Vice-President Navarro’s keynote address at the World Climate Summit 2019 held in Madrid on 8th December

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Let me start by thanking World Climate for the invitation. It is a great pleasure and an honour to participate in the 10th edition of this summit.

We have an unprecedented challenge ahead of us. The next decade is our last window of opportunity to avoid catastrophic climate change.

 

The slogan Chile has chosen for this COP could not be more appropriate. We are at a crucial moment and it is time for action.

We must act fast and we must work together. A solid partnership between the public and private sector is thus fundamental.

This is why the discussions taking place today, here at the Investment COP, are crucial. To succeed in the fight against climate change, we need a strong involvement from the business and investors community.

This is precisely the focus of my intervention today:

  • what is needed to scale up the critical investments to facilitate the implementation of the Paris Agreement.
  • and what role multilateral banks can play in this journey.

 

The outlook today is anything but encouraging.

Experts have told us that to contain global warming to a safe level of below 1.5 degrees, we need to cut drastically emissions, and achieve climate neutrality by mid-century.  

Yet, global emissions are reaching record levels and with no sign of abating.

Each new report that is published on the impact of climate change sets off alarm bells.

 

According to scientists, we are heading to a temperature increase of between 3 and 4 degrees by the end of the century. If this happens, large areas of our planet will become uninhabitable, with irreversible consequences for the economy and for people across the globe.

However, there are also some positive signs. Citizens around the world are concerned about climate change. Society is moving, especially amongst the younger generations. The business and financial communities are also starting to be active.

 

These trends are very evident here in Europe, where climate has become a top political priority.

The European Commission is expected to present in the coming days a European Green Deal to make Europe the first carbon-neutral continent in the world by 2050.

Europe is doing well in taking responsibility, and a leading role in international efforts to address this global challenge.

Yet, Europe is not alone: 77 countries and over 100 cities have committed to net zero carbon emissions by 2050. And I am convinced many more will follow.

Addressing climate change is feasible, but we cannot minimize the scale of the challenge.

The transition to a carbon neutral society is a complex process. It will require a great transformation of our economies and lifestyles.

Massive investments will be needed in the next 10 to 15 years to change the face of our societies and economies.

According to the United Nations, to stay below the 1.5 degree target, the world will need to invest more than 3.8 trillion dollars every year in the next 30 years.

 

The financial challenge is huge.

No public balance-sheet can cope with such needs in isolation. Also, the high levels of public debt limit the capacity to act through public investment in many countries.

It is clear that private investment and financial markets must play a key role if we want to undertake these investments.

In the capital markets, green bonds can be a very useful tool. The European Investment Bank is well aware of its potential, as it pioneered this market in 2007 and is today the largest multilateral issuer of this instrument.

However, although the green bond market has seen impressive growth in recent years, it still represents a very small segment of the global fixed income market.

 

The big question is: how to make the financial system channel financial flows towards the type of sustainable projects that are vital for the transition to a low-carbon future.

The solution necessarily involves making the financial system greener, so that investors take into account climate and sustainability considerations in their decisions.

Here, again, positive developments are taking place.

Today, ESG considerations are more and more important for investors.

Transparency and disclosure on climate-related aspects and risks is also increasing in the market, which is key to enable investors to make more informed investment decisions.

In Europe, a new European taxonomy on climate sustainable investments is just a few steps away from adoption after the key decision by the EU trilogue negotiators only a few days ago. This is an important milestone that will give clarity to investors on what a green investment is.

It will provide a common language that will prevent green washing in the markets.

It’s not just the regulators that are responding. Climate risks are attracting increasing attention from supervisors and central banks.

Recent announcements from the Bank of England and the European Central Bank on their plans to undertake climate stress tests are very telling of the direction in which the financial system is heading.  

Now, it is important to ensure that initiatives across jurisdictions are consistent, as financial markets today know no border.

Public banks and multilateral banks can also play a fundamental role in helping to scale up critical investments for the transition. They can direct capital towards sustainable investment, demonstrating the opportunities and potential returns. They can help mobilise and crowd-in other investors, using their catalytic role and reducing the risks associated with some critical projects.

 

For the EIB, the course is clear. For some time now, climate action has been a top priority of our activity. In the last 7 years, we have provided more than 150 billion euros of financing to climate and environment action. In this period, we have mobilized more than 550 billion euro investments to these objectives. This makes us one of the world’s largest multilateral financiers of climate and environment projects, if not the largest.

Yet, it is evident that the scale of today’s climate challenge requires even greater ambition. Business as usual is not an option.

This is why a few weeks ago, we approved a new climate strategy setting out our new ambition to reaffirm our role as the EU climate bank.

 

We have set ourselves three fundamental goals.

First, we plan to unlock 1 trillion euros of investments globally in climate and environment in the next decade. We will take advantage of our leverage capacity to accelerate the investments needed for decarbonisation.

Second, we will gradually increase our levels of climate and environmental financing to reach 50% of our activity by 2025.

Finally, the EIB Group is committed to align all our financial activities to the goals and principles of the Paris Agreement, so that none of our operations harms these goals and principles.

A clear example of our firm commitment is our ambitious energy lending policy. Under this policy, by the end of 2021 we will stop financing energy projects based on fossil fuels, including gas. We have become the first multilateral bank to adopt such a decision.

 

Let me conclude.

The transition to a low carbon future is challenging but inevitable.

From an economic point of view, it makes total sense. If we do not act now, the costs in the future will be much higher.

Yet we cannot forget that this transition brings huge opportunities for economy and business.

This gives us the possibility to modernize our economies and make them more sustainable.

The direction of travel is evident for public banks but it is becoming clear also for the private sector.

Investment opportunities are big. If the right choices are made today, the gains could be sizable.

The business and the financial sector are now more aware of this than ever.