THE ROAD LESS TRAVELLED: HOW THE EUROPEAN INVESTMENT BANK'S CLIMATE ROADMAP 2021-2025 CAN LEAD IT TO BECOME THE CLIMATE BANK - Bankwatch
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THE ROAD LESS TRAVELLED: HOW THE EUROPEAN INVESTMENT BANK’S CLIMATE ROADMAP 2021-2025 CAN LEAD IT TO BECOME THE CLIMATE BANK
Research and writing Anna Roggenbuck Editing Emily Gray Acknowledgements Pippa Gallop Emily Gray Raphael Hanoteaux Nina Lesikhina Xavier Sol Design nicky@pekarev.eu Cover photo by Macau Photo Agency on Unsplash This report has been produced with the financial assistance of the European Union. The content of this report is the sole responsibility of CEE Bankwatch Network and can under no circumstances be regarded as reflecting the posi- tion of the European Union.
TABLE OF CONTENTS
INTRODUCTION 4
1. TOWARDS THE EUROPEAN UNION’S CLIMATE BANK 5
1.1 FROM THE EIB CLIMATE STRATEGY 2015 TO THE EIB CLIMATE 5
BANK ROADMAP 2021-2025
2. THE EUROPEAN INVESTMENT BANK – NOT YET THE EU CLIMATE BANK 7
2.1 ENDING FINANCE FOR FOSSIL FUELS, HIGH CARBON 7
AND POLLUTING PROJECTS
2.2 GREENHOUSE GAS ACCOUNTING METHODOLOGY 9
2.3 SUPPORT TO CORPORATIONS IN HIGH CARBON SECTORS 10
AND FINANCIAL INTERMEDIARIES
2.4 ENSURE ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 11
OF EIB LOANS
2.5 STEPPING UP CLIMATE FINANCE 12
2.6 INSUFFICIENT LEVEL OF DISCLOSURE 12
3. EIB CLIMATE ACTION IN SELECTED GEOGRAPHIC AREAS, 2016-2019 14
3.1 EIB CLIMATE ACTION IN THE EU 14
3.2 EIB CLIMATE ACTION IN ENLARGEMENT COUNTRIES 16
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 3
INTRODUCTION
Climate change considerations have been In order to deliver on this promise, the EIB
present at the EIB for over ten years now. is currently working on developing the
Initially, the Bank’s climate action was Climate Bank Roadmap 2021 – 2025. Now,
centered on the energy sector, for which while the COVID-19 pandemic is ongoing,
the Bank set a loan volume target for re- there are voices that question the value
newable energy. Then, a climate action and meaning of the EU’s decarbonisation
target for financing climate change mit- agenda and call for the suspension of the
igation and adaptation projects was set European Green Deal. The EIB’s plan for
at 25% of the EIB’s entire portfolio, and an ambitious Climate Bank Roadmap may
eventually, in 2015, the EIB adopted its also be at risk.
first Climate Strategy, with the aim of be-
ing aligned with the Paris Agreement by However, keeping climate action and en-
2020. Simultaneously, the EIB continued vironmental sustainability at the heart of
financing projects that were manifestly economic recovery is the only way we can
detrimental to the climate, such as gas prevent further economic and financial
pipelines, LNG terminals and several air- burdens from being added on top of the
port expansions. huge debt with which we will finance our
recovery. As there is no doubt that climate
The idea to create a European Climate change will unfortunately progress, we
Bank was first put forward by France’s must not charge future generations twice
President Macron and then picked up in by leaving them environmental degrada-
2019 by Ursula von der Leyen, the fresh- tion issues to deal with.
ly nominated president of the European
Commission, who wanted to transform This report summarises the EIB’s under-
the EIB into a European climate bank takings on the road towards becoming
as a part of the European Green Deal, a the EU’s Climate Bank. It presents our
1 strategy for turning the EU into a mod- findings on the implementation of the
EIB President Werner Hoyer, ern, resource-efficient, decarbonised EIB’s 2015 Climate Strategy and looks at
‘The EU Climate Bank: and competitive economy. A response the results of the Bank’s climate action
Channeling private capital into came immediately from the chief of EIB, in the EU and enlargement countries.
sustainable finance’ (speech, who announced the Bank had already It also puts forward recommendations
Conference: A global approach become ‘a global Climate Bank, a global to the Bank which will be presented as
to sustainable finance, Green Bank, and a global Oceans Bank’.1 Bankwatch’s contribution to the devel-
Brussels, 21 March 2019), Following this proclamation, the Bank opment of a new climate strategy. The
https://www.eib.org/en/press/ committed to turn into a ‘climate bank’ research undertaken for this publication
news/the-eu-climate-bank- and expand the share of climate-related was based on climate action data dis-
channeling-private-capital- activities in its portfolio to 50% over the closed by the EIB on the basis of requests
into-sustainable-finance. next few years. for information.
4 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank1. TOWARDS THE EUROPEAN
UNION’S CLIMATE BANK
1 Climate Awareness & High Impact Climate Action
2 Proactive development of a climate action pipeline of projects
Reinforcing the impact
of climate financing
3 Financial innovation for climate action
4 Targeting capital markets: Spur growth of Green Bond market
5 Rolling out climate risk screening for all EIB operations
Building resilience
to climate change
6 Increasing the portfolio of adaptation operations
7 Continuous improvement of mainstreaming tools
8 New revised sector policies incorporating climate considerations
Mainstreaming climate change
across the Bank
9 Managing EIB portfolio: Value at Risk from Climate Change
10 EIB Environmental management system
Source: EIB
1.1 From the EIB Climate Strategy
2015 to the EIB Climate Bank Roadmap
2021-2025
The EIB’s Climate Strategy was first adopt- Strategy, the EIB aimed to be aligned with
ed in September 2015 by its Board of Direc- the Paris Agreement by 2020.
tors following an internal evaluation of the
Bank’s Climate Action by the Operations Alongside the climate action target for
Evaluation unit and public consultations. financing climate change mitigation and
The aim of the Strategy – adaptation projects, set at 25% of the EIB’s
‘Mobilising finance for the transition to a entire portfolio, it had also developed oth-
low-carbon and climate-resilient economy’ er technical tools for climate proofing such
– was to describe the Bank’s future direc- as a carbon footprint assessment, Emis-
tion and development of its climate action. sion Performance Standard for electricity
Although the Bank had already been car- production and shadow carbon price.
rying out its climate action programme to
finance climate change mitigation and ad- In the adopted Strategy, the EIB focused
aptation for years, it had become evident on three strategic areas for which several
and expected that a more comprehensive action plans were developed to strength-
approach for mainstreaming climate con- en the implementation of the strategy by
siderations across all bank operations the end of 2020 and address the foregoing
should be developed to adequately respond weaknesses of its climate action (see the
to the climate change challenge. With this figure).
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 5Unfortunately, the EIB did not offer an the Bank failed to review sectoral poli-
evaluation of the Climate Strategy and cies and the environmental and social
the Action Plans to allow for the better framework, leaving it for 2020 or later.
informed development of a new Climate Despite announcements about the de-
Bank Roadmap 2021-2025. A publicly avail- velopment of lending guidance to main-
able evaluation could have given more stream climate change considerations
insight into the internal achievements, in sectors like tourism, water, circular
updated processes, climate mainstream- economy and others, there is no evi-
ing and climate proofing tools, as well as dence that this was completed. Although
indicated the areas which still require a climate risk assessment system for the
improvements. Only some Action Plans project cycle, processes and procedures
could be observed from outside, as many was to be in place by mid-2018 and cover all
of them aimed at improving internal pro- new EIB operations, it is not clear whether
cesses, due diligence and analysis. this tool for ensuring adaptation and cli-
mate resilient operations is functional.
Under the Action Plans, efforts have been
made to improve internal coordination in Despite the unknown results of the 2015
the Bank, cooperation with other multilat- Climate Strategy, in November 2019 the
eral development banks, identification of Bank announced it would accelerate and
market opportunities for climate action, step up its climate finance, end financing
development of climate action pipelines for fossil fuel energy projects starting in
in new sectors, enhancement of advisory 2022 and align all financing activities with
services and many other initiatives. The the goals of the Paris Agreement from the
Bank could have reported on the progress end of 2020. A new strategy for climate ac-
in the implementation of the Action Plans tion and environmental sustainability ad-
and the impact of this work on its Climate opted by the Board of Directors included a
Action performance to allow for identifi- new Energy Lending Policy and a commit-
cation of areas where the Bank made the ment to gradually increase the share of its
biggest contribution to member states’ cli- financing dedicated to climate action and
mate and energy targets. environmental sustainability to reach 50%
of its operations in 2025. This announce-
Several actions have not been implement- ment was followed by the opening of the
ed. With the notable exception of the stakeholders consultation process for the
Bank’s progressive Energy Lending Policy, EIB Climate Bank Roadmap 2021-2025.
Recommendation 1
The Bank needs to establish or review sectoral policies and lending guidance to
mainstream climate considerations for tourism, water, circular economy, indus-
try and agriculture as well as review the current environmental and social policy
framework to ensure sustainability of its climate and environmental lending.
Recommendation 2
The Bank should disclose an evaluation of the 2015 Climate Strategy and the
Action Plans, if internally available, to allow for better informed development of
the new Climate Bank Roadmap 2021-2025.
6 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank2. THE EUROPEAN INVESTMENT BANK –
NOT YET THE EU CLIMATE BANK
The development of a new Climate Bank in the Bank’s climate safeguards that need
Roadmap is necessary if the EIB is to to be identified and closed by a new Cli-
contribute successfully to the EU Green mate Bank Roadmap for the EIB to meet
Deal. Despite having Climate Action for the Paris alignment criteria.2 The Bank’s
financing energy efficiency, renewables, remaining sectoral policies have not been 2
sustainable transport and climate change aligned with the Paris Agreement, and These are, for example, shadow
adaptation projects, covering roughly thus it continues to finance unsustainable carbon prices that the EIB
25% of its operations, the Bank must still infrastructure, particularly in the trans- applies for projects, Carbon
mainstream climate considerations across port sector. Footprint Methodologies
its remaining portfolio to ensure it does or Emission Performance
not exacerbate climate change through a There is no single methodology for how Standards for electricity and
significant part of its portfolio. All EIB op- to measure alignment; however, there are heat projects.
erations must comply more broadly with certain criteria and ideas developed and
the Sustainable Development Goals, Paris under discussion, including at the EIB.3 3
Agreement and the EU Climate Neutrality See for example: Climate
goal, which would redirect the emphasis 2.1 Ending finance for fossil fuels, high Mainstreaming and Climate
from merely a quarter to the whole of the carbon and polluting projects Proofing. The horizontal
Bank’s financing. The impact of the entire integration of climate
EIB portfolio on climate and the environ- The concept of ‘brown taxonomy’ was pro- action in the EU budget, CAN
ment, rather than the amount of funds posed by the Technical Expert Group on Europe (2018); Definitions
spent on Climate Action, should be the sustainable finance. This group is respon- of levels of Paris alignment,
cornerstone of climate mainstreaming. sible for developing the EU classification E3G (2019); Aligning EU
system for sustainable activities, often budget expenditures with
The volume of the EIB’s financial commit- referred to as the ‘sustainable finance the objectives of the Paris
ments is not the only measure of the im- taxonomy’ or ‘EU taxonomy’. The brown Agreement, Navigant for
portance of its climate safeguards. It is also taxonomy would serve as an additional European Climate Foundation
measured by its ability to leverage private dimension of the EU taxonomy in order (May 2019).
finance, direct the public authorities’ in- to address a situation commonly known
vestment decisions and inspire redirection as ‘greenwashing’: ‘Identifying an envi- 4
of other financial flows to low carbon and ronmentally harmful economic activity EU Technical Expert Group
sustainable investments. Therefore, the as partially green carries significant risks, on Sustainable Finance,
EIB’s alignment with climate objectives on such as leading the market to believe that Taxonomy: Final report of the
the global and the EU level is important for any performance improvement is good Technical Expert Group on
the Bank’s operations and well beyond. enough even if the underlying activity and Sustainable Finance (March
its potential performance is ultimately in- 2020), https://ec.europa.eu/
Although the adoption of the new Energy consistent with environmental goals over info/sites/info/files/business_
Lending Policy was a real milestone in the the medium to long term’.4 The Group economy_euro/banking_and_
EIB’s approach to the sector, setting a new called for the establishment of this brown finance/documents/200309-
‘best standard’ among its peer institutions, taxonomy in order to complete the sus- sustainable-finance-teg-final-
there are still loopholes and uncertainties tainable one. report-taxonomy_en.pdf.
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 7Recommendation 3
The EIB should develop its own ‘brown taxonomy’ for operations which will not
be covered under its climate and environmental sustainability lending – at least
as long as the EU does not develop an EU brown taxonomy. The Climate Road-
map should exclude the activities in high-carbon sectors that are identified as
‘brown’ according to the taxonomy, and such a taxonomy should also serve as
a basis for the review of relevant EIB sectoral policies.
The Energy Lending Policy virtually assessment or a cumulative impact as-
excluded EIB financing for fossil fuel sessment on the level of the corridor or
projects starting from 2022. This also in connection with other existing and
includes lending through financial in- planned gas transport routes. Neverthe-
termediaries. The EIB has also estab- less, the EIB claims the project will not
lished an Emission Performance Stan- be a source of additional greenhouse
dard for heat and power generation gas emissions, and thus will not cause
projects at the level of 250g CO 2 per negative climate impacts. It maintains
kWhe. However, the policy still allows that the project is fully in line with the
the EIB to approve, by the end of 2021, EU’s decarbonisation objectives.
fossil fuel projects from the fourth EU
list of ‘Projects of Common Interest’
(PCIs). If approved by the EIB Board by
the end of 2021, the Bank will be able to Recommendation 4
continue financing them even beyond
2021. Like the rest of the list, none of In the interim period, before the
the gas projects on the PCIs list have complete phase-out of fossil fuel
been subject to a climate impact as- lending, the new Climate Bank
sessment affirming their compliance Roadmap should require all fossil
with the EU’s energy policy and climate fuels infrastructure projects, in-
5 objectives. The European Ombudsman cluding PCIs, to be subject to pub-
A complaint lodged by Food has just opened an inquiry into the al- licly available, sound climate impact
& Water Europe. Letter from leged failure to carry out a sustainabil- assessments and be part of stra-
the European Ombudsman ity and climate assessment for the fos- tegic environmental assessments
to the European Commission sil fuel PCI projects chosen so far and giving due consideration to climate
opening the inquiry into approached the European Commission impacts.
the alleged failure to carry for further clarifications. 5
out a sustainability/climate
assessment for all existing An assessment of PCI projects’ cli-
fossil fuel projects on the mate impact is generally missing and Moreover, the policy allows financing for
list of Projects of Common their impact on climate ignored. A gas infrastructure that could potentially
Interest (10 February 2020), study by CEE Bankwatch Network and transport non-fossil gas, without spec-
https://www.ombudsman. ODG showed a high risk that the gas ifying any conditions. This could allow
europa.eu/en/correspondence/ from the Southern Gas Corridor, a PCI financing for new, highly-polluting fossil
en/124432#_ftn1. project, would be as climate-damaging gas infrastructure, on the basis of a vague
as coal. It also shows that the Southern promise that it will transport so-called
6 Gas Corridor, already in its first stage, ‘green gas’ in the future. Specific technical
Smoke and mirrors. Why the will cause annual carbon dioxide emis- sustainability criteria for such retrofits
climate promises of Southern sions of at least 55 000 ktCO2eq, which is have been developed in the EU Taxonomy,
Gas Corridor don’t add up, CEE comparable to the annual emissions of which require that the main purpose of
Bankwatch Network (January Bulgaria.6 In 2018, the EIB signed loans the retrofit is the integration of hydrogen
2018), https://bankwatch. for the Trans Adriatic Pipeline (TAP) and other low-carbon gases. The repair of
org/publication/smoke-and- and Trans-Anatolian Natural Gas Pipe- existing gas pipelines for the reduction
mirrors-why-the-climate- line (TANAP), important sections of the of methane leakage is eligible only if the
promises-of-the-southern- Southern Gas Corridor. This project pipelines are hydrogen-ready and/or other
gas-corridor-don-t-add-up. was not subjected to a climate impact low carbon gases-ready.
8 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate BankRecommendation 5
The EIB needs to adopt sustain-
ability criteria for the retrofit of gas
transmission and distribution net-
works in line with the EU taxono-
my, and critically analyse the actual
availability of non-fossil gas fuels
for the infrastructure in question.
2.2 Greenhouse gas accounting meth-
odology
Another sector where the EIB should restrict The EIB counts greenhouse gas emissions
finance for high carbon projects is transport. from project it finances, both absolute and rel-
The Bank continues supporting highways ative emissions, and reports these emissions in
and the car industry, as well as the develop- projects’ information notes and in its annual
ment of new airports and their expansion. Sustainability Report on an aggregated level.7
While rail and public transportation indeed
remain the most supported by the EIB, in It is crucial for the Bank to periodically
the last four years the Bank has granted EUR review its methodology for counting such
11.5 billion in loans to motorways and avia- emissions, in order to be in line with the
tion. Given that aviation is by far the most latest scientific developments regarding
carbon-intensive sector and that it is already emissions calculations from different
heavily subsidised via tax exemptions and sectors and properly track the impacts of
other benefits, the EIB needs to significantly financed projects. For the EIB, the EU’s fi-
revise its lending approach. nancial arm, it is a matter of policy com-
pliance to prevent the lock-in of carbon
The EIB’s generous support for the automo- intensive technologies, if the EU is going
tive sector during the last economic crisis to meet its commitments under the Paris
remained largely without scrutiny over the Agreement to pursue efforts to limit the
stated environmental goals of the loans, global temperature rise to 1.5°C. From 2016
namely cutting carbon emissions from cars. to 2018, the EIB updated its methodolo-
An extreme example was the EIB loan used gies several times. The changes included,
by Volkswagen to develop diesel cars with among others, the introduction of meth-
installed emission defeat-devices to rig emis- odologies for ports, airports and forestry,
sion tests, resulting in some models emitting and updated emission factors. The Bank
up to 40% less pollutants in emissions tests estimates carbon emissions to take into ac-
than they did on the street. count in the Bank’s economic assessment
when it calculates the cost of projects’ en-
vironmental externalities and their eco-
nomic rate of return. However, it has not
Recommendation 6 established any target to reduce portfolio
emissions, either from its projects globally
A review of the Transport Lending Pol- or by sector. Bankwatch has identified two
icy, shifting the Bank’s lending toward issues with how baselines are set for cal-
measures to significantly reduce de- culating relative carbon emissions and on 7
mand for unsustainable transport the treatment of scope 3 emissions. The EIB estimates the
modes and to reduce the sector’s greenhouse gas emissions of
overall climate impact, will be con- First, for the baseline, the Bank uses the projects where emissions are
ducted in 2020. In this sector the EIB most likely alternative option for the fi- expected to be significant,
should eliminate financing for high nanced projects. The major criticism of in line with the established
carbon projects such as highways this solution is that it assesses new proj- threshold. See EIB Carbon
and aviation and focus on supporting ects against business-as-usual, usually the Footprint Methodologies
zero-carbon transport infrastructure, technology of the past, instead of the best (December 2018), https://
urban public transport and trains, and socially, environmentally and economical- www.eib.org/attachments/
zero-emission multimodal transport ly feasible and acceptable option or the strategies/eib_project_carbon_
services. best option in terms of reaching the 2030 footprint_methodologies_
and 2050 emissions reduction targets. en.pdf.
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 9Recommendation 7
The EIB needs to take a more holistic view and weigh a number of factors
against each other to find a baseline that encapsulates best practices and pro-
vides real added policy value to the Bank’s financing. The Bank must develop
criteria to identify the best option from the social, environmental and economic
perspectives, rather than the business-as-usual baseline option.
Second, the EIB does not currently account 2.3 Support to corporations in high
for scope 3 emissions in the majority of cas- carbon sectors and financial interme-
es. Thus, in gas extraction, gas pipeline and diaries
LNG terminal projects, no emissions are
counted from the later combustion of the The Bank could also maximise potential
gas in homes, industry or power stations. emissions reductions gains if its loans to
However, where a project’s overall impact companies operating in high carbon sec-
shows GHG improvements, scope 3 calcu- tors (such as industry or energy) that have
lations are included, but when they worsen a high share of fossil fuels in their power
the emissions picture of the project, they and heat generation portfolio were con-
are not included. This approach is hardly ditioned on the company adopting a de-
justifiable. carbonisation plan aligned with the Paris
Agreement prior to loan approval.
Between 2013 and 2019, the EIB provided
Recommendation 8 EUR 4.7 billion to a number of companies
with a high share of coal in their power
In order to carry out well-informed and heat generation portfolios or com-
decision-making and prevent un- panies which plan to develop new coal
derestimation of projects’ climate power capacities. The EIB must not in-
impacts, the Bank needs to take into vest in the projects of companies that have
account all direct and indirect emis- not committed to mitigate their climate
sions related to projects. impacts. The Bank, on one hand, must en-
sure that the projects it finances do not
contribute in any way, currently and in
the future, to an increase in greenhouse
Bankwatch’s own analysis also found that gas emissions, and on the other, that the
the EIB’s estimates may underrate the real projects it finances are part of a plan for
amount of greenhouse gases from proj- emissions reduction and not merely a gre-
ects. For the Southern Gas Corridor, the enwashing exercise.
amount of greenhouse gases calculated in
the Environmental and Social Impact As-
sessments (ESIA) for TAP is 3.5 times high-
er, and for TANAP 2.5 higher, than estima- Recommendation 10
tions made by the EIB’s carbon footprint
assessment. The Bank should not provide loans
for companies operating in high car-
bon sectors which do not have de-
carbonisation strategies. The Bank
Recommendation 9 should offer technical assistance
for the preparation of companies’
In cases where the ESIA provides decarbonisation strategies, includ-
more detailed and accurate data on ing realistic financial plans for their
a project’s carbon footprint, the EIB implementation. The EIB must also
should take these calculations into require that companies receiving its
account in the project’s economic loans purchase electricity from re-
appraisal. newable energy resources.
10 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate BankLending through financial intermediaries well above 28% of its total lending, only
remains a significant part of the EIB’s port- roughly 10% of the EIB’s loans to financial
folio. In 2019, out of the EIB’s entire lending intermediaries have contributed to cli-
of EUR 60 billion, one third went to finan- mate change mitigation and adaptation.9
cial intermediaries for on-lending, mostly As the EIB’s intermediary lending usual-
to SMEs and Mid-Caps. EIB lending policies ly targets smaller scale projects by SMEs,
also apply to intermediated lending; howev- mid-cap companies and local authorities,
er, given financial intermediaries’ limited ca- the Bank must ensure that on one hand
pacity for conducting relevant due-diligence they have access to climate action finance,
as well as the EIB’s limited capacity to en- and on the other that financial interme-
sure intermediaries comply with the Bank’s diaries actively seek to support transfor-
policies, stringent precautionary measures mative projects and develop their internal
need to be developed by the EIB. This would capacities in doing so.
mean that certain types of projects would
be explicitly restricted, such as those involv-
ing fossil fuels or hydropower energy.
Recommendation 12
An example of the EIB’s insufficient lever-
age over its environmental standards in The EIB and EIF must set a climate 8
intermediated operations is the Marguerite action target for each standard fi- The Marguerite Fund is
II Fund’s involvement in development of a nancial intermediary operation (ex- the European Fund for
waste incinerator in Belgrade.8 In 2019, the cept for those which specifically aim Energy Climate Change and
EU’s bank pulled out of funding a contro- at climate action). Financial inter- Infrastructure in which the EIB
versial waste incinerator in Serbia citing mediaries should be obliged to apply is a core sponsor alongside five
clashes with EU waste policies, after the Eu- the EU taxonomy for tracking their National Promotional Banks.
ropean Commission warned it could threat- climate and environmental sustain- EUR 100 million from European
en environmental targets. Despite the criti- ability investments. Fund for Strategic Investments
cism by EU institutions and revelations of has also been committed to
breaches of EU policies and legislation, the the Fund.
project is being continued with support
from an EIB financial intermediary. 2.4 Ensure environmental and social 9
sustainability of EIB loans Bankwatch’s own calculations
covering the period 2016-2019
Even projects that contribute signifi- based on the EIB’s climate
Recommendation 11 cantly to climate change mitigation and action reports.
adaptation may cause substantial harm
The EIB and the European Invest- to the environment and communities. 10
ment Fund (EIF) need to exclude Bankwatch has revealed how the EIB’s CEE Bankwatch Network,
lending through financial interme- hydropower financing has affected Bal- Broken Rivers:The impacts
diaries to energy companies with a kan endemic and endangered species, of European-financed small
high share of coal in their power and and violated national laws and interna- hydropower plants on pristine
heat generation portfolios and ex- tional financial institutions’ standards.10 Balkan landscapes (December
clude other types of high-risk proj- The EIB has also committed to finance 2017), https://bankwatch.org/
ects such as fossil fuels and hydro- the Nenskra Hydropower Plant in Geor- publication/broken-rivers-
power energy. gia, a 280 MW project that, if built, would impacts-european-financed-
irreparably destroy the unique biodiver- small-hydropower-plants-
sity of the Caucasus mountains and the pristine-balkan-landscapes.
economic livelihoods of the indigenous
In addition, the EIB needs to require that Svan people that have lived for genera- 11
a part of its lending through financial in- tions in the region.11 Such projects must See for example: Rusudan
termediaries be directed to projects that not be supported with the EIB’s loans. Panozishvili, ‘Nenskra:
significantly contribute to climate change new players, new risks’,
mitigation and adaptation and meet the A comprehensive approach on how to CEE Bankwatch Network,
technical criteria of EU’s sustainable fi- manage the sustainability of climate 4 December 2019, https://
nance taxonomy. Now when the EIB’s cli- change mitigation and adaptation proj- bankwatch.org/blog/nenskra-
mate action lending in the EU has reached ects was presented in March 2020 by the new-players-new-risks.
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 11Technical Expert Group on the EU Tax- to scale up climate and environmental
onomy. In this approach, a project’s sig- sustainability financing to 50% of its
nificant contribution to climate objec- portfolio by 2025.
tives must be accompanied by the ‘Do no
significant harm’ (to remaining environ- The EIB’s Climate Action is based on the
mental objectives) principle and min- eligibility criteria developed with coop-
imum standards, including on human eration with other multilateral devel-
rights. The Bank’s environmental and opment banks. In 2015, they established
social safeguards framework currently a set of common principles, definitions
does not ensure that environmentally and guidelines for climate mitigation
and socially detrimental projects are finance tracking that allows for joint
eliminated from the EIB’s portfolio. This reporting and comparison.13 The eligi-
framework lacks clear requirements for bility criteria present categories and ex-
project promoters, due-diligence guid- amples of projects which are considered
ance for the EIB management, enforce- as climate action; however, they lack
ment mechanisms, an effective moni- clear technical criteria for sustainability,
toring system and sanctions. which would prevent the ‘greenwashing’
that occurs when any performance im-
provement is counted as climate change
12 mitigation, despite its actual impact. All
Joint Statement by the Recommendation 13 eligible projects are weighted equally for
Multilateral Development Banks their contribution to climate mitigation.
at Paris, COP21: ‘Delivering The EIB needs to replace the exist- The Technical Expert Group on the EU’s
Climate Change Action at ing Common Principles for Climate sustainable finance taxonomy has devel-
Scale: Our Commitment to Mitigation Finance Tracking with oped comprehensive technical criteria
Implementation’ (December the Technical Screening Criteria de- for projects that can substantially con-
2015), https://www.eib.org/ veloped by the EU Technical Expert tribute to climate change mitigation and
attachments/press/joint- Group on Sustainable Finance. adaptation. The Taxonomy can thus be
mdb-statement-climate_nov- applied in the climate and environmen-
28_final.pdf. tal tracking and sustainability proofing
guidelines of the EU’s finance, such as
13 the InvestEU Programme, and could also
EIB, Common Principles 2.5 Stepping up Climate Finance be used by the EIB instead of the exist-
for Climate Mitigation ing Common Principles for Climate Mit-
Finance Tracking (15 June Setting a portfolio target for climate igation Finance Tracking.
2015), https://www.eib.org/ change mitigation and adaptation
attachments/documents/ projects across various sectors of the 2.6 Insufficient level of disclosure
mdb_idfc_mitigation_common_ economy can accelerate the contribu-
principles_en.pdf. tion to low-carbon transformation, as An external review of the EIB’s climate
long as the criteria for project selection action is seriously limited by the level of
14 are sufficiently robust to prevent gre- disclosure. Although the Bank discloses
For example, energy efficiency enwashing. It has been over a decade all climate action operations, on request
covers various projects, from since the EIB established a target for or annually in the Public Register each
buildings to industry to the climate financing at the level of 25% of May following the reported year, data
IT sector. Currently it is not its total annual portfolio, and by 2020 are only disaggregated into a few cate-
clear how much is going to the Bank will have increased climate gories. It is often not possible to under-
which sectors. The EIB already action lending outside the EU to 35% of stand the details of climate mitigation
records its investments total annual lending. In December 2015, or adaptation undertaken with the EIB
according to the NACE system it confirmed its commitment of USD 20 loan.14 Project descriptions and Environ-
internally but does not publish billion a year globally for climate proj- mental and Social Data Sheets (ESDS) do
this information. This would ects for five consecutive years, a total not state that the activity is classified as
help to make Climate Action of USD 100 billion.12 In a November 2019 climate action and do not explain how it
much more transparent and statement ‘€1 Trillion for 1.5°C’, the EIB should contribute to climate change mit-
easier to analyse. made another significant commitment igation or adaptation.
12 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate BankRecommendation 14
The EIB should improve the trans-
parency of its climate action and
environmental sustainability loans
by regular reporting and informa-
tion disclosure in ESDS and describe
projects in line with the NACE code
system of economic activities.15
Our previous research covering the EIB’s
Climate Action 2013-2015 showed that al-
though the Bank has managed to reach
its target for climate finance every year,
it has struggled to finance relevant proj-
ects in several EU countries. Despite the
significant volume invested, deep dis-
crepancies in EIB investments between
EU states remained a major issue.
In 16 EU member states, the level of cli-
mate action was lower than 25% of the
Bank’s lending in those countries, in-
cluding 12 countries where it was lower
than 15%. Although the average portion
of renewables in the Bank’s total lending
was 5.8%, in 19 countries the portion was
below this average, while in Bulgaria,
Latvia and Luxembourg the Bank has
Photo by Martin Adams on Unsplash
not financed any renewable energy proj-
ects.
Between 2013 and 2016, on average al-
most 4% of EIB lending in the EU sup-
ported energy efficiency measures
across many economic sectors; however,
in a vast number of countries, energy
efficiency has been supported only mar-
ginally, and in Bulgaria, which has one of
the most energy intensive economies in
EU, the bank did not support energy effi-
ciency at all. Additionally, the transport
sector dominated in Climate Action and 15
was weighted equally to energy efficien- The Statistical Classification
cy and renewables for its contribution to of Economic Activities in the
climate change mitigation. European Community
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 133. EIB CLIMATE ACTION IN
SELECTED GEOGRAPHIC
AREAS, 2016-2019
EIB Climate Action in EU by category,
2016-2019, % The Bank has also been able to increase its
support to climate change mitigation and
adaptation projects in almost all coun-
Transport 38% tries, except Malta and Estonia, in which
climate action was previously also well be-
Energy efficiency 24% low the average. A significant drop in cli-
mate finance is noticeable in Ireland, Hun-
Renewables 20% gary and Slovenia. Deep discrepancies in
the EIB’s climate investments between
RDI 8% EU states still exist, which to some extent
can be explained by the limited number of
Adaptation 5% projects in some countries. The EIB should
explain how its climate finance takes into
Other mitigation 4% account countries’ emissions reduction
strategies, relevant business opportunities
Waste and wastewater 1% matching relevant climate needs, existing
barriers and available technical assistance.
Afforestation and forest
management 1% Over the analysed period, climate action
lending within the EU was overwhelming-
ly dedicated for transport (38%), followed
by energy efficiency (24%) and renewable
3.1 EIB Climate Action in the EU energy sources (20%).
EIB climate action in the EU has been In the transport sector, the Bank financed
increasing systematically since 2003. Be- many low carbon solutions, such as rail and
tween 2016 and 2019, it reached an average urban transportation systems; however,
of 28.7% of the EIB’s total lending in the the lack of clear technical criteria allowed
EU. In comparison, between 2013 and 2016, for unsustainable projects or projects with
climate action reached an average of 25.8% dubious climate mitigation contributions
of the EIB total lending in the EU. to be labelled as climate action. An example
Comparison of EIB 80.0
Climate Action in EU 70.0
Member States, 60.0
% of total lending 50.0
40.0
30.0
20.0
2013-2016 10.0
0.0
2016-2019 AT UK SE FR LT IE FI DE HU BE RO CZ NL SI IT PL LV SK EE DK ES LU GR BG MT HR CY PT
14 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bankof such unsustainable transport operations These strategies must also identify the ar-
is the EIB’s loans for the automobile indus- eas where enhanced technical assistance
try to develop more efficient traditional is needed in addition to the Bank’s stan-
fuel engines, including the aforementioned dard technical support.
loan for Volkswagen used to develop cars
with installed emission defeat-devices in Renewable energy is the third most sup-
its diesel cars to rig emission tests. ported sector in the EIB’s climate action,
making a large contribution to climate
According to the estimates of the Europe- change mitigation. Renewable energy has
an Environment Agency (EEA), in order to a very significant positive impact on the
meet the 2030 target for energy consump- reduction of the amount of fossil fuels
tion, reductions of at least 32.5%, annual used and their associated greenhouse gas
reductions in EU energy consumption emissions. The use of energy from renew-
over the next decade will have to be more able sources enabled the EU to reduce its
than double the average rate of reductions demand for fossil fuels by more than 12%
observed between 2005 and 2017.16 In this and reduce greenhouse gas emissions by
context, the EIB’s significant increase in 10% more than if renewable energy sources
energy efficiency lending, from 3.6% to had remained at the same level as in 2005.17
6.2% of its entire portfolio, is worth noting. But this sector is also associated with detri-
mental environmental and social impacts,
However, as many countries struggled such as biodiversity loss, land grabbing or
with achieving the national 2020 energy increased emissions of air pollutants and 16
efficiency targets and furthermore are not is also mineral intensive, and thus requires European Environment Agency,
on track towards achieving their respec- stronger sustainability safeguards, includ- Trends and projections
tive 2030 targets, the Bank needs to devel- ing for the supply chain, than what has in Europe, EEA Report No
op better assistance strategies for support- been so far proposed by the EIB. 15/2019 (31 October 2019),
ing energy efficiency in the countries with 11, https://www.eea.europa.
the most needs. Our research shows that Renewable energy reached on average al- eu/publications/trends-and-
despite a noticeable increase in the EIB’s most 6% of the EIB’s entire lending portfo- projections-in-europe-1.
support to the sector, huge discrepancies lio between 2016 and 2019. This means that
between the countries exist. the bank has supported this sector with 17
more than EUR 13 billion over the last European Topic Centre on
In 22 countries, the EIB’s energy efficiency four years. Despite the rapid growth of Climate Change Mitigation and
lending was below the EU average, and in renewables markets, the EEA warns that Energy (ETC/CME), Renewable
several countries where energy efficiency ‘the current average pace of renewable energy in Europe 2019 - Recent
2020 targets were at risk of not being met, energy deployment across Europe would growth and knock-on effects,
such as Malta, Bulgaria, Slovakia, Hungary not enable the EU to achieve the new RES European Environment Agency,
or Poland, the EIB’s presence in the energy target, of 32% by 2030. Meeting the more (December 2019), 13, https://
efficiency sector was rather low. The EIB ambitious EU-level RES (and climate mit- www.eionet.europa.eu/etcs/
needs to give more attention to regions igation) targets for 2030 and 2050 calls for etc-cme/products/etc-cme-
that are energy efficiency laggards and steeper deployment rates of RES across all reports/renewable-energy-in-
develop financial strategies to help those sectors and especially in heating and cool- europe-2019-recent-growth-
countries to meet their climate targets. ing, and in transport’.18 and-knock-on-effects.
25 EIB energy efficiency
investments as %
20
of total lending in
15 EU member states,
2016-2019
10
EU average 6.2%
5
0
SE LT FI FR DE UK BE HR IE LV IT AT PT RO NL BG CY CZ DK EE EU GR HU SI ES PL SK MT LU
Reginal
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 1525
EIB RES investments
as % of total lending 20
in EU member states, 15
2016-2019
10
EU average 5.8%
5
0
EU BE LT UK FR PT ES GR AT IT SE CY FI DE EE BG IE HU NL MT DK HR PL LV CZ SK LU RO SI
Reginal
As the EIB’s contribution varies signifi- including for district heating networks, to
cantly across member states, it would be provide comprehensive advice on the pos-
useful for the Bank to conduct an evalu- sible alternative renewable solutions, the
ation of the extent to which its lending development of fourth and fifth genera-
contributed to achieving national 2020 tion district heating and available finance,
targets and also identify the areas where such as EU funds and national schemes.
its financial contribution would bring the
most value. In 2019, the majority of EU
countries were on track with the estab-
lished trajectory for renewables shares, Recommendation 15
with the exception of Poland, the Nether-
lands and Ireland. The bank’s renewable The EIB needs to develop coun-
lending in these countries was far below try-specific climate and environ-
the average. National contributions to the mental sustainability finance strat-
EU’s 2030 targets for renewable energy egies and strengthened technical
consumption, which will be established assistance instruments, in cooper-
in the National Climate and Energy Plans, ation with member states and on
are still not finalised; nevertheless, more the basis of their National Energy
efforts in deploying renewable technolo- and Climate Plans and the Territorial
gies will be required from every country if Just Transition Plans, which would
the EU is to meet its long term decarboni- explain the EIB’s financial role in
sation commitments. achieving national climate and en-
ergy targets. These strategies would
The new Renewable Energy Directive identify the areas of biggest climate
with the updated, EU-wide binding target mitigation opportunities and needs
of 32% RES has also prioritized certain ac- in adaptation, existing legal, eco-
tions that the EIB could further explore: nomic and regulatory frameworks
renewable self-consumption and renew- and barriers, as well as adjusted
able energy communities; cross-border technical assistance.
cooperation projects; improvements in
the sustainability of biofuels, bioliquids
and biomass; and increasing the share of
renewable energy in the heating and cool- 3.2 EIB Climate Action in enlargement
ing sector. Under the new Energy Lend- countries
18 ing Policy, the heating and cooling sector
European Topic Centre on for buildings, as well as SMEs, may still The enlargement region covers Turkey, Al-
Climate Change Mitigation and benefit from EIB loans even if an invest- bania, North Macedonia, Serbia, Montene-
Energy (ETC/CME), Renewable ment continues using fossil fuels. The EIB gro, Bosnia and Herzegovina and Kosovo.
energy in Europe 2019 - Recent needs to expand its technical assistance The EIB operates in the region on the basis
growth and knock-on effects, 13. for renewable heating/cooling projects, of the External Lending Mandate, a guar-
16 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank30
Climate Action in
25
enlargement countries,
20 2016-2019, % of total
15 lending
10
5
0 Climate Action in
enlargement countries by
y
ia
ro
a
ia
a
o
ke
in
ni
ov
rb
on
eg
sectors, 2016-2019, %
ov
ba
r
s
Se
Tu
ed
en
Ko
eg
Al
ac
t
rz
on
M
He
M
rth
d
an
No
a
sni
Transport 64%
Bo
Renewables 24%
antee fund securing the Bank’s operations, Other 6%
and also using its own resources. Technical
operational guidelines established by the Waste and Wastewater
European Commission give more detailed GHG reduction 2,5%
directions for the EIB’s lending policies in
the regions covered by the ELM. The Man- Energy Efficiency 2,5%
date has a strong climate objective, requir-
ing the EIB to establish a Climate Strategy Adaptation 1%
for the operations covered by the Mandate,
and sets a target of at least 25% funding RDI 0%
supporting climate action. We can there-
fore expect a high contribution of ELM Recommendation 16 Afforestration and
covered operations to the EIB’s overall cli- Fores Management 0%
mate performance in the region. The EIB must expand technical
assistance for heating and cooling
Technical guidelines for Turkey indicate that projects, including for district
renewable energy and energy efficiency heating networks, to provide
should remain a priority sector for further comprehensive advice on the
EIB support, also through a widening net- possible alternative renewable
work of financial intermediaries to strength- solutions, development of fourth
en the EIB’s support in favour of small and and fifth generation district heating
medium-sized investments. In the Western and available finance, such as EU
Balkans, the EIB is expected to grow its sup- funds and national schemes.
port for climate related activities, specifically
in upgrading the energy efficiency standards
of public buildings, including schools and
hospitals. It was neither renewable energy nor energy
efficiency that dominated climate action in
The EIB’s climate action in enlargement enlargement countries. The transport sec-
countries reached an average of almost 21% tor received the bulk of loans, which went
of the overall volume of the EIB’s loans over towards six projects in Albania, Turkey and
the period 2016-2019; however, most of the Serbia. Although costly rail investments
climate action operations were located in in Istanbul are needed for improving the
Turkey. In Bosnia and Herzegovina, North quality of public transportation in a big
Macedonia, Albania and Kosovo climate fi- city, they should not be the sole offer of the
nance was almost non-existent. Hence, the EU Climate Bank in the enlargement re- 19
ELM expectations that the Climate Strate- gion. Also, all the EIB’s renewable projects Technical Regional Operational
gy will help the gradual growth of the EIB’s in enlargement countries were located in Guidelines for EIB financing
climate related activities in Western Balkan Turkey, as were the overwhelming majority operations under Decision
has not materialised.19 of energy efficiency investments. 466/2014/EU, 26 May 2015.
The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate Bank | 17Recommendation 17 Recommendation 18
The EIB should develop dedicated Dedicated EIB climate action and envi-
climate action and environmental ronmental sustainability strategies for
sustainability strategies for the en- enlargement countries should explain
largement region and strengthened the Bank’s role in supporting sustain-
technical assistance instruments able energy infrastructure in the West-
in cooperation with the candidate ern Balkans.
countries and on the basis of their
National Energy and Climate Plans
once they are developed, which
would explain the EIB’s financial role The region has a massive need for energy effi-
in achieving national climate and ciency investments, such as for the insulation
energy targets. These strategies of buildings and the reduction of distribution
would identify the areas of biggest network losses. Decarbonisation of the elec-
climate mitigation opportunities tricity and heat sectors also has the immense
and needs in adaptation, exist- potential to reduce air and water pollution
ing legal, economic and regulatory if sustainable solutions are used. Given the
frameworks and barriers as well as high share of existing hydropower in the
adjusted technical assistance. region, and the relatively good interconnec-
tions between most of the countries, the re-
gion is in a strong position to balance variable
renewables and should not be distracted by
The lack of EIB investments in sustain- unsustainable solutions such as gas.
able energy infrastructure in the West-
ern Balkans needs to be addressed as a Particular support is needed for household
matter of priority. In Serbia and Bosnia energy efficiency measures, heat pumps,
and Herzegovina, new lignite power prosumers and energy communities. These
plants are still being planned. These may not be simple operations for the EIB
plans starkly conflict with the Paris due to their dispersed nature, but they are
Agreement’s aim of limiting climate very much needed and certainly will not
change to 1.5 degrees Celsius. All the happen without the EU and EIB’s support.
projects have serious economic, envi- EIB staff have on some occasions men-
ronmental and legal weaknesses, which tioned that the Bank would like to do more
would burden electricity consumers and on energy efficiency in the region and that it
taxpayers for years to come. In addition, has difficulty finding energy projects which
existing Balkan coal plants breach air meet its standards. We agree that this is a
pollution laws. A study by the Health real problem and support the EIB’s commit-
and Environment Alliance, Bankwatch ment to ensuring its standards are main-
and others, showed that in 2016, 16 exist- tained. Nevertheless, this problem calls for
ing coal plants emitted as much sulphur additional analysis and is not sufficiently
dioxide and dust as 250 plants from the explored in the EIB ELM Climate Strategy.
EU. As a result, it is estimated that they
are responsible for around 3 900 prema-
ture deaths annually, spread between
20 the region and nearby EU countries. 20 Recommendation 19
CEE Bankwatch Network, Consequently, the EIB’s current Climate
Comply or close. How Western Strategy for External Lending Mandate EIB support for energy infrastruc-
Balkan coal plants breach does not adequately address climate-re- ture in enlargement countries should
air pollution laws and what lated issues in enlargement countries prioritise investments in energy ef-
governments must do about and does not form a solid basis for a ficiency of buildings and small scale
it (December 2019), https:// systematic increase of EIB involvement renewable projects for prosumers
bankwatch.org/publication/ in promoting sustainable solutions to and energy communities in order to
comply-or-close-how-western- displace coal and other fossil fuels in support existing energy infrastruc-
balkan-coal-plants-breach- the region. It would certainly need to go ture and prevent development of
air-pollution-laws-and-what- deeper if it is to justify the idea that the fossil fuel based infrastructure.
governments-must-do-about-it. EIB is a Climate Bank.
18 | The road less travelled: How the European Investment Bank’s Climate Roadmap 2021-2025 can lead it to become the Climate BankThe region’s transport system is currently
too reliant on roads and motorways, and
short-haul flights have become common
due to the poor public transport connec-
tions between countries. These trends are
putting the region on an unnecessarily
carbon-intensive trajectory. Sustainable
transport needs to be made more promi-
nent in the EIB’s investments in the region,
and railways and urban mobility put at the
fore. Electrification of urban public trans-
port and pedestrian/cycling infrastructure
need to be prioritised and local authorities
assisted to ensure public participation and
investment into these modes.
Recommendation 20
The Bank should reprioritise its in-
vestments in the transport sector in
enlargement countries from roads
and motorways to public transpor-
tations solutions in order to avoid
putting the region on an unneces-
sarily carbon-intensive trajectory.
The circular economy, too, needs the EIB’s
support in the region. EU financing sourc-
es, including those of the EIB, must be
used only for measures which contribute
to the circular economy, especially waste
prevention, recycling, and composting.
They must not be used for waste inciner-
ation, which locks in cities, financially and 21
materially, for decades and competes with This section draws
recycling and prevention initiatives.21 on Joint NGO
proposals on the
Green Agenda
for the Western
Photo by Dan Meyers on Unsplash
Recommendation 21 Balkans, 3 April
2020, https://
The circular economy should be- bankwatch.org/
come one of the pillars of the EIB’s wp-content/
climate action and environmental uploads/2020/04/
sustainability strategies for en- NGO-paper-
largement countries, focusing es- on-the-Green-
pecially on waste prevention, recy- Agenda-for-the-
cling, and composting. Western-Balkans.
pdf.
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