It is a great pleasure to be here with you in person in Rome this morning.
Let me begin by thanking our hosts at Cassa Depositi e Prestiti – both Chairman Giovanni Gorno Tempini as well as CEO Dario Scannapieco, a dear friend and highly estimated former colleague at the EIB, for assembling such a fine programme and distinguished selection of speakers.
The Long-Term Investors Club brings together the leading financial institutions with a public mandate from the world's largest economies. Our aim is to promote the role of long-term finance in driving economic development and sustainable growth around the world.
In this configuration, our members can actively connect and share valuable knowledge and insights. In partnership with the G20 and other relevant multilateral formats, we look to provide expert insight, thought leadership and best practice.
The G20 agenda based on the priorities “People, Planet, Prosperity” encompasses the wide range of issues at hand: concerns about inequality, environmental degradation, and long-term growth prospects, as we are all supporting the recovery from the pandemic.
Rarely has global policy coordination been more important.
Rarely has expert insight, thought leadership and best practice been in such high demand to tackle climate change, promote public health and digital transformation.
In my view, there are three related strands for success:
If this crisis has shown us one thing, it is that we will not achieve our climate targets with current technologies. Despite massive lock-downs, carbon emissions have dropped by less than 7 percent in 2020.
If we are to achieve our climate targets, we will need a reduction in Greenhouse gas emission of that very same magnitude … every single year for the next decade.
We need to step up our ambition.
In Africa alone, our engineers expect that energy demand will increase five-fold in the coming decades. If we allow this demand to be addressed with coal- and gas-fired power plants – as is the case today – our climate ambitions will literally go up in smoke.
New disruptive technologies need to emerge, grow to scale and become competitive quickly. We cannot wait for decades of marginal improvements and gradual cost reduction – we simply don’t have the time. This is also why we have to support the adoption of top-notch technological solutions in developing countries.
Now, what will need to happen? I think we need a global public-private partnership for the recovery, leading to net-zero.
We see liquidity in markets of a magnitude never seen before. At the same time, if our Economists ask firms about their investment plans… the answer is very sobering: the vast majority prefers to remain in a “wait-and-see position”.
The pandemic has exposed huge investment gaps in infrastructure, accumulated over the last decades:
The global pandemic certainly provided a jolt of urgency on the health and digitalisation front, revealing by necessity what is needed.
On the climate front, scientists are unequivocal in their contribution to the sixth report of the UN-led Intergovernmental Panel on Climate Change: it is unfolding here and now, as evidenced by observed changes in weather extremes.
Despite the large infrastructure investment gap, private investment in new infrastructure has been falling for the last decade from about USD 156 billion in 2010 to about USD 100 billion in 2019, according to the Global Infrastructure Hub.
So what is needed? Clearly, we cannot replace the private sector with public investment activities. This would make no sense in terms of expertise, nor in terms of magnitude.
Instead, what we need is to find ways to channel the available liquidity … into promising, high impact projects. And this is where institutions like the ones that are part of the D20-LTIC come into play:
First, we must join forces for the establishment of fully compatible regulatory frameworks to build trust and providing clarity to investors and the private sector.
Second, we must focus on the most vulnerable and the most affected: on a truly Just Transition, within our societies and globally;
And we must build and nurture an innovation ecosystem which can increase the societal value of existing and new infrastructure.
Progress on achieving the Sustainable Development Goals has been uneven and the international community is calling on public banks to step up our collective efforts significantly to achieve these goals. As resources are scarce, every cent invested in infrastructure projects has to unleash impact.
The members of the Long Term Investor Club - and their peers and partners – have a responsibility and a big opportunity to mobilise private finance and channel these resources to build sustainable societies. We are talking about the largest economic transformation and opportunity of the past 50 years.
To fill the finance gap, private finance needs clarity, transparency, good governance and appropriate incentives.
We should recognise the key importance of risk capital to support private sector leadership in innovative energy and digital solutions, in developing the circular economy and in ensuring the resilience of investments to current and future climate impacts.
And we need to join forces in developing instruments to address market failures and supporting innovative investment that are economically viable, but do not receive commercial finance due to perceived risks.
In order to do so, we should also engage upstream in project cycles, providing the technical support needed to fill a huge knowledge gap when it comes to such complex and innovative projects, on top of providing models allowing for higher risk taking based on blended finance.
This is why at the European Investment Bank we are seeking to become an incubator, not just of finance but also ideas and expertise.
At the EIB we have taken several important steps over the last year:
The first is to set an ambitious climate agenda based on a full Paris Alignment and the target to support €1 trillion of climate investment by the end of the decade. We will put climate in everything we do.
Beyond mitigation, we should not forget about the relevance of adaptation also in the context of infrastructure investment. We will announce a detailed adaptation plan later this year, which will detail specific actions, prioritisations and initiatives in line with our ambition as the EU climate bank.
The second is the decision to o set up a development branch to increase the impact of our activities outside the European Union. Through a development branch, the EIB will reorganise its global activities and increase its presence on the ground, developing more targeted strategies and services in close cooperation with partners.
This step is particularly important as Europe is currently redesigning its model to connect to the world. The Global Gateway announced by EU Commission President Ursula Von der Leyen will be based on the very successful Team Europe approach and we are looking forward to contributing to strengthen Europe’s partnerships for connectivity globally.
Let me conclude by sharing with you my strong belief that we can accomplish a lot through infrastructure investment if we are ambitious, work together and make use of the right tools.
We must ensure that every cent spent on the recovery protects our climate, environment and improves quality of life. Let’s be bold and act now - and be decisive in the fight for climate and environment. I believe that by working together, in partnership like this, we have a real chance to make difference.
I invite you all to be open and seek true and deep cooperation…together we are more than the sum of parts!