Innovation and the ECAs – reflections from BU Spring Meeting 2024
Key insights on ECAs' innovations, evolving mandate in navigating geopolitical uncertainty, supporting the green transition and domestic economies, promoting impactful and sustainable development, and leveraging new technologies to create tailored customer solutions.
In April 2024, the Berne Union's Spring Meeting centred on the theme of “Innovation.” At its core, innovation involves introducing novel approaches to enhance processes and outcomes. Whilst ECAs, being government-backed institutions, might not be viewed traditionally as centres of innovation, the post-COVID-19 era has brought about significant changes in their perceived role within domestic economies and in global trade and development.
Key trends such as geopolitical tensions, economic power shifts, technological advancements, the green transition, the renewed demand for resources, and industrial policy have driven ECAs to evolve. ECAs are now transforming their products, strategies, and even mandates to provide immediate and effective solutions for their domestic economies, helping them better navigate the global changes.
Accordingly, a recent survey by the BU ECA Committee found that innovation is a key tool for enhancing competitiveness, efficiency, and adaptability in the strategic plans of most ECAs (28 out of 32) over the past three years. The primary focus areas include IT Innovation and Product Innovation, followed by Process and Working Environment Innovation [see Figure 1].
The "Others" category includes responses such as adapting to regulatory frameworks, exploring Generative AI[1], implementing robotic process automation, and shifting towards predominantly paperless work environments.
Figure 1: The focus areas of innovation for ECAs
Examining the sources of innovation within ECAs
The survey revealed that, unsurprisingly, the key driver is management decision-making, [see Figure 2] followed by client demand and government policy. Insights from a Slido poll during the “Evolution of the ECAs: Focus on Strategy and Mandate” panel discussion at the Spring Meeting 2024 further highlighted that “new government policy requirements” significantly influence ECAs. These requirements have transformed some ECAs from being mere insurers or lenders of last resort into proactive trade facilitators or enablers.
Figure 2: Sources of innovation
What drives innovation?
Adapting to geopolitical dynamics
During the panel discussion, it became evident that adapting to changing geopolitical dynamics is the most significant driver behind ECAs altering their strategies and expanding their mandates. A Slido poll revealed that participants found this adaptation to be the most impactful aspect of ECAs' strategic initiatives, followed closely by a focus on environmental sustainability.
Securing national interests
This emphasis on geopolitical factors explains why securing "national interest" or "national security" is increasingly at the forefront of ECA strategies. With a secure supply of critical minerals becoming a top priority due to their importance for the green transition, the development of new technologies, energy security, and clean energy advancements, ECAs are innovating to strengthen supply chains and strategic sectors. To safeguard these "national interests", they are adopting new approaches, such as loosening or removing national content requirements and, in some cases, not subjecting transactions to the OECD Arrangement to allow more flexibility in structuring deals.
Indeed, the evolving geopolitical landscape is pushing ECAs to become more adaptive and proactive. By innovating their strategies and mandates, ECAs are ensuring they remain vital players in supporting their domestic economies while addressing global challenges.
ECAs and the green transition
On the climate front, ECAs are increasingly introducing green products and incentives, supporting various international initiatives and agreements, and establishing alliances such as NZECA[2], to position their exporters and suppliers as key contributors to the global low-carbon transition. Consequently, ECAs are becoming integral to the climate goals of their respective governments.
These climate-related objectives are driving significant changes in ECA strategies, mandates, and portfolios. This shift includes moving away from fossil fuels and increasing support for renewable energy projects, especially with the OECD Arrangement’s longer tenors for this sector. For example, some ECAs are prioritising offshore wind, green industry, and green maritime sectors, reflecting their commitment to fostering a sustainable, low-carbon future.
Focusing on development and impact
ECAs’ evolving roles increasingly include a focus on the "development" and "impact" aspects of trade as direct tools of their governments. The concept of "impact" has gained prominence recently, especially as ECAs strive to understand the effects of their projects. This shift is generally influenced by the rise of ESG (Environmental, Social, and Governance) principles and sustainable investment initiatives, such as the United Nations Principles for Responsible Investment (PRI) – not only for ECAs but also in the financial sector. These frameworks have prompted a fundamental change in financial service practices, encouraging decision-makers to incorporate ESG factor analysis to enhance returns and better manage risks. Moreover, ECAs are contributing to broad prosperity and earning capacity in other countries, underscoring their commitment to impactful and sustainable development.
Becoming more customer-centric
Additionally, ECAs have become more customer-centric, aiming to be more flexible in meeting customer needs. SMEs in particular have received significant attention in ECAs strategic innovation. Technological advancements, such as AI, have enabled ECAs to introduce flexible digital solutions tailored to SMEs. Some ECAs are also expanding their mandates to support their domestic economies. During the panel discussion, it was emphasised that even when supporting domestic transactions, ECAs still consider potential future exports.
Embracing technological innovation
The survey results show that 28 out of 32 ECAs have invested significantly in technological innovation. ECAs are eager to use advanced risk analysis tools, such as AI, to efficiently anticipate and mitigate risks, including credit and climate risks. Moreover, the success of innovation and change within ECAs relies on their people becoming more adaptive and innovative. To facilitate this, some ECAs are prioritising changes in workplace culture to ensure their strategies are effectively implemented by their employees. The survey results indicated that "working environment innovation" was among the top three innovations introduced by ECAs. To further support this, the BU ECA Committee is conducting its first webinar related to human resources practices of ECAs in September 2024.
The future of ECAs and their expanding strategic roles
A final Slido poll asked participants which aspects of ECAs' strategic evolution they found most promising for future economic development. The options included enhanced support for renewable energy projects, increasing focus on promoting international trade, embracing innovative financing mechanisms, strengthening collaboration with governmental initiatives, and expanding ECAs’ mandates to encompass a broader definition of national interest, domestic support, and untied support. The majority of the 32 participants favoured the expansion of ECAs’ mandates, indicating a strong belief in the importance of broader strategic roles. Innovative financing mechanisms came in second, with nine votes, while strengthening collaboration with governmental initiatives received only one vote.
This clear preference underscores the growing expectation for ECAs to broaden their roles and embrace innovative strategies. By doing so, ECAs will not only adapt to the shifting geopolitical and economic landscapes but also remain pivotal in driving sustainable and inclusive growth in a rapidly evolving global economy. The transformation of ECAs into more dynamic, proactive entities reflects a forward-thinking approach that is essential for navigating the complexities of the modern world. With volatility and uncertainty becoming increasingly inescapable realities in global trade, it is essential for ECAs to evolve in order to remain vital players, stepping up and expanding their role in fostering economic resilience and development worldwide.
- Generative artificial intelligence (AI) describes algorithms (such as ChatGPT) that can be used to create new content, including audio, code, images, text, simulations, and videos. Recent breakthroughs in the field have the potential to drastically change the way we approach content creation. (https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-generative-ai ) ↑
- https://www.unepfi.org/climate-change/net-zero-export-credit-agencies/ ↑
