Keynote address by EIB President Werner Hoyer at B20 Summit focusing on climate finance
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Ladies and gentlemen,
It is a great honour to be with you today. Let me thank you for this opportunity to talk about the transformation for inclusive growth.
In these exceptional times, the gravity of the COVID-19 crisis is still unfolding. We are required to take all the necessary steps to cushion the health and economic fallout. But, while this is already a daunting challenge per se, we have to think and plan for the recovery and for the future. We have to be decisive about the principles that will guide us.
Let me stress to you that solidarity and partnerships will be indispensable.
The COVID-19 crisis, from a health tragedy and economic disaster, is already a social crisis: the World Bank estimates that additional 88 million people will live in extreme poverty in 2020.
It is clear that COVID-19 has derailed many global efforts in meeting many Sustainable Development Goals. Africa has lost decades of efforts for sustainable development, and millions of jobs – without the protection of social safety nets.
The consequences of the climate emergency are still unfolding, and again the poor and the vulnerable are the most affected.
Let me share with you my belief that any response needs to take a very clear path towards sustainable and inclusive growth.
The virus is taking an immense toll of human lives.
But unfortunately people also die, today, now, as I speak, as a consequence of climate change. They die of floods, of droughts, of vast and unstoppable forest fires. They die because all these scourges lay their countries to waste, leaving them with nothing. And in some cases, they die on perilous journeys, fleeing their homes to escape extreme poverty.
It is imperative that COVID-19 does not dilute our commitment towards climate and sustainable growth agendas. A stronger and faster action, and a more ambitious plan for the path towards meeting SDGs need to be built.
It is shocking to see how fast the clock is ticking.
Think of this: All five of the warmest years since 1880 have occurred since 2015. We face an unprecedented loss of biodiversity and significant threats across global ecosystems.
We do not have any buffer time left for climate.
So, how to square the circle?
How to combine short term recovery needs and long term action?
To be very frank: investing and creating 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.
The pandemic has lead us to rethink many aspects of our lives. Let us turn it into a defining moment in our fight against climate change and environmental degradation.
Our recovery must be different.
We need to transform the way our economies work by investing, heavily, on new technologies, on skills and on infrastructure, all entailing climate mitigation and climate adaptation.
We have to replace lost jobs with sustainable and socially inclusive economic activity, adapted to - and resilient to - climate shocks.
What does this transformation really mean for the economy and public policy?
Climate action requires serious structural change and it implies tremendous investment. In Europe, to achieve the 2030 greenhouse gases reduction target alone, we need an estimated €350 billion of additional investment annually. That’s a double-digit increase compared to current total investment levels!
Yet volume is not the only important requirement. We must focus on the quality of each investment and on its impact.
How much greener does it make the recovery?
Is it economically and financially viable across its lifetime?
How does it support competitiveness, jobs, quality of life?
We must deliver an abundance of low-cost renewable power, for example. We have to mass electrify transport, we have to improve energy efficiency in everything we do. We need to develop and deploy low-carbon energy carriers, with clean hydrogen being the current frontrunner in that field. And decarbonising energy-intensive industries through the application of new technologies. All these actions require massive investment in Research and Development.
While the European Union was the first to commit to net-zero, other countries are going in the same direction. According to a recent statement by President Xi, China – producing more than a quarter of the world’s Co2 - will aim to reach climate neutrality by 2060.
This commitment reinforces the sense of a new global paradigm requiring massive structural change along the way.
This underlines the importance of climate and environmental issues to long-term global competitiveness and growth.
That said, we need to remember that for some countries the recovery from the effects of COVID-19 and the transition towards net-zero will be extremely complicated for many people, firms and territories. The needed changes cannot be at the expense of the poorest, or of the weakest in our societies or countries.
They need to bring widespread opportunities, jobs, and quality of life: they should be sustainable from an ethical and societal standpoint.
The success in combining environmental sustainability and improve social development will be measured by the capacity to reach out to communities affected by conflict, fragility and migration.
A year ago, we at the European Investment Bank Group announced our intention of transforming into “the EU climate bank”. This represented a giant step in our ambition to contribute to the transition to carbon-neutrality and increased climate resilience. To make this happen, 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, 50 percent, will go to climate action and the environment by 2025 and beyond.
- Secondly, we aim to support €1 trillion of green investment over the critical decade ahead.
- Finally, we pledge to align everything we do to the goals and principles of the Paris Agreement by the end of this year. Two months from now, all our new financing will be Paris-aligned. We will put climate in everything we do.
And we will be rigorous about this. As the EU climate bank, it would make no sense for the European Investment Bank Group to support the Paris Agreement with 50 percent of our finance if, at the same time, some of the other 50 percent of our lending undermined the low-carbon goals.
Therefore, in line with the principles of sustainable finance, we will ensure that all our financed projects do no significant harm to the low-carbon and climate-resilient goals of the Agreement.
This ambition will entail huge changes. At the European Investment Bank Group, we need to accelerate our green financing activities to reach the ambitious goals set by our shareholders, but we have a solid foundation to build on.
Since 2012, we have provided €170 billion of finance supporting over €600 billion of investment in projects that reduce greenhouse gas emissions and help countries and regions to adapt to the impacts of climate change. This makes the European Investment Bank one of the world’s largest providers of finance for projects supporting climate action and environmental sustainability. Last year alone, we invested approximately €21 billion in green projects. This accounted for 34 percent of our lending volume.
These activities, like the other lending of the European Investment Bank, are funded through the issuance of bonds on international capital markets.
As the inventor of green bonds in 2007, we have been instrumental in the development of the green capital markets. Since that first issuance, we have supplied more than 33 billion euros of Climate Awareness Bonds, as we call our green bonds, all allocated to climate change mitigation.
More recently, we have pioneered Sustainability Awareness Bonds, the proceeds of which contribute to environmental and social sustainability objectives.
Financial markets have evolved rapidly over the last years so that green investments can flourish. We have contributed actively to the development of the EU’s Sustainable Finance Taxonomy and to the draft EU Green Bond Standard. This voluntary standard is an important step towards a wider and yet more transparent and robust Green Bond market.
All this work on the Taxonomy is aimed, on the one hand, at preventing greenwashing.
A more positive, transformative way to look at it is to say that it makes green markets more transparent, which in turn makes them more attractive to private investment. And much of all the long-term, green investment that we need will be driven by the private sector.
But the Taxonomy and the Green Bond Standard are excellent examples of the behind-the-scenes role the public sector can play in accelerating and facilitating the reorientation of financial flows towards sustainable finance.
…Climate will be central to our strategy, global operations, and cooperation with others.
We are expanding the scope and the reach of our partnerships.
To maximise our global impact, we are ready to partner with others not just as an incubator for finance, but an incubator for knowledge and ideas that drive the transition to a low carbon environment.
Ladies and gentlemen,
For a true recovery, the resources available must be spent wisely, with a long-term vision in mind. Every cent spent on the recovery must have positive climate, environmental, and social impact combined. This will allow us to introduce 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.
COVID-19 has reminded us of the fragility of human life and the importance of standing together. The purpose of economic activity is to sustain our societies and the lives of our citizens. Now is the time to recognise that we must take a new path to achieve this goal.
Let us turn our pandemic recovery into a defining moment in our fight against climate change and environmental degradation.
Thank you very much!