This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.
European Investment Bank
Integration of climate mitigation and resilience in key sectoral strategies
|Some progress||Climate resilience well integrated in water and cities sectors, but progress needed in energy and transport. Mitigation well reflected in energy and cities, but progress needed to integrate mitigation into transport and water. The EIB Climate Bank Roadmap has set a good precedent which now has to be translated into sectoral strategies accordingly.|
|Energy||Exclusion of fossil fuels, focus on renewables and energy efficiency.||Some references to climate resilience.|
|Transport||Unclear exactly how climate mitigation applied to aviation and roads in particular.||Project promoters required to show climate resilience.|
|Water||Climate change mitigation is applied to water lending.||Good and detailed focus on climate resilience. Paris agreement and climate change strategy are referenced.|
|Cities||EIB links its lending in urban development with mitigation-relevant investment, under reference to the Paris Agreement.||Climate adaptation listed as one of the main themes.|
The EIB Climate Bank Roadmap outlines how specifc sectors (cities, water, transport, agriculture) shall be aligned with the Paris Agreement. However, it remains to be seen how ambitious the roadmap will be reflected in the sectoral frameworks to be approved in 2021 (most importantly the new transport policy).
In November 2019, the EIB approved a new energy lending policy committing to end fossil fuel financing, with some limited exceptions. Projects already under appraisal prior to the policy approval were still approved. (More info under EIB/Fossil fuels.)
The EIB Energy Lending Policy details five principles that will govern future EIB engagement in the energy sector:
- prioritising energy efficiency with a view to supporting the new EU target under the EU Energy Efficiency Directive.
- enabling energy decarbonisation through increased support for low or zero carbon technology, aiming to meet a 32% renewable energy share throughout the EU by 2030.
- increasing financing for decentralised energy production, innovative energy storage and e-mobility.
- ensuring grid capacity and resilience essential for new, intermittent energy sources like wind and solar and security of supply, as well as strengthening cross-border interconnections
- increasing the impact of investment to support energy transformation outside the EU.
The guiding approach of the new policy is to support the energy transformation toward net-zero emissions by investing in areas that can enable higher integration of renewables. This includes various areas of focus: energy efficiency, supporting the new EU target under the EU Energy Efficiency Directive; energy innovation; decentralised energy production; energy storage and e-mobility; grid capacity and cross-border interconnections to manage variability of supply.
The EIB will also apply this approach to supporting the energy transition in countries outside the EU, notably in the context of Nationally Determined Contributions (NDCs).
While the Energy Lending Policy only makes brief reference to “climate resilient energy systems” and adaptation. The EIB has stated that climate resilience is integrated through its Climate Risk Assessment system, which screens for any risks associated with climate change across all projects.
Recommendation: EIB could draw on the approach that the IDB Energy Sector Framework takes to adaptation in its mid term review of its Energy Lending Policy in order to strengthen this area.
Within the EIB Transport Lending Policy, which dates from 2011, land transport is prioritised towards urban public transport and rail projects rather than road projects due to a greater potential to reduce emissions “per transport unit” . A similar approach to waterborne and airborne transport is also taken.
This is confirmed by the Cleaner Transport Facility, which lays out a framework for facilitating clean investment in transport. The EIB has noted that integration of climate in the transport policy will be done at the time of updating the EIB Transport Lending Policy, a review which is overdue and appears to be dependent on EU-level transport policy review. In the meantime, the EIB has carried out analyses that are not published in this area, including an ongoing study on climate action in transport (clarification from EIB as to whether this remains unpublished would be welcome).
The EIB has an internal guidance document for tracking climate action in transport projects for both mitigation and adaptation. Clarification as to whether this can be made public would be welcome.
Regarding climate resilience, the Transport Lending Policy states that “the Bank will therefore ask promoters to ensure that the project is climate resilient through appropriate design and operating measures”. The EIB should consider giving project promoters more training in this regard.
The EIB Climate Strategy of 2015 foresaw a review of sectoral strategies with regards to lending. This has only been done for the Energy Lending policy, and should be extended to the Transport Lending Policy.
It is noted that in the EIB Position Paper on its Climate Bank Roadmap 2021-2025, the EIB is considering several options with regards its approach to airports and aviation. The options include continuing economic appraisal tests with externalities, a limiting of support to the improvement of existing airport capacity and an approach based on expected GHG emissions of investments. It is likely that the second of these options will be most impactful in this area.
Recommendation: EIB should limit its support for airports to facilities improvements of existing airport capacity.
Recommendation: EIB should consider introducing an emissions performance style standard or absolute transport sector GHG emissions target in order to ensure emissions from EIB transport investments are minimised.
The EIB Position Paper on its EIB Climate Bank Roadmap is also not entirely clear as to its approach to road infrastructure, and suggests that investments in road infrastructure would have to be accompanied with a national or regional plan for “alternative fuel provision”. Secondary roads would be subject to a similar test, and investments in rural roads would continue given that rural populations have few alternatives.
Recommendation: The EIB should clarify this position in its final EIB Climate Bank Roadmap, and consider much stricter restrictions on its road infrastructure investments given the wider need for modal shift to meet decarbonisation goals.
The EIB water strategy has a focus on climate change resilience. This is demonstrated by the Water Lending Policy having a section dedicated to adaptation. The 2017 EIB water sector lending orientation reiterates these policy commitments and provides further details on the appraisal of climate risks in water sector projects. The document also links the water sector strategy to the Paris Agreement. A specific document for Financing Water and Climate Change Adaptation reiterates the importance of climate change to investment decisions in the water sector for the EIB.
For mitigation, the Water Lending Policy details that the EIB will “continue to enhance climate change mitigation by capturing greenhouse gases from biological treatment and reduction in the use of energy (e.g. energy efficiency in water supply, methane reduction in sludge treatment of wastewater plants, and de-pollution of water bodies generating greenhouse gases).” In addition, as for transport, there is an internal guidance document for tracking climate action in water and wastewater related projects for both mitigation and adaptation.
The EIB’s Climate Bank Roadmap Position Paper lists “water saving technologies” and “the development of diagnostics for water and vector-borne diseases” as investment areas where climate resilience could be maximised.
A factsheet on the EIB’s contribution to the urban agenda lists climate adaptation as one of its key themes, and that a significant proportion of the EIB’s urban lending is considered as climate finance.
The EIB website on urban development lists a range of mitigation projects that are eligible for investment, such as: Nearly zero-emission public transport, energy-efficient buildings, circular and smart cities. The EIB also links its lending for social housing with energy efficiency requirements referring to the Paris Agreement.
Clarification from the EIB on whether it has an overarching lending policy or strategy covering cities and urban development would be welcome.
The EIB’s Position Paper on its Climate Bank Roadmap states that as regards new and renovated buildings, it is considering “deeming all projects [within the EU] that comply with national mandated standards as consistent with low-carbon pathways”. The EIB has stated that it assumes that projects in the EU are compliant with the Energy performance of buildings directive. Although this is certainly a valid approach, it leads to questions whether EIB scrutinises buildings build according to national standards to be in line with the Paris Agreement. The EIB’s Position Paper on its Climate Bank Roadmap also states that “urban and water projects typically already relate to wider resilience plans”.
Outside the EU, the EIB is considering using internationally recognised certification schemes (such as the IFC’s EDGE scheme), however with the ability to assess a project on a case-by-case basis where these standards are not met.
Recommendation: This language could be tightened further as this leaves a lot of freedom to the project task teams within the EIB.