10 things you need to know about the EIB and climate action

The EIB is not only the global leader in raising significant loans for climate action worldwide but is helping to deliver significant reductions in carbon and energy savings.

Our 2014 sustainability report notes that as a result of the EUR 19 billion of climate lending for that year, 3 000 GWh of energy was saved and 12 000 GWh of energy was generated from renewable sources. Our lending overall in 2014 led to 3 million tonnes of CO₂ emissions being avoided. Over the next five years, thanks to our new climate strategy, we hope to provide more than EUR 100 billion for climate investment worldwide.

The EIB is a pioneer in the field of climate finance, with experience, credibility and a proven track record. Green Bonds are a notable example.

The Green Bond market was pioneered by the EIB in 2007 to support green projects, such as renewable energy and energy efficiency. With over EUR 10 billion raised in Green Bonds, we are the world’s largest issuer. Green Bonds are unique in the investment world; the money raised through them can only be allocated to green projects. Notable examples of their success include a long-awaited power line across the Pyrenees that will enable excess Spanish renewable energy to be exported and ease one of the worst network bottlenecks in Europe. The INELFE interconnection between France and Spain is the first trans-European direct current link using innovative converter technology. Last October we agreed to finance the project to the tune of EUR 350 million and it was inaugurated earlier this year having being allocated funds from EIB Green Bonds.

Helping communities in the frontline of climate change to adapt must be a key part of the global response to climate change. Getting the balance right between mitigating climate change and creating a climate-resilient society is one of the three pillars of our Climate Strategy and it directly supports the Sustainable Development Goals. We are already working on this!

The impact of EIB-supported smaller funds and projects on the ground targeting adaptation in developing countries is already significant. Our equity investment in EcoEnterprises Fund, a pioneering impact fund with a women-owned management team, is helping to build strong local networks and create sustainable livelihoods, fostering resilience within communities and helping people adapt to the changes that climate change will inevitably bring. We were a lead investor in the Fund, providing instrumental support and helping it grow to its current base of 22 investors and more than USD 35 million in committed capital. The Terrafertil project in Ecuador was supported by EcoEnterprises and underlines the link between development, environment and climate. Terrafertil is  a quality supplier of dried tropical fruits, snack mixes and juices, under its label Nature’s Heart in Latin America, the US, Europe and Asia. The company is the largest producer of golden berries in the world. Terrafertil provides employment for 324 local people. Agriculture is extremely vulnerable to the effects of climate change but thanks to this project, local people are contributing to a low-emission, sustainable enterprise that encourages conservation of the local environment.

Forging a partnership with other Multilateral Development Banks ahead of the Climate Conference in Paris is vital to improve our impact and raise the finance needed. We at the EIB have been leading the way, particularly on agreeing a common way to measure our impact and our ambitions – and the idea of “mainstreaming” climate action. Collective action is vital.

With others like the World Bank, the IMF and the European Bank for Reconstruction and Development we are working together on a number of important initiatives such as developing definitions for mitigation and adaptation projects. Definitions are essential for counting where the money is actually going and for fostering investments in certain sectors or technologies. The “mainstreaming” principles are part of the puzzle and a way of applying our climate commitment to everything we do. The EIB loan of GBP 90 million to build the new Royal Liverpool Hospital is a case in point. When completed, Liverpool will host one of the largest hospitals in the UK, with 18 theatres, 23 wards, 646 single bedrooms, a large Clinical Research Facility and a 40-bed Critical Care Unit. This is the city’s largest ever development, which will create 750 jobs during construction alone. As well as this, the project will reduce the environmental impact of the existing hospital through energy efficiency measures and reduced unit energy consumption.

Raising finance for renewable energy in developing countries and emerging economies is not always easy. Having the EIB on board attracts others to join and provide climate finance for projects, initiatives, sectors and in parts of the world that might struggle to gain support otherwise. We are pioneering the field of innovative climate finance with funds like GEEREF.

Advised by the EIB Group, the Global Energy Efficiency and Renewable Energy Fund (GEEREF) is an innovative fund-of-funds that looks to bring private sector capital into renewable energy and energy efficiency projects in developing countries. This innovative fund invests in private equity funds which in turn finance private sector projects – creating a catalytic effect in which for every euro invested in GEEREF over EUR 50 will be invested in projects on the ground. Launched in 2008 with public funding of EUR 112 million from the European Union, Germany and Norway, GEEREF welcomed its first private sector commitments in 2014. By May 2015, GEEREF had attracted EUR 110 million from commercial investors, reaching its target fund size of EUR 222 million. GEEREF’s funds have invested in 39 clean energy projects so far, with robust financial returns and clear social and environmental benefits. For example a EUR 10 million investment in the Evolution One fund, which in turn invested in the Kouga Wind Farm approximately 80 km west of Port Elizabeth in South Africa, will contribute to greater energy security and alleviate poverty by creating new jobs. 219 people, predominantly from the local community, were employed during the 26-month construction phase. There are 30 employees with permanent jobs since the wind farm became operational in March 2015.

The EIB-backed GEEREF was among the first investors to support the Africa Renewable Energy Fund (AREF), which is now building a geothermal energy plant that will supply enough energy for half a million homes in Ethiopia. The project takes advantage of the constant heat and steam generated by the Corbetti volcanic caldera 250 km south of Addis Ababa. The USD 2 billion project is currently in a pilot stage, producing 2 megawatts of electricity, but within eight years it will supply 500 megawatts, fully a quarter of Ethiopia’s entire consumption. Alastair Vere Nicoll, managing partner for the fund running the project, says GEEREF was key because its support catalysed others to invest in AREF. Now that the concept is proven, plans to set up a new GEEREF-style vehicle with a target size of close to EUR 1 billion are on the table.

Last spring, South Africa also saw its first concentrated solar plant inaugurated in the small town of Pofadder in the Northern Cape Province. Backed by a EUR 210 million EIB loan, the 100 MW plant will light up 80 000 households, with the additional benefit of reducing South Africa’s carbon emissions by 300 000 tonnes every year.

Forests are the planet’s way to tackle harmful carbon and EIB projects are increasingly focusing on this area in Europe, its neighbourhood and beyond. One project in Turkey is now being studied closely in the hope that it can be replicated in other parts of southern Europe and beyond.

Turkey is one of the most erosion-prone countries in the world as well as being at risk of forest fires like much of the Mediterranean region. Forest rehabilitation and afforestation can tackle mitigation and adaption challenges in the field of climate action. An EIB loan of EUR 150 million to support Turkey’s action plan has already paid off with visible improvements on the landscape. The investment covers reforestation, erosion control measures and forest fire-fighting capacity and equipment. As well as contributing to local employment it is estimated that the rehabilitation and afforestation measures will avoid 230 000 tonnes of CO₂ emissions, which is equivalent to 150 000 people taking return flights from Ankara to New York.

And it is not just money that we lend, but also our expertise: our collective know-how on managing financial products for climate action is invaluable. Commercial banks would not spend years on first-time fund managers, but the EIB has with fruitful results.

The EIB’s new energy efficiency programme, PF4EE (Private Finance for Energy Efficiency), aims to lend EUR 750 million to commercial banks by 2017, which the banks will then onlend to small businesses to spend on energy efficiency infrastructure. The initiative will encourage local banks in a number of European countries to increase lending for energy efficiency projects by both providing long-term low-cost loans and credit risk protection to financial intermediaries, as well as improving lending expertise in the sector. The initiative is managed by the EIB and the European Commission will provide EUR 80 million for credit risk protection of energy efficiency loan portfolios and in support of technical experts funded from the Life programme. The EIB signed its first PF4EE loan to Komercni Banka of the Czech Republic for EUR 75 million and expects to complete a deal with a Spanish bank before the end of the year.

Another shining example of how the EIB is providing knowledge and expertise is the African Renewable Energy Fund, a dedicated renewable energy fund focused on sub-Saharan Africa. EIB-supported, the fund has USD 200 million of committed capital to support small to medium-scale projects.

Our projects aim to bring stability and positive climate impacts to regions under pressure. Many of the climate projects we support not only tackle climate issues directly but also help climate-sensitive regions to safeguard jobs in sustainable sectors.

One notable example of the Bank’s role in creating a new renewable energy industry in a developing country is the Tafila Wind Farm in the Jordanian desert. This is a part of the world that desperately needs stability and long-term lending. And the EIB is stepping up. The Tafila Wind Farm in the Jordanian desert started producing electricity commercially on 16 September, after 21 months of construction and testing. In the shadow of conflict and civil unrest in neighbouring Syria, Iraq and Egypt, the USD 287 million project defied regional instability just as surely as its towers stand unbent by the desert gusts. The project’s financial backers, which include the European Union’s bank, the European Investment Bank, believe Tafila’s towers will herald a new industry that will transform the country’s economy. Jordan aims for renewable energy to contribute 10% of its needs by 2020. That is vital to a country whose energy costs eat up 20% of its gross domestic product. The EIB’s support also enabled the Jordanian Government to create the administrative infrastructure to handle half a dozen solar projects in which the Bank is already involved, as well as a USD 80 million deal that the Bank expects to sign next month with the Jordanian Government to finance the infrastructure for connecting future renewable energy projects to the country’s electrical grid.

The EIB is leading the way in innovative finance to support the new Sustainable Development Goals. The recent UN summit in New York underlined how development and climate goals are interlinked. This is already understood in many of the projects and initiatives supported by the EIB.

Althelia Climate Fund is investing in ecosystem conservation and sustainable agroforestry, applying the highest standards of social, environmental and governance criteria. Returns are generated through the production and sale of real assets (in the form of sustainable agriculture and soft commodities such as certified cocoa and coffee, and FSC timber) and presently undervalued environmental assets (including carbon emission reductions and other payment for ecosystem services such as biodiversity and water) to several complementary high-growth markets. Operating in Africa, Asia and Latin America, the EIB commitment in this area is around EUR 15 million. The impact goes beyond just the generally understood concept of climate. The fund and its projects contribute to other areas like gender equity and the economic improvement of communities whose livelihoods depend directly and indirectly on natural ecosystems.

We at the EIB have been working to foster innovation, support new industries, create confidence and attract private investment even at the height of the financial crisis in Europe. The development of offshore wind is a prime example of this.

Take Portugal’s floating wind farm - WindFloat, part of the country’s largest utility Energias de Portugal. The EIB first stepped in in 2008 when private investment dried up around offshore wind farms. The financial crisis could have wiped out offshore farms, where the technology was still in its early stages. Commercial banks did not want to take the risk. But EIB technical experts recognised the potential. Onshore turbines are typically 2 or 3 megawatts. Offshore they are 6 megawatts and increasing in size with each new project. This industry just would not have happened without the EIB. And the EIB involvement attracts other financial institutions at a crucial “scaling up” stage. The EIB aims to contribute EUR 25 million in loan finance toward building a floating wind farm of full operational size, producing three times as much energy as the prototype. It should generate enough electricity to supply more than 20 000 Portuguese households. Have a look at this video to see what we are talking about!