Nature based solutions

As part of the Climate Bank Roadmap, EIB has commited to develop a product for natural capital financing under the InvestEU framework. This will be based on the experience of the Bank managing the Natural Capital Financing Facility.

The Climate Strategy also states that “as a longer-term endeavour, the [EIB] will work on the development of tools to account for project impacts on biodiversity, ecosystem services and biodiversity-based livelihoods”.

However the EIB together with the European Commission has set up a Natural Capital Financing Facility (NCFF) intended to boost investment in nature based adaptation to climate and has issued a guide for project promoters on how to access support. This facility is backed by an EU budget guarantee.

Under the NCFF, EIB has invested in peatland restoration projects in Finland and reforestation projects in Portugal, amongst other projects.

At COP26, EIB signed the Joint MDB Statement on Nature, People and Planet, in which it committed to clearly setting out institutional strategic approaches to further mainstream nature into the Bank´s analysis, assessments, advice, investments and operations by 2025. The MDBs further commit to fostering nature positive investments, supporting governments to revise national biodiversity strategies and action plans (NBSAPs) and enhancing public reporting on the Bank´s efforts and initiatives to mainstream nature in analyses and operations. 

As part of its Climate Bank Roadmap, EIB identifies a role for itself to implement the EU Biodiversity Strategy. Most notably, EIB has developed a biodiversity risk assessment (BRA) system which will be implemented in the second half of 2021. It further states, that “in the near term, the BRA […] systems will become part of an integrated Environment, Climate and Social Risk Assessment System.” However, EIB has not set a timeline when to fully integrate that system.

Outside the climate realm, the EIB implements biodiversity standards through its Standard 3 on Biodiversity and Ecosystems. The guidance note on this standards asks project promoters to pay attention to “sites of demonstrated importance to climate change adaptation for either species or ecosystems”.  Together with the European Commission and WWF, the EIB developed the Sustainable Blue Economy Finance Principles. It is notable that in 2019 EIB committed €2.5 Billion to the sustainable blue economy. The EIB invested EUR 5.6 billion in the forestry sector from 2015 to 2019, making the bank one of the largest global financiers of this sector. The EIB has also provided long-term financing to some of the world’s largest environmental and conservation projects.

The EIB Statement on Environmental and Social Principles and Standards, recognises the significant value of biodiversity and the Bank’s commitment to securing favourable economic, environmental and social outcomes for all its financing activities in line with the objective of the EU Biodiversity Strategy as well as the EU Strategic Action plan on the Convention on Biological Diversity. Biodiversity is also integrated into EIB’s economic analysis of investment projects.

The Climate Bank Roadmap remains relatively week on agriculture. EIB commits to ensure that “activities will not expand into areas of high-carbon stock or high biodiversity value.” The most positive aspect is the proposition to “no longer support export‐orientated agro‐business models that focus on long‐distance air transport for commercialisation.” More information would be needed about thresholds and definition for the implementation of this commitment.

Regarding livestock lending, the EIB Climate Bank Roadmap suggests to “focus support on meat and dairy industries adopting sustainable animal rearing methods that contribute to improved GHG efficiency”, for which EIB would consider investment under the farm to fork strategy or organically animal raising methods eligible. However, this statement leaves room for interpretation is not ambitious enough to be considered Paris aligned.

What is more encouraging however is its focus on “smallholder farmers and women farmers in particular [to] promote synergies between climate action and social development in the bioeconomy sector”.

With regards meat and dairy, it is “considering focusing its support for the meat and dairy industries on investments that are based on sustainable animal rearing contributing to improved GHG efficiency”. Priority will be given to agricultural products with low emissions profiles, which is very welcome. It is questionable whether this focus of GHG “efficiency” of meat and dairy is sufficient given the GHG contributions of this sector, and whether this really takes into account animal welfare and biodiversity issues as well.

It is considering excluding “projects that increase demand for certain unsustainable agricultural products, where expansion of cropping areas into high carbon stock or high biodiversity is very likely”. More information is needed as to exactly what this would cover, including what this means for livestock farming that uses soy as a feed, for example. Furthermore, this would be best approached from a supply-side perspective and not from a demand-side perspective.

The EIB is also considering its position with regards “export-oriented agro-business models that depend on long-distance air transport for commercialisation”.

Despite the multiple benefits for adaptation and mitigation, in terms of climate change lending outside the EU, agriculture and forestry make up a relatively small portion of total lending volumes – less than 10% in 2016.

Like other MDBs the EIB has not focused on investments for healthy and less carbon-intensive diets which could act as a driver to reduce deforestation and agricultural emissions, except in so far as noting that value chains also play a vital role in healthy diets. A recent report by EIB does note, however that “meat, fish and seafood, eggs and dairy use about 83% of the world’s available farmland and account for 56-58% of agriculture’s emissions”.

Within its PATH framework the EIB details how it will try and ensure its counterparties achieve Paris alignment. The framework noted that raising of animals is included as a high emitting sector and all those counterparties will need to meet the PATH framework requirements.

It is understood that the EIB excludes commercial logging in primary tropical forests and the conversion of natural forests to plantations but it is unclear where this is explicitly stated in EIB standards and safeguards. Clarification from the EIB on this would be welcome. There is no commitment for net-zero deforestation.

From 2015-2019 the EIB lent EUR 5.6bn to the forestry sector around the world. Within Europe, the EIB supports the EU Forestry Strategy and Forest Action Plan, and notes that forests cover 33% of Europe’s total land area.  As a long-term lender, EIB documents note that EIB is well suited to the long-term character of the sector.  The EIB’s lending to the forestry sector includes planting activities, forest rehabilitation and protection (including disaster recovery) and wood processing and research. The same document notes that half of the EU’s total renewable energy consumption is derived from forest biomass.  However, how this affects climate mitigation depends in large measure on how it is sourced and consumed. 

The Climate Bank Roadmap commits EIB to support “deforestation free” value chains as part of the EU Biodiversity Strategy and EU Forest Strategy. In addition, EIB is reviewing its forestry sector approach, which will particularly focused on “intermediated products and advisory services”.