"Finance is an essential great enabler of climate action." That’s what Simon Stiell, United Nations (UN) Climate Change Executive Secretary, said at the last UN Climate Change Conference, COP28. From funding new tech and mitigating risk to scaling sustainable initiatives, finance can be a powerful catalyst for transforming ideas into action.
How does specialty credit fit into the picture? Here, Allianz Trade’s Sustainability Expert, Julia Elena Taubenberger, and Deputy Global Head of Specialty Credit, Pierre Lamourelle, discuss the role of our Specialty Credit for Low Carbon in contributing towards a net-zero economy.
How did Specialty Credit for Low Carbon come about, and what is its significance?
Pierre Lamourelle: At Allianz Trade, there’s been a long-term commitment to, and enthusiasm for, supporting players who are having a positive social and environmental impact. Given our client portfolio and leading position in the industry, we knew we had a great opportunity to drive long-term impact in this area.
It’s important to understand that, in the Specialty Credit unit, we address non-standard trade credit insurance needs for clients. We handle cases that don’t fit traditional trade credit insurance, with 60-70% of our portfolio focused on financing projects for commercial banks and multinational corporations, particularly infrastructure projects. Our expertise spans from short-term trade finance to long-term projects, such as offshore wind farms.
To support sustainable growth, we developed the Allianz Trade Specialty Credit for Low Carbon, combining sound underwriting with support for low-carbon technology projects.
How has this product evolved recently?
Julia Elena Taubenberger: Allianz Trade launched Specialty Credit for Low Carbon Solutions in 2020, and we recently assessed whether this could be a qualifying insurance product or service that contributes to one or more environmental, social or governance objectives, without doing significant harm to any of the other objectives.
Allianz Trade’s Specialty Credit for Low Carbon focuses on projects in low-carbon technologies across sectors such as energy, fuel or transport, covering the financing of such a project and ensuring that investments in Green Bonds are held for the upfront premium for the duration of the policy.
Pierre: A key aspect to highlight is the concept of the virtuous circle at work here. For clients, this means we demonstrate a strong commitment, willingness and, most importantly, capacity to insure transactions under Specialty Credit for Low Carbon.
The second part of the circle is that as part of our commitment, for projects related to low carbon solutions, we commit to hold investments in Green Bonds of an amount equal to or greater than the annualized premium paid for the duration of the policy period.
What are some examples of projects currently supported by Specialty Credit for Low Carbon?
Pierre: Our purpose-led approach within the Specialty Credit team at Allianz Trade means we are committed to getting involved in projects that have a positive environmental impact.
We completed a deal with a large European investment bank to support the first large offshore wind farm in France. Allianz Trade is covering the initial construction phase, followed by a 17-year operational phase. Construction was completed on schedule with 80 turbines installed to generate 480 megawatts of power – enough to supply energy to over 400,000 homes.
Building upon our commitment to supporting the development of renewable energies, we worked closely on a project aimed at developing solar power in Asia, financing a 150MW+ ground-mounted solar photovoltaic project. The project has in place a 20-year offtake agreement signed with one of the largest power utility companies in the country.
Our commitment to impact underwriting can also be seen in the transport sector, where we recently supported the European Bank for Reconstruction and Development (EBRD) to replace a fleet of public buses in northern Europe. Allianz Trade provided insurance to finance the transition to modern, battery- and electricity-powered trolleybuses, supporting the eventual transition to an all-electric fleet upgrade.
Why is it important that Allianz Trade is offering a product like Specialty Credit for Low Carbon?
Pierre: First and foremost, we are firmly committed to the Paris Agreement, aligning our strategy with its goals. Echoing the vision of the Allianz Group, Allianz Trade is dedicated to making a positive environmental impact – not just in our operations but also in our role as an insurer.
Julia: Exactly – what we do as an insurer is crucial. By providing insurance for technologies which are critical for the transition and decarbonization of our economy, we offer the confidence and support necessary for these initiatives to succeed and help drive economic growth supported by low-carbon technologies.
Pierre: Scalability is key to growing these technologies and having a real impact on the economy. And it needs to be a global effort. From financial services providers to public institutions, we need to combine pockets of capabilities.
In this context, our role extends beyond being just a financial service provider; we are contributing to the industry through our expertise in sustainability-linked underwriting. As part of the Allianz Group, we set targets guided by our Group´s published transition plan, which sets measurable, time-bound targets and is reviewed by an independent external experts, and are a member of international coalitions like the Net-Zero Asset Owner Alliance (NZAOA).
How do you see Specialty Credit for Low Carbon developing in the future?
Pierre: Specialty Credit for Low Carbon is expanding across various technologies, and we’re committed to deepening our understanding of their impacts and identifying the technologies of tomorrow. This involves developing our expertise to better assess all the risks associated with these projects, including non-financial risks.
Our differentiating factor at Allianz Trade is that we have all of this expertise internally. We collaborate closely with Allianz's Property & Casualty (P&C) division, for example, whose engineers help us evaluate the technical risks in complex environments like offshore wind farms.
As a multiline insurer with massive capabilities and scale, we are thrilled to be able to continue supporting our clients – and supporting the shift to a future with lower carbon emissions.
