Integration of climate mitigation and resilience in key sectoral strategies

Explanation

Energy

The EBRD Energy Sector Strategy (ESS) 2024–2028 reflects the EBRD’s commitment to the Paris alignment of its operations. The climate emergency is one of three factors shaping the strategic direction of the ESS (the others being energy security and innovation), requiring an accelerated green energy transition to allow emissions to peak this decade and reach net zero by mid-century. Building on this, the ESS establishes two strategic directions for the Bank in the sector:

• accelerating the decarbonisation of energy
• delivering resilient, efficient, and inclusive energy systems.

Priority areas for investment in decarbonisation include the need to scale up renewable energy. The strategy commits to increasing global renewable capacity by a factor of 4–5 by 2030, although it does not set a formal target for capacity installation. The second area of action is the modernisation and expansion of electricity grids and storage solutions to allow the integration of renewables. The strategy also sets the direction for the promotion of zero-carbon fuels, including green hydrogen, and the phasing out of fossil fuels, including the need to ensure a rapid exit from coal. However, the EBRD stops short of committing to a complete fossil fuel phase-out from its operations.[1]

On delivering resilient, efficient and inclusive energy systems, the EBRD recognises the need to make energy assets resilient to the adverse impacts of climate change, and that the benefits of resilient energy infrastructure outweigh the costs. The EBRD also calls for energy efficiency measures, aiming to increase energy efficiency and productivity by around 30% by 2050. Finally, the ESS highlights the need to manage the energy transition in an inclusive and equitable manner, identifying energy access, human capital development, and equitable transition through local renewable energy ecosystems and regional development as areas of action.

The ESS introduces a performance monitoring framework with indicators corresponding to each of the priority areas identified. However, there seem to be no quantified, time-bound targets associated with the indicators.

Transport

The EBRD’s Transport Sector Strategy (TSS) 2019–2024 recognises the need for transport systems to be greener and more resilient to the impacts of climate change. It commits to a low-carbon approach across the sector. To that end, “Low Carbon and Innovative Solutions”, which will drive change and reduce carbon emissions, is one of the four strategic directions in the TSS. Furthermore, the TSS incorporates the “Avoid–Shift–Improve” approach.

On decarbonisation, the TSS calls for scaled up investment in less polluting modes of transportation. The strategy also focuses on electrification of transport modes, including through modal shifts such as road to rail. Finally, it focuses on the need for use of cleaner fuels, including by fuel switching to less-carbon-intensive fuels and the promotion of investments in vehicles fuelled by alternative low-carbon fuels, including hydrogen or biogas where feasible.   

On climate resilience, the TSS commits to increased capacity building and blended financing to promote climate adaptation in transport. The EBRD will additionally focus on scaling up climate resilience solutions, for example, sustainable landscapes, and adaptation solutions in coastal, flood prone and mountain areas. The Bank further commits to carrying out climate resilience risk assessments for all public sector transport-related projects over EUR 50 million.

The EBRD has set a target of 40% of total annual investments in the transport sector to be Green Economy Transition-labelled, as determined by the criteria set in the Annex to implementing the Green Economy Approach. Since GET-labelled projects include all projects that aim to advance the transition to sustainable mobility and zero-emissions transport, it is unclear why the EBRD should not aim for all transport sector projects to pursue these objectives.    

While the decarbonisation and climate resilience priorities represent a step in the right direction, questions remain as to how they will be implemented in practice and what standards will be applied. There is no plan outlined for operationalising the “Avoid–Shift–Improve” approach, nor are details available on how the sustainability of particularly polluting modes of transport, such as road infrastructure or aviation, are addressed in practice. The Bank applies only one exclusion related to transport infrastructure: on infrastructure or services principally dedicated to the transportation of coal. The EBRD should consider broadening its exclusion list related to transport investments incompatible with the 1.5 °C temperature goal. This could include all investments related to fossil fuel aircrafts and airport capacity expansion, fossil fuel-powered merchant fleets, and new large road infrastructure where alternatives are possible, as the European Investment Bank (EIB) has done. Furthermore, the EBRD should consider providing concrete targets to tackle GHG emissions across all transport modes to ensure alignment with Paris goals and the need to decarbonise the transport sector by mid-century.

Water

Water infrastructure policy is included within the Bank’s Infrastructure Sector Strategy (ISS) 2025–2029, which recognises the “criticality of water”. It identifies the need for better overall management, protection and production of water resources, recognising the particular vulnerability of EBRD regions to water stress. It recognises the need to align with the Paris Agreement, arguing that provision of affordable water, fundamental to an equitable economic future, cannot be secured without substantially reducing CO₂ emissions in line with Paris goals. It further recognises the inherent exposure of infrastructure to physical climate impacts.

“Enhancing climate and nature action”, through the decarbonisation of infrastructure sectors, including that of water systems, is one of three strategic directions for the Bank in this space. The EBRD commits to: scaling up investments targeting decarbonisation in hard to abate sectors, such as desalination facilities; and addressing the expected rise in the water industry’s overall electricity demand (40% by 2040 from current levels). It will pursue improved energy efficiency, better energy management and electrified heat-based energy solutions in water resource management where possible.

A second strategic direction is to “strengthen resilience”. The strategy calls for futureproofing of infrastructure through high-standard project preparation that considers physical climate impacts and vulnerabilities. It calls for solutions that combine hard engineered (“grey”) solutions (i.e. rigid, man-made structures) with “green” and “blue” infrastructure alternatives. The Bank commits to exploring the potential for nature based solutions in infrastructure, including in the context of coastal protection infrastructure.

The ESS introduces a performance monitoring framework with indicators corresponding to each of the priority areas identified, including climate mitigation (with outcome indicators such as “Water saved, reused and/or recycled”) and resilience (“number of beneficiaries made more resilient to climate shocks”). However, there seem to be no quantified, time-bound targets associated with the indicators.

Cities

Cities are also covered by the ISS 2025–2029, which has “Scale up and deepen climate action in cities” as one of six critical action areas. The EBRD recognises the particular vulnerability of cities to climate impacts, but also their key role in addressing climate change – trough technological innovation, change in consumption patterns and addressing climate-related risks.

The ISS recognises the need to reduce GHG emissions within the urban transport and municipal sectors and accordingly commits to consider climate mitigation when developing EBRD investments and policy reforms. The strategy also recognises the need to enhance the resilience of urban infrastructure, services and communities to the impacts of climate change. Finally, the EBRD will facilitate a coordinated and strategic approach to climate action across all infrastructure sectors using integrated urban planning and investment strategies, through for instance Sustainable Urban Mobility Plans.

To this end, a EBRD commits to deepening the Green Cities programme, which it argues represents the type of integrated and systemic approach to climate action

it intends to prioritise. It aims to increase the number of follow-on Green City projects, tailor the Green Cities Action Plan (GCAP) methodology to external development, and utilise the Green Cities network for knowledge sharing, capacity building and partnerships. It further commits to the deployment of new financial instruments and stronger programme monitoring for the framework and GCAPs. Tracking indicators such as “Number of GCAPs adopted and commitments to trigger projects” are therefore included in the ISS’s performance monitoring framework. Again, though, the EBRD does not associate quantified, time-bound targets with these. 

Agriculture

The Food and Agribusiness Sector Strategy (ASS) 2025 acknowledges the agriculture sector’s vulnerability to climate change, as well as its significant contribution to climate change through greenhouse gas (GHG) emissions and inefficient resource use, including energy, water, and waste management. These inefficiencies occur across all stages of the food system: primary production, processing, and retail.

To address these challenges, environmental sustainability is one of the three core pillars of the ASS, alongside social and economic sustainability. A key focus of the strategy is “supporting the alignment of food systems with the climate change mitigation and adaptation objectives of the Paris Agreement”, with the aim of decarbonising food supply chains and improving the sector’s overall capacity to adapt to climate change risks. As a result, the EBRD sets an objective of 50% of all food and agribusiness investments to be GET-labelled over the strategy period. This is a best practice approach among MDBs.

Regarding mitigation, the strategy identifies several opportunities for the EBRD to engage, including promoting practices and technologies that reduce projects’ GHG emissions, supporting the development of carbon markets within the agricultural sector, assisting with the implementation of sustainability and climate disclosure regulations, and facilitating the introduction of novel biological inputs to fuel a bio-based economy (such as biofuels) and thereby reduce reliance on fossil fuels. It also emphasises support for alternative crops, including alternative proteins and urban farming, which is another best practice approach among MDBs.

On adaptation, the strategy focuses on enhancing the resilience of food systems through sustainable resource management and climate-resilient infrastructure. It also aims to invest in resource-efficient technologies and provide comprehensive climate and nature risk assessments through an expanded technical cooperation offer. Additionally, it promotes the introduction of climate risk assessments and insurance for primary agriculture, which is another best practice approach.

As part of the green component of the strategy’s performance monitoring framework, the Bank commits to tracking impact across a range of relevant indicators. These include avoided CO₂e emissions, primary energy saved, the number of client companies adopting low-GHG solutions and/or becoming more resilient to climate shocks, and the adoption of corporate environmental governance policies and practices by companies. However, the strategy does not include quantified targets for any of these indicators.

Recommendations: 

• The EBRD’s Transport Sector Strategy 2019–2024 has a target for 40% of all transport sector investments to be Green Economy Transition (GET)-labelled, and the Food and Agribusiness Strategy 2025 50%. The EBRD should set similar targets for all other sectoral strategies. For high-climate-impact sectors such as energy and transport, the EBRD should aim for most investments to be GET-labelled, allowing only limited, clearly justified exceptions.
• The EBRD should adopt a clear strategy for operationalising the “Avoid–Shift–Improve” principle in the transport sector, with systematic procedures, time-bound targets, indicators and a monitoring framework.

[1] For more information on fossil fuel phase-out, see the “Fossil fuel exclusions” metric.