The EIB promised last year to step up its commitment to the climate — by the end of 2021, it will end the financing of fossil fuel projects; over the next 10 years, the EIB Group plans to trigger investments of more than €1tr in climate protection and environmental sustainability; and at the same time, the EIB will increase the proportion of such investments in its portfolio from 25% to more than 50% by 2025.
And, by the end of this year, it will have fully aligned all its financing activities with the principles and goals of the Paris Agreement.
It is doing all this amid the economic and health crises created by Covid-19.
“Climate change might not feel like a top priority right now under Covid conditions, but the climate emergency and the environmental emergency are challenges that won’t wait for us,” says EIB president Werner Hoyer.
“We took a big step forward last year in our decisions on fossil fuel financing and now first of all it is necessary that we live up to our own criteria and ambitions.
“This is something that is a huge challenge for our institution, but if we can meet this challenge we can strengthen our position in the global context and we will be the market pioneer.”
Ensuring that Europe is at the forefront of efforts to deal with the twin climate and environmental emergencies is key for Hoyer from a strategic point of view as the union faces a changing world and the need to protect Europeans.
“Everyone is talking only about the US and China. We as Europeans will not play our role in this if each and every Member State tries to go it alone,” he says. “Therefore the onus is on European unity now more than ever before.
“Climate and development are two key areas where I think Europeans, to put it mildly, still have a chance and this is why we, as the EU Bank, are so forcefully pursuing our role as the Climate Bank.”
Roadmap ahead
But while the ambition of the EIB is to move forward to a world of decarbonisation, a low carbon economy, and more money and more funding for green projects, it knows that realising that ambition requires working with its partners in Team Europe, in the other multilateral development banks and with the private sector.
“Even though we are a very big institution, everything will not be done through us — and actually most of it will require financing from other institutions,” says Ambroise Fayolle, who is taking up the reins as vice-president in charge of climate as well as development. “The [involvement of the] private sector in particular will be essential to get to the pass on the green transition and to reach climate neutrality by 2050, the key objective of the European Union.”
The immediate task is to approve the Climate Bank Roadmap (CBR) that will set out in detail how the EIB will achieve its ambitions over the 2021-2025 period. The EIB has been consulting with stakeholders and partners since March to deliver on the text, and plans to publish during the fourth quarter.
“Our ambition has to be reflected in an operational framework and this is the goal of the Climate Bank Roadmap that we have started to discuss with our executive board,” says Fayolle. “It is important to have this roadmap, to have this operational framework, to deliver our package of projects and contribute significantly to the new Green Deal. I hope it will be agreed after discussion with the board and will set the standards for other institutions and our colleagues in other multilateral development banks to have a future that is more green and that is more low carbon.”
Dual emergency
Rising to prominence in the CBR is a wider focus on environmental issues — such as biodiversity, ecosystems and land use — as well as climate.
“If anyone was in any doubt that the environmental emergency is as serious as the
climate emergency, they just have to look at the recent WWF report, which shows a 68% biodiversity loss in the last 40 years,” says EIB chief climate change expert Nancy Saich. “It’s absolutely catastrophic.”
Saich says that the EIB’s work on climate has given it a much better idea of the need for an approach that cuts across both issues.
“You can’t really seriously address climate change without also addressing the problem we have with nature, where we are devaluing nature by destroying forests and polluting the oceans,” she says. “Similarly, you can’t seriously address the biodiversity, environmental degradation and pollution problem without thinking about climate change as well.”
Financing adaptation to climate change — an article of the Paris Agreement — also often means working on broader environmental issues, but without a deliverable target the EIB has found it hard to provide more than roughly €1bn a year so far.
“We need to really seriously address the adaptation goal of the Paris agreement as well as the mitigation goal,” Saich says. “By having a climate target and a sustainability target what we are doing is reprioritising and re-emphasising the importance of land and water and we believe it will also help us do a lot more on adaptation.”
Ocean clean-up
The Clean Oceans Initiative (COI) is one project that has an environmental objective but also provides climate mitigation and adaptation benefits.
The EIB, working in close partnership with Agence Française de Dévelopment and KfW, launched the COI two years ago with a financing target of €2bn by 2023. The three banks finance projects that reduce the discharge of plastics into the ocean — both the estimated 8m tonnes of macro plastics owing to no or poor waste management and the 1.5m tonnes of micro plastics, part of which reaches the ocean through untreated wastewater.
“Together the three banks have provided €1.3bn of finance to 21 projects, so we are well on track,” says EIB lead engineer Jonas Byström. However, the EIB is now looking to create a bigger impact through the Clean Ocean Project Identification and Preparation (COPIP) programme, which will identify and prepare replicable projects in sub-Saharan Africa, primarily in the solid waste sector.
“The kind of projects that really have an impact are those in the mega-cities in Asia and sub-Saharan Africa, where waste collection can be as low as 20%-30%, and where non-collected waste and plastics end up on the streets and — via drainage canals and rivers — eventually reach the ocean.
“We have a team of consultants looking at the coastal and near-coastal riverine cities in sub-Saharan Africa to identify projects that we and the other COI banks could co-finance and contribute to reducing the discharge of plastics.
“The goal is to identify new institutional, technical and financial structures and solutions that are more efficient or impactful in addressing the problem of ocean plastics. Ideally the projects should have a high potential for replication to reach beyond the projects that we actually do.”
Improving waste collection reduces informal waste dumping and burning, and cuts emissions of the powerful greenhouse gas methane, while increasing plastic recycling reduces the carbon footprint compared with using virgin plastics, Byström points out. Improving waste collection also reduces accumulation of waste in drains and canals which reduces flood risks and contributes to the adaptation to the more frequent storms that are a product of climate change. Among its COI projects, the EIB has provided a €50m loan to help Cotonou, Benin, improve stormwater management.
“There you have a double impact — the reduction of plastics and other waste disposed in the ocean, and also a climate adaptation impact from improving the drainage and waste collection systems, thereby reducing the risks and impact of flooding.”
While the EIB is already working with AfD and KfW on the oceans project, it is discussing co-operation and is due to announce new partners on this important topic.
“We are looking for new ways to co-operate that enable us to go beyond what we can do on our own — particularly in Asia, where there are many good reasons and opportunities to be involved in clean and sustainable ocean related work,” says Byström.
Green development
The EIB’s work in Africa also highlights the nexus between climate and development. Perhaps because 85%-90% of its annual lending takes place in the European Union, it is sometimes forgotten that it is the world’s largest multilateral development bank, and provides around €7bn a year outside the EU.
Climate and environment are at the heart of the EIB’s development approach, says Saich.
“Some people used to argue that climate is all very well but we’ve got to do development first,” she says. “That argument is dead.
“These countries are more than aware of how vulnerable they are to climate change, how extreme weather is affecting them and we know that if we don’t address that then much of the development effort will be undermined.
“Absolutely, you have to address climate and development together — because no development project is worth anything at all if it’s washed away.”
Almost every country in the world signed the Paris Agreement (and all the countries in which EIB operates), which means that each has a nationally determined contribution to make.
“They need support from public banks like us to help them accelerate what they are doing,” says Saich. “We want to help developing countries to leapfrog some of the high emitting activities that the industrialised nations did and achieve the SDGs like access to energy, transport, education and health by going straight to low carbon technologies like renewables and digital solutions.”