however, is from a low base since the continent’s exports remained depressed after the COVID-19 pandemic. North America (3.6%), the Middle East (3.5%), and Asia (3.4%) should all see moderate export growth. European exports are once again expected to lag those of other regions, with growth of just 1.7%.

Strong import volume growth of 5.6% in Asia and 4.4% in Africa should help prop up global demand for traded goods in 2024. However, all other regions are expected to see below-average import growth, including the Middle East (1.2%), North America (1.0%), and Europe (0.1%). Merchandise exports of least-developed countries (LDCs) are projected to grow 2.7% in 2024, down from 4.1% in 2023, before growth accelerates to 4.2% in 2025. Meanwhile, imports by LDCs should grow 6.0% this year and 6.8% next year following a 3.5% contraction in 2023.

That Africa accounted for only 14% of intra-African merchandise trade in 2022 (down from 16% in 2018) – the lowest of the global regions – underlines the huge gap and challenge faced in realizing the African Union’s Agenda 2063 vision of economic integration and inclusive socio-economic development on time, and the trade-led development ambitions of the African Continental Free Trade Area (AfCFTA), which aims to bring together 55 African states and create an integrated market of 1.3 billion people, with a combined GDP of USD3 trillion.

Intra-OIC Trade and Challenges

One of the core mandates of COMCEC, the Organisation for Islamic Cooperation (OIC), and the Islamic Development Bank (IsDB) Group specifically requires all three institutions to promote intra-OIC trade and foreign direct investment (FDI) flows in their Member States. In fact, COMCEC has set a target of reaching 25% of intra-OIC trade by 2025.

The IsDB marks its 50th Anniversary and ICIEC its 30th Anniversary in 2024. The fact that intra-OIC trade and investment have not even hit 25% of their total exports and imports and FDI flows suggests what an uphill struggle it remains for Member States to upscale their bilateral and multilateral trade and investment flows.

The reasons are manifold. There is a fundamental mismatch and dissonance between the OIC economies, ranging from the wealthiest nations in terms of GDP per capita to some of the poorest nations on earth, especially in Sub-Saharan Africa and South Asia.

The huge economic disparities between the various segments of OIC cohorts exacerbate a multitude of challenges, of which intra-OIC trade and investment is high on the agenda.

Merchandise trade of LDCs, 2019-2023 Billion USD and % shares

ICIEC serves its mandate by providing risk mitigation and credit enhancement solutions to Member States’ exporters selling to buyers across the world, and to investors from across the world investing in Member States. ICIEC also supports international exporters selling to Member States if the transactions are for capital goods or strategic commodities. In this context, ICIEC’s intervention through the provision of export credit and political risk insurance is more crucial than ever to support Member States in securing strategic commodities and fostering cross-border trade and investments.

Intra-Trade and Intra-Investment Facilitated for OIC Member States During 2019 to 2023 (USD million)

According to the ICIEC 2023 Annual Report, intra-OIC trade increased from USD 4,370 million in 2019 to USD 4,461 million in 2020, reaching USD 5,365 million in 2023. Similarly, intra-OIC investments increased from USD 1,047 million in 2019 to USD 832 million in 2023.

Given that the intra-OIC trade and investment base is very low, the pathway to increased intra-OIC trade and investment flows assumes even greater challenges. The IsDB Group, including ICIEC with its risk mitigation and credit enhancement tools, can only contribute measuredly to boosting OIC trade and investment, as the Group must contend with competing priorities and demands on their finite resources.

Major Member States by Export Business Facilitated in 2023 (USD million)

Major Member States by Import Business Facilitated in 2023 (USD million)

Governments, corporates, banks, and credit insurers can do much more to give intra-OIC trade and investment traction and a boost. They should ensure that their regulations, seamless strategies, and trade and investment incentive packages are in place, going beyond traditional bilateral and multilateral MoUs and cooperation agreements.

OIC Trade Snapshot

The usual caveats are the low sovereign credit rating, poor or nonexistent regulatory frameworks, the lack of facilitating institutions and qualified human capital, a lack of credit insurance market awareness and education, in conjunction with increased geopolitical risks including conflict, climate change, governance issues and natural disasters. The question remains how to mitigate this huge disequilibrium in OIC economies, their natural resource and commodities strengths and weaknesses, and a spate of associated metrics.

ICIEC’s involvement in intra-OIC trade and investment is commendable – facilitating USD51billion in intra-OIC trade and investment since inception. But the latest data for FY2023 shows that there is much room for improvement despite the various barriers to boost such facilitation. Most of the export business facilitated in 2023 came from six countries – Türkiye, UAE, Kazakhstan, Algeria, Saudi Arabia, and Egypt, with Türkiye alone accounting for USD2,083 million.

Intra-OIC trade and investment have the potential to be a gamechanging facilitator to lead the OIC economies into recovery from the impacts of the pandemic era, the subdued global economic recovery, and the vagaries of geopolitical tensions and their impacts on commodities price volatility, sovereign indebtedness, a global cost-of-living crisis and a break on reaching the UN SDG and Paris Net Zero targets – all of which affect developing countries including the IsDB ones disproportionately.

According to the ICIEC 2023 Annual Report, a deeper dive into intra OIC trade dynamics reveals an intriguing paradox. While 2021 marked a zenith for intra-OIC imports at 436.0 billion, a subsequent contraction to 365.4 billion in 2022 raises pertinent questions about the internal trade synergies and potential barriers within the OIC ecosystem. Similarly, the export narrative mirrors this trend, with intra-OIC exports peaking in 2021 but retracting in 2022. The retraction, however, is almost certainly due to the pandemic, the Ukraine conflict supply chain impacts, and the slow global economic recovery.

Outlook and Drivers

WTO Director-General Ngozi Okonjo-Iweala maintains that “we are making progress towards global trade recovery, thanks to resilient supply chains and a solid multilateral trading framework — which are vital for improving livelihoods and welfare. It’s imperative that we mitigate risks like geopolitical strife and trade fragmentation to maintain economic growth and stability.” Already some governments have become more skeptical about the benefits of trade and have taken steps aimed at reshoring production and shifting trade towards friendly nations.

However, her Chief Economist Ralph Ossa warns that “while the trade environment is clearly challenging, we should not paint too dark a picture of international trade. The volume of world merchandise trade was essentially flat throughout 2023, and the 1.2% decline in 2023 is relative to 2022. In fact, it was up 6.3% compared to the pre-pandemic peak in the third quarter of 2019, and up 19.1% compared to 2015. These figures emphasize the resilience of international trade.”

The global trade outlook for 2024 nevertheless remains subject to significant uncertainties. Persistent geopolitical tensions, rising shipping costs, and high levels of debt weighing on economic activity in many countries may still exert negative influences on global trade.

According to UNCTAD’s Global Trade Update in March 2024, some of the most relevant factors influencing global trade in 2024 and beyond include:

• Positive economic growth, but with significant disparities.                               Global forecasts for GDP growth remain at around 3% for 2024, but these still fall below historical averages. Furthermore, substantial disparities persist among countries and regions in terms of their anticipated economic outlook for the upcoming year. Such disparities will influence patterns of trade.

• Strong demand for both container shipping and raw materials.
During the last few months, there has been increasing demand for container shipping, as reflected by the strong increase in the Shanghai Containerized Freight Rate Index and the Baltic Dry Index on the back of a rise in global demand for raw materials.

• Commodity prices volatility. Ongoing geopolitical tensions and regional conflicts could renew volatility in energy and agricultural markets. Additionally, the increasing importance of secure access to critical minerals for the energy transition is expected to affect prices and further contribute to market volatility in these commodities.

• Lengthening of supply chains. Global trade is being influenced by the response of supply chains to shifts in trade policy and geopolitical tensions.

• Increase in subsidies and trade restrictive measures. The prioritization of domestic concerns and the urgency of meeting climate commitments are driving changes in industrial and trade policies. Trade restrictive measures and inward-looking industrial policies are anticipated to negatively impact on the growth of international trade.

• Shipping routes disruptions. Geopolitical tensions are also causing disruptions in shipping routes, particularly those related to the Red Sea and Suez Canal. Moreover, efforts to maintain water levels in reservoirs supplying the Panama Canal are anticipated to continue reducing passages in 2024. These events are driving up shipping costs,
extending voyage durations, and disrupting supply chains.

Standard Chartered signed a Non-Honouring of Sovereign Financial Obligation (NHSFO) agreement with ICIEC to fund a EUR103 million solar electrification project through the installation of 50,000 off-grid solar-powered streetlamps in rural areas across Senegal. Furthermore, Standard Chartered is also cooperating with ICIEC and Agrobank of Uzbekistan to bolster economic development in the central Asian country through Islamic financing products. This is expected to yield EUR150 million in support of SMEs in Uzbekistan. Can you expand on the rationale for this cooperation? How important is ESG, sustainability, energy transition and SME funding in your project pipelines and portfolios?

We have a longstanding relationship of working with ICIEC in transactions which have supported key priority sectors of Member States across Africa. Supporting ESG, sustainability, energy transition and SMEs is a key priority for Standard Chartered. Our rationale for supporting these transactions is our commitment to these markets, the developmental benefits of the transactions and our relationship with both the borrowers and ICIEC.

The Senegal transaction is a highly development project resulting in the electrification of remote villages where it is challenging to achieve electrification via traditional transmission lines. This project will directly facilitate increased economic activity and development in these regions. In addition, the social benefits will include improved quality of life and reduced crime. In relation to Agrobank of Uzbekistan the proceeds will be used for funding SMEs which will also have major development impact through supporting SMEs to expand, increasing employment and economic activity across the country.

We believe ICIEC is an ideal partner for cooperation in these transactions given its commitment to support such sustainable and developmental projects. In addition, ICIEC has a flexible approach and willingness to execute these transactions in a tight timeline. We would like to thank ICIEC for their cooperation which has contributed to the successful financial close of many such projects.

As ICIEC celebrates its 30th anniversary in 2024, its role as the only Shariah-based multilateral export credit and investment insurance provider continues to be crucial given that it has facilitated over USD108 billion in trade and investments, promoting growth, and development in its member states since its inception. The challenge is to upscale ICIEC’s operations and also to enhance the culture of credit and investment insurance in OIC member states. From the vista of a major international bank, with a history of involvement in the Islamic finance industry, how could this be achieved, especially in an era of rising uncertainties and geopolitical challenges?

We believe that there is a lot of opportunity for further collaboration with ICIEC to financing sustainable projects in member states. We see great potential across our footprint markets in Africa, Asia and the Middle East, which includes many ICIEC member states. Whilst most of our recent successes have been in Africa and most recently in Uzbekistan with the MoU signing, we are exploring further opportunities in many of the ICIEC member states including Türkiye, Pakistan, Malaysia, and Indonesia. In addition to supporting member states directly on sovereign financing, ICIEC is supporting on lending transactions to development banks in member states which has benefits beyond these countries.

A Resurgent Türkiye Riding the Crest of an Export Boom Beckoning Innovative Trade Finance and De-risking Solutions

Türkiye is riding the crest of an export boom. It’s just over 40 years since then Turkish Undersecretary of Treasury Turgut Ozal, who went on to become Prime Minister and then President of the Republic, urged Turkish business to “Export or Die.” The rationale was to emphasise the importance of trade and manufacturing to an economy. With greater exports comes greater demand for export finance, credit insurance and guarantees. According to official Turkish trade data released in January 2024, the country’s exports increased for a third consecutive year reaching USD255.8 billion in 2023, up by 0.6% year-on-year from the USD254 billion in 2022. Türkiye exported to an impressive 70 countries in the year. ICIEC and the IsDB Group has enjoyed very close relations with Türkiye and its various agencies especially Turk EXIM, the state ECA, corporates and banks. The IsDB Group has an important regional hub in Istanbul, where ICIEC also has a dedicated regional office. Last year for instance the Hub hosted a ground-breaking three-day immersive Workshop to explore the pivotal role of information sharing and business intelligence in supporting trade and investment decisions in the member states of the Organization of Islamic Cooperation (OIC). Fatma Gamze Sarioglu, Senior Country Manager for Türkiye at ICIEC, delves into the foundational policies and contemporary dynamics shaping Türkiye’s trade and economic landscape and examines the historical context of modern trade initiatives, the current export landscape, strategic international collaborations, the impact of digital transformation on the trade sector, and the potential for ICIEC’s Sukuk Insurance Policy in upscaling issuances.

Given that Baku is the host city for COP29 at the end of 2024, the focus for the third consecutive Conference of the Parties (COP) under the aegis of The UN Framework Convention on Climate Change (UNFCCC) converges on Azerbaijan, the newest ICIEC accession Member Country, following in the footsteps of Sharm El Sheikh for COP27 and Dubai for COP28. In the UAE, ICIEC also launched its much-anticipated Climate Change Policy and ESG Framework. Salih Suwarelzahab, Senior Legal Counsel and Climate Action Team Lead at ICIEC, looks ahead to a post-COP28 Climate Action, Finance and Risk Management Pathway underpinned by the Corporation’s transformative results-oriented Climate Change Policy and ESG Framework, the IsDB Group synergies, the role and importance of partnerships with global best practice institutions and the private sector, and the promise and opportunities of Azerbaijan’s brave new Green Energy and Decarbonisation Strategy.

COP28 in the United Arab Emirates (UAE) represents a watershed moment in ICIEC’s history with the launch of ICIEC’s Climate Change Policy and ESG Framework. The publishing of the two key documents reflects an ongoing commitment towards mainstreaming Climate Action that began in 2021 at COP26 in Glasgow, in which Mr. Oussama Kaissi, CEO of ICIEC, participated.

Through a stepwise approach ICIEC setup a Taskforce dedicated to Climate Action and implemented the screening of Political Risk Insurance projects for Climate Risks. ICIEC staff were trained in Climate Change Fundamentals, whilst existing partnerships were steered towards addressing common objectives around sustainability and climate change, and new partnerships were forged, such as ICIEC’s membership of the InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions in 2022.

In 2023 a total business insured target of 10% was dedicated to Climate Action and this target was reached and surpassed. In 2024 the target for total business insured for Climate Change projects and transactions was increased to 13%.

Climate Change Policy

ICIEC Climate Change Policy serves as a testament to our dedication to addressing climate change head-on. It is our blueprint for a greener, cleaner, and more sustainable world. Through this policy, we outline our commitment to reducing carbon emissions, protecting our planet’s invaluable natural resources, and promoting sustainable economic growth.

The ICIEC Climate Change Policy establishes to:

• Support Member States to meet their commitments under the Paris Agreement, particularly their Nationally Determined Contributions (NDCs).
• Promote investment and trade opportunities that support resilience, playing a pivotal role in reducing greenhouse gas emissions and enhancing adaptability to climate change.
• Be aligned with The Islamic Development Bank Group by guaranteeing projects and investments that are in line with the Group’s climate action objectives.
• Engage with Financial Institutions to promote business models and investments that are focused on renewable, energy-efficient, natural capital, among other environmental themes, aligning with the broader transition towards the low-carbon economy.

ICIEC’s Climate Change Policy and ESG Framework mark the commencement of a transformative results-oriented process where ICIEC’s operations, insurance, de-risking, physical assets and human capital and focus are addressing the Climate Crisis at their core, based on the needs of ICIEC’s member countries, IsDB Group synergies, the role of the private sector in climate finance and industry best practice. 2024 sees the second phase of the Climate Change project which is dedicated to screening, monitoring and evaluation based on practical, achievable and industry benchmarked parameters that take all ICIEC’s business lines into account.

At the institutional level, the year 2024 will witness the responsibility for Climate Change and ESG being housed in a dedicated Function whilst capacity building continues to be offered to all operations staff who will have specific climate change specific KPI’s. Staff who are trained in climate change are naturally better equipped to proactively seek out transactions and projects that contribute towards climate change mitigation, adaptation and/or resilience. A stock take of ecological consumption versus potential savings will take place on ICIEC’s physical premises with clear environmentally friendly recommendations made and implemented, and travel mission carbon footprints will be mitigated through investment in certifiable carbon sink schemes in ICIEC member countries.

Collaboration & Smart Partnerships the Key
Collaboration and smart partnerships remain at the heart of ICIEC’s Climate Action strategy as the global climate funding gap continues to grow whilst climate disasters proliferate. Through smart partnerships, ICIEC has signed a number of MoUs with technology and industry leaders such as GE Vernova, multilateral institutions focused on designing climate-based solutions such as the Global Green Growth Institute and export credit agencies (ECA’s) whose portfolio of transactions and supported companies are predominantly renewable energy based, such as EKF of Denmark.

Closer to ICIEC Headquarters, outreach is underway with the Saudi and Middle East Green Initiatives in order to tap into the value chains of carbon sequestration and the circular economy. A methodological approach to partnerships has ICIEC member states’ National Determined Contributions and National Adaptation Plans at its core.

Due to its proximity to its member countries, ICIEC, through the Member Country Partnership Strategy of the IsDB Group, remains cognizant of the priority areas of respective member countries for climate action. This know-how is invaluable to financial institutions that have financing targets and that need ICIEC’s de-risking and insurance support to access new markets and to expand their footprint in existing ones. Furthermore, specialized companies in member countries that produce goods or services that contribute towards climate action are continuously identified with a view to assisting their activities in other ICIEC member states and beyond.

ICIEC joined ETAF, the Energy Transitional Accelerator Financing Platform, managed by IRENA, at COP28 in Dubai in recognition of the need to bring diverse, effective partners (including the private sector, multilateral lenders and renewable energy industry leaders) around the same table in order to support the rollout of renewable energy projects to the amount of US$4 billion by 2025. ICIEC, as a member of the International Union of Credit and Investment Insurers (the Berne Union), which celebrates its 90^th anniversary this year, has been invited to join the Berne Union Climate Working Group and shall bring the perspective of the Economic South and 49 member countries in the search for export credit and insurance-based contributions and solutions to the climate crisis.

As a founding member of the AMAN Union of Commercial and Non-commercial Risk Insurers and Reinsurers in member countries of the Organisation of Islamic Cooperation (OIC) and the Arab League, ICIEC strives to provide climate leadership and assistance to sister ECA’s in member countries as the common challenges posed by the climate crisis invariably provide opportunities for growth in new economic sectors.

Azerbaijan’s Competitive Green Advantages

Since COP26, two COPs have fortuitously been hosted by ICIEC member countries, COP27 in Sharm El Sheikh, Egypt, whose focus was on adaptation, and COP28 in Dubai, in the UAE with COP29 being hosted by ICIEC’s newest member country Azerbaijan. Azerbaijan is one of the oldest and most pioneering oil producing countries in the world, with drilling and extraction activities dating back to at least the 1800’s.

Few countries reflect energy transition in a similar manner to Azerbaijan with a commitment to produce 30% of energy from renewables by 2030 and with the potential to be a green hydrogen hub and key supplier to the European Union, capitalizing on 23,000 MW of solar power potential, 800 MW of wind energy power, 520 MW of hydropower energy and 800 MW of geothermal energy. In a geopolitical energy ecosystem rife with uncertainty and volatility due to the conflict in Ukraine, if implemented correctly, Azerbaijan’s hydrogen potential is capable of providing the ultimate win-win scenario and playbook, clean fuel for the European Union (EU) market in line with EU pledges, legislation and taxonomies, and a new and profitable global export for Azerbaijan.

One of Azerbaijan’s competitive advantages for green hydrogen export is the existing pipeline infrastructure that was designed and built to export hydrocarbons. Across ICIEC’s 49 member countries whilst the severity of the climate crisis continues to become more manifest, innumerable opportunities for green growth emerge that are spurred on by innovation, technology and enterprise.

ESG Framework

The ICIEC ESG framework is a comprehensive strategy that reflects the organization’s strong commitment to environmental, Social, and Governance (ESG) principles. It is designed to integrate ESG values into every aspect of ICIEC’s operations and decision-making. Key elements of the ICIEC ESG framework include:

•  The framework underscores the importance of embedding ESG principles at the core of ICIEC’s operations.
• ICIEC’s governance structure ensures oversight of ESG initiatives and their integration into the overall business strategy.
• ICIEC focuses on developing ESG-centric products and services while incorporating ESG criteria into risk assessment and underwriting.
• ICIEC implements various measures to promote sustainability throughout its internal processes, from HR to supply chain management and policies.
•  ICIEC actively aligns with global sustainability objectives and collaborates on initiatives that contribute to these goals.
• ICIEC’s framework includes a robust ESG reporting mechanism that promotes transparency and accountability, ensuring stakeholders are informed about ICIEC’s ESG performance

Collaboration & Smart Partnerships the Key                                                              

Collaboration and smart partnerships remain at the heart of ICIEC’s Climate Action strategy as the global climate funding gap continues to grow whilst climate disasters proliferate. Through smart partnerships, ICIEC has signed a number of MoUs with technology and industry leaders such as GE Vernova, multilateral institutions focused on designing climate-based solutions such as the Global Green Growth Institute and export credit agencies (ECA’s) whose portfolio of transactions and supported companies are predominantly renewable energy based, such as EKF of Denmark.

Closer to ICIEC Headquarters, outreach is underway with the Saudi and Middle East Green Initiatives in order to tap into the value chains of carbon sequestration and the circular economy. A methodological approach to partnerships has ICIEC member states’ National Determined Contributions and National Adaptation Plans at its core.

Due to its proximity to its member countries, ICIEC, through the Member Country Partnership Strategy of the IsDB Group, remains cognizant of the priority areas of respective member countries for climate action. This know-how is invaluable to financial institutions that have financing targets and that need ICIEC’s de-risking and insurance support to access new markets and to expand their footprint in existing ones. Furthermore, specialized companies in member countries that produce goods or services that contribute towards climate action are continuously identified with a view to assisting their activities in other ICIEC member states and beyond.

ICIEC joined ETAF, the Energy Transitional Accelerator Financing Platform, managed by IRENA, at COP28 in Dubai in recognition of the need to bring diverse, effective partners (including the private sector, multilateral lenders and renewable energy industry leaders) around the same table in order to support the rollout of renewable energy projects to the amount

of US$4 billion by 2025. ICIEC, as a member of the International Union of Credit and Investment Insurers (the Berne Union), which celebrates its 90^th anniversary this year, has been invited to join the Berne Union Climate Working Group and shall bring the perspective of the Economic South and 49 member countries in the search for export credit and insurance-based contributions and solutions to the climate crisis.

As a founding member of the AMAN Union of Commercial and Non-commercial Risk Insurers and Reinsurers in member countries of the Organisation of Islamic Cooperation (OIC) and the Arab League, ICIEC strives to provide climate leadership and assistance to sister ECA’s in member countries as the common challenges posed by the climate crisis invariably provide opportunities for growth in new economic sectors.

ICIEC and Climate Action
Partnership: ICIEC is proud to announce the signing of several key partnerships to provide a framework for joint action in promoting climate action, green projects, extending training and capacity-building opportunities, and organizing joint seminars and workshops. These collaborations will enable us to better understand our shared challenges related to climate change mitigation efforts as well as help create a more sustainable future for all. We are confident that these initiatives will bring positive changes both locally and globally by providing access to resources that can help reduce emissions while also creating jobs through green investments.

• ICIEC has been proactively aiding the OIC member states in reaching their climate objectives. An innovative step by ICIEC in this direction is the Green Sukuk Insurance Policy, facilitating Sukuk issuers to secure capital for viable green initiatives. Furthermore, ICIEC is providing de-risking solutions for regional funds in Africa, focusing on mitigation and adaptation measures.
• Towards a sustainable financial horizon, ICIEC has put forth the idea of a climate-centric fund in collaboration with institutional partners. This proposed fund is poised to offer discounted insurance premiums for financing Climate Action initiatives, especially in the Least Developed Member States. Additionally, ICIEC is committed to capacity building, leading to the provision of climate change training for its employees.
• To underscore its commitment to the Climate Action cause, ICIEC has become a part of the InsuResilience Global Partnership, aiming for climate disaster risk finance and solutions. This move solidifies ICIEC’s position as a pioneer among its industry contemporaries. Presently, ICIEC signed a Collaborative Partnership Agreement with The International Renewable Energy Agency (IRENA), through the Energy Transition Accelerator Financing Platform (ETAF), a multi-stakeholder climate finance solution.
•  ICIEC has signed an agreement with ”Aware for Projects”, a landmark online climate risk screening software solution. This new tool will help the Corporation identify potential climate change risks and develop a consistent approach to assessing them.
• ICIEC developed a Climate Change Policy and ESG Guidelines to institutionalize its Climate Action and Green Finance commitments.

Azerbaijan’s Competitive Green Advantages

Since COP26, two COPs have fortuitously been hosted by ICIEC member countries, COP27 in Sharm El Sheikh, Egypt, whose focus was on adaptation, and COP28 in Dubai, in the UAE with COP29 being hosted by ICIEC’s newest member country Azerbaijan. Azerbaijan is one of the oldest and most pioneering oil producing countries in the world, with drilling and extraction activities dating back to at least the 1800’s.

Few countries reflect energy transition in a similar manner to Azerbaijan with a commitment to produce 30% of energy from renewables by 2030 and with the potential to be a green hydrogen hub and key supplier to the European Union, capitalizing on 23,000 MW of solar power potential, 800 MW of wind energy power, 520 MW of hydropower energy and 800 MW of geothermal energy. In a geopolitical energy ecosystem rife with uncertainty and volatility due to the conflict in Ukraine, if implemented correctly, Azerbaijan’s hydrogen potential is capable of providing the ultimate win-win scenario and playbook, clean fuel for the European Union (EU) market in line with EU pledges, legislation and taxonomies, and a new and profitable global export for Azerbaijan.

One of Azerbaijan’s competitive advantages for green hydrogen export is the existing pipeline infrastructure that was designed and built to export hydrocarbons. Across ICIEC’s 49 member countries whilst the severity of the climate crisis continues to become more manifest, innumerable opportunities for green growth emerge that are spurred on by innovation, technology and enterprise.

Azerbaijan’s Brave New Green Energy Strategy with a Stated Role for Islamic Finance, Investment and De-risking Solutions

Given that Baku is the host city for COP29 at the end of 2024 and Azerbaijan is a recent ICIEC accession member state, it is no surprise that the Government of President Ilham Aliyev is prioritising key economic development areas such as the promotion of regional connectivity (rail, gas pipelines, and electricity transmission), decarbonization especially through solar and wind renewable energy, the ‘Middle Corridor’ project which is aimed at supporting SMEs through collaboration with local domestic banks, and the promotion of Islamic finance and ICIEC’s credit and investment de-risking insurance. Oguz Aktuna, Acting Manager, Asia Region Division, Business Development Department at ICIEC, profiles Azerbaijan’s clean energy transition status and its Net Zero pathway, and ICIEC’s recent and future involvement in the country’s SDG and decarbonisation journey.

Azerbaijan joined membership of ICIEC in January 2023. Azerbaijan will host the COP29 Climate Summit in Baku in 2024. This signifies a crucial global event, with the country hosting the climate conference for the first time in the Central Asian region.  ICIEC on the other hand, with its experience in renewable projects will support Azerbaijan’s clean energy transition and its Net Zero pathway.

Azerbaijan plays a crucial role as an energy hub and as a transportation corridor in the region by connecting the CIS (Commonwealth of Independent Central Asian States) to Europe. In 2023, ICIEC, together with the Government of Azerbaijan, outlined key priorities to participate in projects for the economic development of the country, such as the promotion of regional connectivity (rail, gas pipelines, and electricity transmission), decarbonization (renewable energy – Solar, Wind), the “Middle Corridor” project, supporting SMEs through collaboration with local domestic banks, promotion of Islamic finance and Islamic insurance and supporting the reconstruction of the Karabakh enclave.

Azerbaijan’s economic progress has historically relied on oil and gas exploration, constituting 95% of its export revenue. Despite this, the country has embraced global efforts to combat climate change, ratifying the Paris Climate Agreement in 2017. Azerbaijan announced a goal of reducing greenhouse gas emissions by up to 35% by 2030 and 40% by 2050 compared to 1990 levels.

The International Energy Agency (IEA) predicts a 25-year lifespan for Azerbaijan’s oil reserves, emphasizing the need for alternative energy sources. It should be mentioned that the climatic conditions in Azerbaijan present significant opportunities for generating electricity through solar and wind resources. Key renewable energy sources include onshore and offshore wind farms/clusters, solar power, and hydroelectricity. The potential for solar and wind power generation is particularly noteworthy.

Azerbaijan is currently entering a strategic development phase. The focus is on creating economic opportunities in newly liberated territories (Karabakh, Eastern Zangazur and Nakhchivan), emphasizing a modern construction model and a “Green Energy Zone” with stated net-zero emissions. The government has undertaken extensive infrastructure development, including power transmission lines, substations, and hydroelectric projects. The Central Bank of Azerbaijan is developing a strategy to incorporate sustainable finance principles into the financial sector, including banking, insurance, and capital markets. Commitment to clean technologies, the use of clean energy, recycling, and environmental remediation is a key aspect of Azerbaijan’s policy.

Azerbaijan’s Green Energy Focus

To adhere to the targets Azerbaijan has initiated partnerships in “green energy” projects involving key players such as Masdar (Abu Dhabi Future Energy Company), ACWA Power, BP, and others. Such plans include the construction of the solar and wind energy projects with Masdar, for a total capacity of up to 1.0 GW onshore and offshore. ACWA Power has entered into implementation agreements with the Azerbaijani Ministry of Energy for the development of a 1.0 GW onshore wind farm and a 1.5 GW offshore wind farm featuring energy storage. In October 2023, the Garadagh Solar Power Plant (230 MW) constructed in cooperation with Masdar, came on stream.

The country aims to strengthen its electricity network to integrate 1,862 MW of “green power” by 2027. Efforts are underway to establish the “Caspian-EU Green Energy Corridor” and the “Azerbaijan-Turkey-Europe Corridor”, with plans to export approximately 5 GW of green electricity through various routes by 2030. To achieve this objective, leaders of the governments of Azerbaijan, Georgia, Hungary, and Romania have collectively signed a Memorandum of Understanding (MoU) for the construction of the Black Sea Energy Subsea Cable. Furthermore, Azerbaijan expresses a keen interest in involving other Caspian littoral countries, such as Kazakhstan and Turkmenistan, in this project.

In 2019, the IsDB’s Board of Executive Directors (BED) approved the IsDB Climate Change Policy. During COP28, ICIEC announced the launch of its groundbreaking Climate Change Policy and ESG Framework and an agreement to join the Energy Transition Accelerator Financing (ETAF) Platform, managed by the International Renewable Energy Agency (IRENA). ICIEC recognizes that export credit insurance and political risk insurance are essential tools to bridge the Climate Action finance gap by de-risking investments and access to capital goods and green technology, thus making them more attractive and bankable to private sector participation.

Spanning the Water-Energy-Food Value Chain

Climate Action encompasses the range of vital value chains that span the Water- Energy-Food as relates to climate change resilience, mitigation and adaptation, which is reflected in the range of projects and interventions that ICIEC continues to support in its Member States. ICIEC’s innovative solutions provide protection against nonpayment risks associated with international trade transactions, while also providing support for green investments in renewable energy projects, low-carbon transport systems, clean technology transfers and other sustainable initiatives.

ICIEC is committed to helping our 49 Member States achieve their development goals, including resilience, mitigation and adaptation to the threats posed by climate change. ICIEC cover has been directed towards various sectors over the years, with US$2.35 billion going specifically into clean energy initiatives such as solar energy systems and wind farms – assisting with their importation and use in national infrastructure projects. With this commitment to ICIEC Member States’ development goals, we strive to help mitigate threats from climate change so that all stakeholders may benefit from a better future together.

Historically, ICIEC, as a multilateral credit and political risk insurer, has been playing an important role in facilitating renewable energy projects in its Member Countries. For example, in 2016, ICIEC supported 316 MW Wind Farm Projects in Turkey and provided a US$80 million reinsurance cover to Eksport Kredit Fonden (EKF), – the Danish ECA, now rebranded as EIFO. In 2018, ICIEC provided US$68 million in political risk cover to support Alcazar Energy’s (UAE) investment in four 50MW solar plants. The project is part of Egypt’s Nubian Suns Renewable Energy Feed-in Tariff (FiT) programme announced in September 2014, which is in line with the Egyptian government’s Sustainable Energy Strategy 2035.

In Sharjah, UAE, ICIEC supported the waste-to-energy (WtE) project, led by Masdar, and Bee’ah (Sharjah Environment Company). ICIEC provided insurance cover for the project’s construction financing, working in partnership with SMBC, the leading Japanese bank. During COP 28 ICIEC and Standard Chartered Bank signed a Non-Honoring of Sovereign Financial Obligation (NHSFO) policy for supporting the project of procuring and installing 50,000 off-grid solar-powered streetlamps across Senegal’s rural areas.

We will continue our support for clean energy projects in our Member Countries. In 2023, ICIEC and Masdar signed an MoU to promote renewable energy projects in Member Countries using ICIEC’s credit enhancement and risk mitigation solutions. During COP 28, ICIEC and GE Energy Financial Services, Inc. (GE Vernova) inked an MoU aimed at bolstering sustainable development and climate action across ICIEC’s 49 Member Countries.

Transforming the Progress of the ‘UAE Consensus’ at COP28 on Tripling Renewables through Greater Alignment of NDCs with National Energy Plans

One of the positive outcomes of COP28 in Dubai was the setting of a global target to triple renewable energy capacity by 2030. The so-called ‘UAE Consensus’ seems to have cemented the role of renewables as one of the most effective ways to address climate change and transition to a just and clean energy dispensation. As the ‘Custodian’ of the global renewable energy pledge, the International Renewable Energy Agency (IRENA) is committed to monitoring the progress towards achieving the targets on an annual basis and track COP28 commitments to maintain momentum to 2030. Francesco La Camera, Director-General of IRENA, here discusses the challenges and opportunities for renewables at a time when current global and national commitments fall short of the necessary levels required by between 30-50% by modernising existing physical infrastructure to support and accelerate the renewables grid system and regulatory architecture to facilitate investments and improve socio-economic and environmental outcomes, the urgent need to develop a ‘fit-for-purpose’ workforce, and the role of Islamic finance options especially innovative de-risking and credit enhancement involving also private capital in enhancing IRENA’s Energy Transition Accelerator Financing (ETAF) Platform and toolkit, to which the IsDB and ICIEC signed up to in Dubai.

ICIEC Quarterly Newsletter: Now that the fog of COP28 Dubai has settled, can you share your assessment of COP28 per se, and those relating in particular to achieving the Paris Net Zero targets by 2050, the holy grail of restricting global warming to 1.5ºC and the state of renewable energy in the global energy mix? What are the investment needs according to IRENA? How do they compare to where we are now?

By setting a global target to triple renewable energy capacity by 2030 to more than 11 TW, the UAE Consensus at COP28 in Dubai has successfully cemented the role of renewables as one of the most effective energy solutions to address climate change, creating unprecedented momentum and crystal-clear direction for the energy transition.

We are proud that IRENA’s World Energy Transitions Outlook served as the foundation for this target. The chance to achieve the goals of the Paris Agreement is slipping away, we cannot afford to miss the closing window of opportunity. Now it is on governments to match this increased ambition with concrete plan and action.

IRENA’s World Energy Transitions Outlook 2023 makes sober reading but also highlights the huge benefits a just energy transition could bring in terms of GDP growth, jobs, poverty alleviation, and remedies from the devastating impacts of climate change. Do you think the pledge made by Heads of State at COP28 to triple global renewable energy capacity by 2030 is achievable when funding commitments made on climate action at previous COPs were not met? Do you agree that accelerating transition progress worldwide requires a shift away from mindset and structures built for the fossil fuel era? In this respect what is your view on the UAE COP28 Presidency’s call for a Global Renewable Energy Target to complement that of the Paris one? Fossil fuel producers argue for an orderly transition period given the role they have in forex earnings, revenues, job creation, financing budgets and development agendas. Do you agree?

Doubling down on the energy transition should not be viewed as a cost, rather as an investment opportunity. Our analysis clearly shows that a renewables-based energy transition will help create jobs, grow the global economy, improve energy access and enhance energy security.

In fact, IRENA’s World Energy Transitions Outlook finds that the substantial job losses in conventional energy jobs would be more than offset by 2030 through gains in renewable energy and other energy-transition-related jobs. It is already concretely established that renewables are the most effective climate action tool available. The next frontier is to eliminate any lingering doubt about its business case and viability for economic growth and prosperity.

The Islamic Development Bank (IsDB) and its multilateral insurer, ICIEC signed Partners Agreements on accession to IRENA’s Energy Transition Accelerator Financing (ETAF) Platform in Dubai, focused on advancing just, affordable and clean energy transition in low-and-medium-income countries (LMICs). How will the ETAF Platform facilitate the financing of renewable energy projects in IsDB member states and how can we upscale the involvement of Islamic finance in climate action, mitigation, adaptation and finance, especially through a smart partnership between IRENA and ICIEC, specifically to boost the role of credit and investment insurers such as ICIEC in making renewable energy projects bankable to donors, institutional and private investors?

Last year was record-breaking in terms of renewable energy installations and investments. However, it is important to recognise that progress is not advancing equally across the world. In fact, over the past six years, the gap in renewable energy investment between developed and developing countries has widened considerably.

For example, in 2015, the per capita investment in renewable energy in Europe and North America (excluding Mexico) was nearly 23 times greater than in Sub-Saharan Africa. By 2021, this disparity grew further, with per capita investment in Europe outpacing that in Sub-Saharan Africa by 41 times, and in North America, the difference escalating to 57 times.

This is why IRENA is expanding its project and investment facilitation efforts to help narrow this gap and make affordable financing more accessible to developing countries. Through its Energy Transition Accelerator Financing Platform (ETAF), IRENA is creating a pipeline of energy transition projects and pairing them with investors to accelerate renewable energy deployment.

The platform, established in 2021 with support from the United Arab Emirates, aims to scale up renewable energy projects that contribute to Nationally Determined Contributions (NDCs) in developing countries, while also bringing benefits to communities through enhanced energy access and security, and promoting economic growth and diversification.

Today, the ETAF family is 13 partners strong, with collective pledges surpassing US$4 billion at COP28. The ETAF Platform also stands out for its inclusivity, offering a broad range of financial solutions and risk mitigation products. As members of ETAF, the Islamic Development Bank (IsDB) and the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) have broadened the platform’s toolkit further with Islamic finance options, enhancing ETAF’s capacity to tailor its support to the unique requirements of numerous developing countries in the Islamic world.

There is a clear global target to triple renewable energy, but how do we ensure that the transition accelerates to that level? What are the main challenges, bottlenecks and impediments in advancing just energy transition through renewable energy?

To ensure that the growth in renewables reaches the necessary levels by 2030, IRENA’s World Energy Transitions Outlook identifies three priority actions for the coming years to urgently overcome existing systemic barriers from the fossil fuel era.

First, we must modernise and expand existing physical infrastructure to support and accelerate the development of a renewables-based energy system. According to IRENA analysis, approximately one third of the total power sector investment to 2030 must go into power grids and flexibility.

Secondly, we need to establish a new policy and regulatory architecture to facilitate investments and improve socio-economic and environmental outcomes. The energy transition is a system-wide effort, extending beyond just adding power, with new rules and regulations needing to be cross-cutting to encompass end-use sectors like industry, buildings, and transport.

Lastly, there is an urgent need to develop a workforce that is well-equipped to build and maintain a renewables-based energy system. This includes retraining and recertifying fossil fuel industry workers for careers in renewable energy.

Without addressing these three key areas, the world will not be able to triple renewables and accelerate the transition to the necessary speed and scale to limit rising temperatures to 1.5 °C.

As the “custodian” of the COP28 renewable energy pledge, where do you see the progress of the industry in 2030. Short of a doomsday scenario of climate apocalypse due to the failure of humanity meeting the cornucopia of targets, how optimistic are you that given the drive, determination and diligence of organisations such as IRENA, we can mitigate some of the worst effects of climate change through credible, just and affordable energy transitions?

There is undeniable progress being made, which will inevitably grow due to the momentum established by the ‘UAE Consensus’ at COP28. As the custodian of the global pledge, IRENA will track progress towards the global energy targets on an annual basis and track COP28 commitments to maintain momentum to 2030.

Our analysis indicates that current commitments fall short of the necessary levels by less than half to meet the tripling renewables pledge. Similarly, targets set in national energy plans and policies fall short by 30%.

The forthcoming round of NDCs in 2025 must bring a transformative leap forward. Renewable energy targets in NDCs must also be aligned with national energy plans to enhance the effectiveness and credibility of these commitments. It also sends a clear message to investors throughout the supply chain, promoting further growth in the renewable energy sector.