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The European Investment Bank: Becoming the EU Climate Bank

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EIB

At a time of converging economic, health, climate and environmental crises, the European Union has committed to strong public investment to transform its economy. In parallel, the European Investment Bank (EIB) is in the process of setting out its “roadmap” for becoming the EU Climate Bank.

The EU’s goal is to deliver climate neutrality and climate resilience, while seeking transformative change abroad, with the aim of achieving a fair and prosperous society for its citizens.

Whether the EIB can fulfil the role of EU climate bank will depend on whether it can evolve institutionally to help deliver on each of these bold agendas.

Introduction to Becoming the EU Climate Bank

This report provides an overview of how the EIB can deliver transformative change across different climate-related areas of activity, in order to fulfil its role as the EU climate bank. It is intended as a contribution to the ongoing consultation on the EIB Climate Bank Roadmap 2021-2025. It also examines the resulting implications for how the EIB must evolve as an institution in order to deliver these responsibilities.

The report begins by introducing what is meant by a “climate bank”, concluding that a climate bank must be focused on driving transformational change toward a climate-safe world.

As a mission-driven institution, a climate bank can bridge the gap between finance and policy, providing a credible commitment from government to create new markets that other investors can pursue; in so doing, a climate bank can fast-track the transition, whilst serving as a repository of expertise in climate finance.

The introduction offers a brief history of the “EU climate bank” idea, before presenting the policy context and the EIB’s responsibility in helping deliver the European Green Deal, and then reviews the current status of EIB climate change efforts.

4 Key Recommendations

In the main sections, the report provides recommendations for four key dimensions of EU climate policy in which the EIB should deliver transformational change.

1. Delivering climate neutrality – the EIB should develop internal roadmaps for transformational activities in different sectors, including in such areas as:

  • Early retirement of high-carbon assets and their replacement with cheaper alternatives
  • In terms of transportation and mobility, enabling climate-neutral systems by focusing on no-regrets options and taking an integrated systems approach

2. Delivering adaptation and resilience – the EIB should develop a strategic framework on adaptation, to ensure its resilience work is of the highest impact, including:

  • Transformational investment in system-level (e.g. health system or food system) resilience, identifying systemic priorities and originating project pipelines
  • An ambitious plan to scale adaptation finance, set adaptation targets for EIB finance and leveraging public and private investment

3. Delivering a fair and prosperous society – the EIB should pursue economic recovery from COVID-19, just transition and climate objectives with a single strategy, applying the social paradigm of the Green Deal and advancing learnings and best practice, by:

  • Stimulating an economic recovery that is green and inclusive, playing a countercyclical role, supporting climate-themed jobs and infrastructure
  • Assuring that the transition is just and fair, leaving no one behind, using key just transition principles and disseminating best practice

4. Supporting Green Deal Diplomacy and Engagement – the EIB should support the Green Deal’s global aims, via engagements with other financial actors and contributing to Green Deal diplomacy in developing countries, by:

  • Serving as the EU’s global climate bank, helping key regions/countries reach Paris-aligned and climate-safe development pathways
  • Promoting EU and EIB sustainable finance norms with other MDBs and financial actors worldwide (e.g. the climate bank model, fossil phaseout, financing strategies)

The Necessary Institutional Changes

The report then examines the wide-reaching, cross-cutting implications of the above for the EIB, concluding that the EIB can only deliver its responsibilities as a climate bank if it transforms itself as an institution. This should be one of the deliverables of the EIB Climate Bank Roadmap 2021-2025. The necessary institutional changes include:

  • Mainstreaming the climate bank status to be reflected across the EIB: looking to sectoral strategies; transparency policy; financial intermediary standards; and client engagement strategies; project (e.g. financial/economic) appraisal guidelines; and carbon accounting methodologies.
  • Building essential capacities required of a climate bank to become a knowledge bank: by expanding technical advisory capacity, notably for originating a pipeline of more transformational projects, and engagement capacity for engaging with country governments, financial institutions, and others.
  • Seeking a capitalisation increase from the Member States commensurate with the scale of the challenge and investments required: Member States should consider giving the EIB a climate-specific capitalisation in order to fulfil its role as the EU Climate Bank, and as a signal to other MDBs that climate ambition is rewarded by progressive shareholders.

Sparking Conversation

This report is written in the context of the EIB developing its “Climate Bank Roadmap 2021-2025”, and it is possible that many of the recommendations are being actioned within that process already. The report aims to inform and encourage a constructive conversation among the EIB’s staff, national shareholders, and broader stakeholders. In addition, it is hoped this report will serve as a resource for other public banks worldwide, including multilateral and other public banks that seek to become a climate bank for their own respective geographies.

As the world’s largest multilateral bank, and the first multilateral bank to pursue a formal process for consolidating its position as a climate bank (or green bank), the EIB has a responsibility to build on its track record of positive achievements by setting an example of a high-ambition interpretation—and successful delivery—of its duties as a climate bank.

Read the full report, The European Investment Bank: Becoming the EU Climate Bank, here.

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