Werner Hoyer, president of the European Investment Bank:

‘Don’t let COVID-19 divert us from climate challenge’

Werner Hoyer, president of the European Investment Bank:

‘Don’t let COVID-19 divert us from climate challenge’

Climate change means that we, too, must change. Our public policy and public sector institutions must lead the way, so that private investment joins us in transforming our economies to counter global warming. If we make the right changes — and quickly — we can plot a path to sustainable jobs and growth.

‘We cannot turn away from climate action’

The European Investment Bank (EIB) has responded to this impetus for change with a new path towards a cleaner, greener future, as set out in our Climate Bank Roadmap (CBR). Approved on 13 November 2020 by our Board – representing the 27 member states – the CBR outlines how we will implement climate action in every area of our business during the period 2021 to 2025. Reflecting EIB’s role as the climate bank, it demonstrates our long-term commitment to climate and environmental finance, even as we recognise the vital role green investment must take in the recovery from COVID-19. Some argue, of course, that climate change should take a back seat now, because job creation should be the sole reaction to the COVID-19 slump – whether those jobs are in sustainable, green sectors or in polluting industries that will soon have to wind down. This argument is rooted in the fact that COVID-19 is such a present and potentially lethal threat to millions. Unfortunately, climate change is killing people, too, in floods, droughts or vast and unstoppable forest fires.

‘How green can we make the recovery?’

Resilient We do not have the luxury of turning from the path of climate action, even temporarily. To create jobs in industries with no long-term future is money wasted. To do so at a time when we can redirect investment to sustainable jobs in industries that actively counter climate change would be a terrible error. Our recovery must be green. Despite the loss of life and incomes, the COVID-19 crisis allows us to “build back better”, to replace lost jobs with sustainable and socially inclusive economic activity, adapted and resilient to climate shocks. Through the European Green Deal, the EU has endorsed climate neutrality by 2050. To ensure a smoother structural adjustment, the European Commission recently proposed reducing emissions 55 percent by 2030, compared to 1990 levels. This requires serious investment. To achieve the 2030 greenhouse gases reduction target alone, we need an estimated 350 billion euros of additional investment annually. Yet, volume is not the only important requirement. We must focus on the impact of each investment, asking how much greener it makes the recovery. We must deliver an abundance of low-cost renewable power. We have to electrify the transport and heating sectors. We need to develop and deploy low-carbon energy carriers, with clean hydrogen being the current frontrunner in that field. We must promote energy efficiency and decarbonise energy-intensive industries through the application of low-carbon technologies. We must invest in green innovation to ensure that our economies and societies become more resilient to a changing climate and to preserve and enhance our natural capital.

Paris Of course, we need to remember that for some countries the recovery from the effects of COVID-19 and the transition towards net-zero will be more challenging than for others. We must ensure that the transition is just. Supporting economic and social cohesion was one of the founding principles of the European Investment Bank in 1958. It continues to be a core priority, and thus the European Investment Bank Group seeks to ensure that no people or places are left behind along the transition route. This is of particular concern to regions that currently rely on carbon-intensive industries as a major source of local employment and income. The European Investment Bank is a key contributor to the EU’s Just Transition Mechanism. Most prominently, we will be the financing partner for the public-sector loan facility, where we expect to unlock investment of at least 25 billion euros. All these factors are part of our CBR. Fully embracing our role as the EU climate bank, we have set ourselves three high-level operational goals: firstly, the European Investment Bank will dramatically increase its level of support for climate action and environmental sustainability investment. Half of our overall annual lending volume will go to climate action and the environment by 2025. Secondly, we aim to support 1 trillion euros of green investment over the critical decade ahead. Finally, we have pledged to align everything we do to the goals and principles of the Paris Agreement by the end of 2020.

Leadership Even before the CBR, the European Investment Bank had already taken decisive steps to align all of its activities with the principles of the Paris Agreement. Through our 2019 Energy Lending Policy, our support for the energy sector is now aligned to a net-zero greenhouse gas emissions path. We do this by phasing out support for upstream oil and gas production and large-scale energy production based on unabated oil, natural gas, coal or peat. We are also withdrawing from financing traditional gas infrastructure. Instead, we will focus on supporting the renewable energy sector, investments in energy efficiency, and the development and deployment of alternative fuels and their enabling infrastructure. Apart from building upon the commitment to stop supporting traditional fossil fuel energy projects, our CBR explains how we will meet all these commitments. The most important three elements are the following:

  • Increase the percentage of EIB finance for climate action and environmental sustainability from about 30 percent today to at least 50 percent of the bank’s total volume by 2025.
  • Align all new finance with the principles and goals of the Paris Agreement as of the end of this year.
  • Support 1 trillion of investment in climate action and environmental sustainability from 2021 to 2030.

Next to this, the EIB commits to maintaining its leadership in the capital markets, where the EIB was the first institution to issue a green bond and is still the largest supranational green bond issuer. These bonds will allow us to continue to focus on clean energy, innovative technologies and digitalisation, which will play a major part in modernising and decarbonising industries, but also introduce new tools that draw on robust climate data to better understand climate risks. All in all, this focus on climate will increase the available financing that helps societies adapt to climate change happening right now and makes economies more resilient to future problems. A green recovery will allow us to avert the climate crisis by introducing the deep structural shifts in our economies that are necessary. It would also demonstrate to the younger generation that we have heard their concerns for the future, thus providing social solidarity. Now is the time to recognise that we must take a new path to achieve this goal. Werner Hoyer, president of the European Investment Bank

‘We must ensure the transition is just’

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