Latest update on climate mitigation finance

The SDG Knowledge Hub of the International Institute for Sustainable Development (IISD) provides the recent update on European developments in climate mitigation finance.

 

Climate Mitigation Finance Update: Focus on Europe

In the past month, Europe has seen a flurry of activity relating to finance for climate mitigation, including a €300 million investment partnership between the European Investment Bank (EIB) and Chinese Eximbank, a commitment from the European Commission to increase spending on climate change to 25% of the total budget between 2021-2027, and an announcement from the European Bank for Reconstruction and Development (EBRD) to begin disclosing climate-related financial risks and opportunities.

The European Investment Bank (EIB) has signed an agreement with the Export-Import Bank of China (Eximbank) for a €300 million loan towards climate finance. Expected to leverage other financiers for up to €1 billion in investments for reducing carbon emissions and improving environmental protection, the agreement is the first climate finance-focused deal between the EIB and Eximbank. The €300 million loan will be directed towards renewable energy, energy efficiency, sustainable transport and water investments in the provinces of Beijin, Tianjin and Hebei. Following the launch of the partnership, the specific projects to be supported will be identified in the coming months. Priority will be given to projects with high levels of pollution, where climate mitigation actions can have the most impact. Also in the past month, EIB launched a €500 million climate awareness bond and signed a €100 million loan for “nearly-zero-energy-buildings” in Denmark.

Under future budgetary plans for the period 2021-2027, the European Commission (EC) has pledged to spend €320 billion on climate change mitigation and adaptation, one quarter of its total budget and an increase of €114 billion in comparison to the current budget. Hailed as an opportunity to shape the future of the European Union (EU) in a spirit of solidarity between Member States by EC President Jean-Claude Juncker, the plan represents an increase in the climate-related percentage of the EU budget, though falls short of the 40% target that French President Emmanuel Macron suggested would enable an ambitious transition to a low-carbon economy.

In response to the announcement, Climate Action Network (CAN) Europe, a network of over 140 organizations working on climate and energy issues, welcomed the increase in the planned budget, underscoring that this points to recognition of the need to deliver on higher climate ambition, but also called for a target of at least a 40% spending of the EU budget post-2020 to meet the Paris Agreement goals. Furthermore, CAN Europe expressed concern at reports that overall spending in practice could amount to only 20% of the total budget, according to information from draft versions of the European Commission’s regulation on the European Regional Development Fund and on the Cohesion Fund.

The post-2020 budget announcement from the European Commission also coincides with the announced end of the operations of the European Commission Technical Assistance Facility (EC TA) linked to the European Energy Efficiency Fund (EEEF), which has supported energy efficiency projects since 2011, with a total investment volume of €194.4 million, and estimated savings of 26,701 tonnes of CO2e. Following the end of the EC TA, the EEEF has created a Technical Assistance Facility to provide technical assistance support to public authorities.

In further developments from Europe, the European Bank for Reconstruction and Development (EBRD) has become the first Multilateral Development Bank (MDB) to join the list of supporters of the Task-force on Climate-related Financial Disclosures (TCFD), announcing its commitment to disclose climate-related financial exposures. Initiated by the Financial Stability Board (FSB) in response to a call from the G20 economies in 2015, the establishment of the TCFD responds to concerns that failure to fully assess and reflect the risks to financial operations from growing greenhouse gas emissions and climate change poses a risk to the global financial system. The TCFD recommendations provide guidance on how to disclose climate-related financial risks as well as opportunities.

EBRD laid out its initial disclosure activities in its 2017 Sustainability Report, released 10 May. The report provides an overview of the bank’s activities in 2017, noting among other items that its 2020 target of a 40% climate financing share of total annual investments was met in 2017, three years ahead of schedule. The report notes, however, that despite progress in 2017, “the pace of global climate change is accelerating faster than the world’s response to it,” underscoring EBRD’s intention to further step up support, influence and innovation in 2018.

Several other activities, in Europe and beyond, have also been announced:

  • Amman joins EBRD Green Cities programme
  • EBRD’s Green Cities Framework kicks off in Minsk
  • EBRD finances the largest solar power plant in Mongolia
  • IDB Invest finances 48MW Achiras wind farm in Argentina
  • $300 Million World Bank Operation to Help Scale Up India’s Energy Efficiency Program
  • Armenia’s first large-scale solar plant gets the green light
  • World Bank and UNOPS sign US$50 million solar project in Yemen
  • First joint renewable energy project signed in Kazakhstan

 

 

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