European Investment Bank

Standalone climate strategy and integration of climate in overarching strategy

This page is part of the E3G Public Banks Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs

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Paris alignmentReasoning
Paris alignedThe EIB Climate Bank Roadmap as a whole is a significant step toward a Paris aligned Climate Bank. The Roadmap is based on a 1.5 degree scenario and has inferred concrete actions from that, most notably a shadow carbon price of €250 per ton by 2030 and €800 by 2050. However, to be transformational, the implementation of the roadmap will be key and we will closely monitor the process.
Climate strategyOverarching strategy
The EIB Climate Bank Roadmap as a whole is a significant step toward a Paris aligned Climate Bank. The Roadmap is based on a 1.5 degree scenario and has inferred concrete actions from that, most notably a shadow carbon price of €250 per ton by 2030 and €800 by 2050.The EIB Operational Plan refers to climate change and climate action as part of the transversal objectives of EIB. Both Paris alignment and the ‘do-no-significant harm’ principle, in the context of the EU taxonomy, are included.

Explanation

Overarching strategy

Climate change has been fully integrated into the EIB Group 2020 Operational Plan, as the EU Climate Bank project was put front and centre of this overarching strategy for the EIB. Climate action is one of two transversal objectives of the EIB’s strategy. The EIB’s role within the European Green Deal is also mentioned in detail. There are multiple references to the “climate emergency”. It also states that “by the end of 2020, the EIB Group will align all its financing activities with the goals of the Paris Agreement”. The EIB also refers to the ‘do-no-significant harm’ principle, in the context of the EU taxonomy.

Standalone climate strategy

The EIB Climate Bank Roadmap is the most comprehensive and deep climate strategy of all major public development banks at the moment. EIB’s ambition to become the EU’s climate bank will almost certainly be realised if this strategy is fully implemented. However, the roadmap leaves room for interpretation. The successful transformation depends on how EIB will restructure its organization, how it will use the tools described in the roadmap (scenarios, reporting and carbon prices) and how the roadmap will be in turn reflected in the “full” internal and external lending policies. A deep and thorough integration is crucial, also with respect to the precedent the EIB will set. This will require close monitoring and evaluation by stakeholders. If this is accomplished, EIB’s Climate Bank Roadmap will be a gold standard for public lending.

The EIB Climate Bank Roadmap is structured around four main workstreams. These have been developed under consideration of the Paris Agreement, the EU Taxonomy and the joint MDB Paris alignment framework.

  1. Accelerating the transition through green finance
    – Increasing investment earmarked for green and climate finance
    – Support innovation and new business models
  2. Ensuring a just transition for all
    – Establish territorial Just Transition Plans and reduce vulnerabilities
  3. Supporting Paris aligned operations
    – Focus on high-emitting sectors
    – Integrate transition and physical risks
    – Apply Paris alignment to counterparties (including intermediaries)
  4. Building strategic coherence and accountability
    – Coherence with EU Sustainable Finance Action Plan and the EU Taxonomy
    – Integrated environment, climate and social policy
    – Internal alignment of policies, structures, human resources

The roadmap is explicitly aligned with a 1.5-degree target. The EIB used the IPCC Special Report on Global Warming of 1.5 ̊C to derive the necessary tools and thresholds for the roadmap.

EIB will establish a shadow cost of carbon that will rise to 250€ per tonne CO2 in 2030 and 800€ in 2050. This carbon price was calculated using the evidence of the IPCC Special Report on Global Warming of 1.5 ̊C. Note also that EIB very transparently discloses the calculation of the carbon price (Annex 5). This is currently best-practice among MDBs. The decisive question is, how the carbon price will be applied.

The roadmap is particularly aligned with the EU Taxonomy and the Joint Paris Alignment Process of the MDBs. The former will most likely require additional efforts for some areas, while the latter could position the EIB already well ahead in that process.

EIB commits to a target of at least 50% green and climate finance of annual lending by 2025. This is slightly less ambitious than a at least 50% climate finance target as is discussed in other MDBs.

In all areas that E3G has previously identified as being crucial to repeat the success of the Energy Lending Policy (Transport, climate risk and adaptation, intermediary lending and transparency), the Climate Bank Roadmap remains the vaguest.

For more information in this area please refer to E3G’s report “The EIB: Becoming the EU Climate Bank“.

It should be noted that the draft EIB Climate Bank Roadmap states that:

“Due to the lag between initial appraisal and the final presentation, non‐aligned projects may continue to be presented to the Board for approval for a period of time. A longstop date for Board approval of any non‐aligned operation is set at the end of 2022.”

The focus of the EIB’s 2015 Climate Strategy was adopted before the Paris Agreement, is on the opportunities for the real economy in addressing climate change, including job creation, retaining Europe’s position as a global leader on green technologies; and investing in energy efficiency and renewable energy. It also recognises the effect of climate change on living conditions. Nevertheless, the Climate Strategy did not contain clear milestones and timelines for the EIB to implement its action plans.

The EIB’s main focus has been on mitigation but it has mentioned and highlighted the barriers to adaptation and the need for strengthening the capacity for those who work on delivering projects on the ground. The EIB assesses climate risk through its Climate Risk Assessment (CAR) system, established in 2019. EIB assesses cliamte risk on project, portfolio and counterpart leve. The Bank intends to develop an aggregate reporting on Climate Risk for the entire portfolio. The planned Climate Bank Roadmap further details the intention of EIB to systematically assess its climate risk exposure and this section will be updated accordingly upon publication.

In November 2019, the EIB Board of Directors approved a further set of ambitious targets for climate action and environmental sustainability: the EIB group will increase its operations in climate and environmental sustainability in a gradual manner to reach 50% of its operations in 2025 and it will aim to support up to EUR 1 trillion of climate and environmentally sustainable investments between 2021 and 2030.

Recommendation: This deadline for all Board approved projects to be Paris aligned should be brought forward e.g. to end 2021, as 2 years+ is likely to be much longer than the appraisal process for many projects. 

Recommendation: For transformational, the EIB should support client countries to identify and implement programmes, including institutional reforms, that can support deep decarbonisation and alignment with a 1.5°C pathway.

 


 

Last Update: November 2020

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