Aligning all our operations with Paris agreement goals and principles
The European Investment Bank has put in place a framework to ensure that the projects it supports — whether they be in energy, transport, industry or agricultural sectors — are aligned with the goals of the Paris Agreement. This was the purpose of the Climate Bank Roadmap.
To complete this framework, we need to address the wider activity of clients that goes beyond the project in question. For example, should the Bank support a low-carbon project such as a solar farm with a company that also wants to invest in high-carbon activities such as a coal-fired electricity plant? How can we help clients make the transition to cleaner processes?
This framework is the next step in our journey to make the Paris Agreement a success. The treaty commits all parties that signed it to “finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.”
We have introduced an updated approach to ensure that the clients we lend to are aligned with the goals of the Paris Agreement on climate change. This applies to large companies active in high-emitting sectors, those that are highly vulnerable, and large financial institutions. Building on European Union regulations, this requires large companies to disclose their alignment plans, including a mid-term carbon target. Such plans should also address building resilience to future climate change. The EIB will work with clients to develop and publish these plans.
This general approach — based on disclosure — is powerful. But it also needs a bottom line for companies that intend to invest in very high carbon activities incompatible with the Paris Agreement. In general, the EIB will not support projects, including low-carbon ones, with companies that invest in activities such as the building of new coal-fired power plants or coal mines. Details on this bottom line can be found in the EIB’s updated Paris Alignment for Counterparties framework.
Our climate and environmental sustainability financing
In focus: a sunnier outlook for the climate crisis
The 2020s are often described as the ‘’critical’’ decade. This is a shorthand to remind us that if we are to avoid the worst effects of global warming, global emissions must fall rapidly in the next ten years. In fact, they must be cut by half if we are to limit warming to 1.5 degrees by the end of the century.
Global emissions in 2021 rebounded to pre-pandemic levels, the pricing of fossil fuels remains stubbornly inefficient, and many of the most recent net-zero pledges are light on detail, to put it generously. This is worrying. But it is equally important to recognize the progress being made. This article highlights three elements from 2021 that provide grounds for cautious optimism about the quick reduction of global emissions. In doing so, it highlights some of the key themes for climate finance likely to dominate the next year or two.
Climate action and environmental sustainability
We support projects that reduce or prevent the emission of greenhouse gases. For example, this can be done by investing in:
- research and development of low-carbon technologies,
- renewable energy,
- low-carbon transport solutions,
- industrial de-carbonisation.
We invest in projects that anticipate the adverse effects of climate change and take appropriate action to prevent or minimise the resulting damage. Early and well-planned adaptation can save lives and money. For example, such investments include projects that:
- reduce the risk of floods,
- develop resilient cities,
- increase afforestation.
The EIB Adaptation Plan supports the objectives of the European Union Adaptation Strategy inside and outside the EU. The EIB pledges to increase the share of adaptation support to 15% of the Bank’s overall finance for climate action by 2025. This represents an almost three-fold increase, compared to adaptation finance over the past five years.
The EIB will screen all projects it finances for the risks of climate change and ensure they are adapted to future changes. A new advisory service called ADAPT will help public and private sector clients understand how climate change affects their operations.
We back activities that promote sustainable management of natural resources, biodiversity and the environment.
Our Environmental and Social Sustainability Framework
The EIB Group has a revised Environmental and Social Sustainability Framework (ESSF), applicable to all new operations.
The ESSF uses a risk-based approach to support the integration of environmental, climate and social considerations into the project cycle. It will ensure the fulfilment of our Paris alignment commitments, while ensuring a just and fair transition for economies that are:
- climate and disaster-resilient
- environmentally sustainable
European Green Deal
Climate change and environmental degradation threaten the entire planet. To tackle these challenges, Europe needs a new growth strategy where:
- there are no net emissions of greenhouse gases by 2050;
- economic growth is not entirely dependent on resource use;
- no person and no place is left behind.
The European Green Deal is the roadmap for making the EU economy sustainable and inclusive.
The EIB's contribution to the European Green Deal Investment Plan is expected to amount to €250 billion in terms of total green investments under EU mandates (through EU instruments and the EU budget).
Implementing our climate ambition in Europe and beyond
It is essential to retrain workers and create new jobs in areas where coal mines and CO₂-intensive activities have historically been a major source of employment and economic activity. Although we expect the green transition to create around 500 000 jobs in Europe by 2050, we are working hard to ensure that our financing contributes to a just transition for those regions or countries most affected, so that no one is left behind in the fight against climate change.
In 2019, the EIB committed to increase gradually the share of its financing dedicated to climate action and environmental sustainability to reach 50% of its operations in 2025. In developing countries alone, we invested in 2023 a total of €3.9 billion, or 52% of the total financing for these regions, including those most exposed to climate-related disasters. The EIB Group applies the same environmental and social standards to evaluate projects inside and outside the European Union.
Assessing the impact of our projects
Climate impacts are carefully considered in every project we support. At the appraisal stage, we screen projects by examining the following:
When appraising the economic case for a project resulting in a significant change of greenhouse gas emissions (GHG) we incorporate an economic cost of carbon.
We are phasing out our support for energy projects that rely on unabated fossil fuels. These projects include the production of oil and natural gas, natural gas infrastructure and power generation technologies resulting in greenhouse gas emissions above 250g CO2 per kWh of electricity generated. Find out how the EIB is supporting the energy transformation in our Energy Lending Policy.
For projects, sectors and areas particularly vulnerable to climate change impacts, we require the promoter to consider climate risks and to incorporate adaptation measures into project design and operation. We are rolling out a climate risk management system as part of our climate strategy implementation.
Transparency and credibility are key in mitigation finance reporting. In 2015, the EIB, other multilateral development banks and the International Development Finance Club (IDFC), established a set of common principles, definitions and guidelines for climate mitigation finance tracking.
International financial institutions' reports on accounting on GHG emissions
- International Financial Institution Framework for a Harmonised Approach to Greenhouse Gas Accounting
- International Financial Institutions approach to GHG accounting for Energy efficiency
- International Financial Institutions approach to GHG accounting for Renewable energy projects
- International Financial Institutions approach to GHG assessment in the Transport sector
Did you know? In 2007, we pioneered the green bonds market by issuing the world’s first Climate Awareness Bond (CAB), allocated exclusively to climate change mitigating activities in line with EU’s sustainability objectives. In 2018, our first Sustainability Awareness Bond (SAB) extended this approach to other environmental and social policy objectives. As of end of July 2020, the EIB remains world’s leading supranational of green and sustainability bonds with over €38 billion raised across 17 currencies. In total, CAB and SAB proceeds have helped finance 312 projects in 71 countries around the world.
Together with other experts, we have contributed to the EU Sustainability Taxonomy and the EU Green Bond Standard. The EU Taxonomy is a tool to help investors, companies, issuers and project promoters navigate the transition to a low-carbon, resilient and resource-efficient economy. The EU Green Bond Standard, based on best market practice and the EU Sustainability Taxonomy classifications, aims to safeguard the robustness of the green capital markets.
The EIB is committed to aligning its tracking methodology for climate action and environmental sustainability (“green”) finance with the framework defined by the EU Taxonomy Regulation and the EU Green Bond Standard.
The EIB plans to align its CAB/SAB Frameworks with the EU Green Bond Standard (EUGBS), as retained and amended by the European Commission. The EUGBS requires that EU green bonds are allocated to economic activities that meet the requirements of the EU Sustainability Taxonomy (EUST). In sectors that are not yet covered by the EUST, the EIB uses its definitions within the spirit and logic of the EUST. In September 2018 we became the first issuer to retain these principles in our CAB/SAB documentation, thus establishing a direct link between sustainability lending and funding in the spirit of the EU Taxonomy Regulation.
What's next: we will contribute to the EU Platform on Sustainable Finance to develop the EU Taxonomy to cover for wider areas of environmental and social sustainability.
The EIB is the EU’s climate bank and one of the world’s main financiers of climate action
Find out how the roadmap provides a framework to counter climate change and protect the environment during the critical decade ahead
We carefully check that our projects meet our environmental and social principles and standards and conform with our corporate responsibility commitments
We work with many parts of the public and private sectors to increase investment in projects that help the climate and environment
Stay up to date
- MDB Common Principles for tracking nature-positive finance
- 2022 Joint Report on Multilateral Development Banks' Climate Finance
- Joint MDB Methodological Principles for Assessment of Paris Agreement Alignment of New operations
- Joint Report on MDB Climate Finance 2021
- MDB Principles for Long-Term Strategy (LTS) Support
- MDB Just Transition High-Level Principles
- Joint Report on MDB Climate Finance 2020
- Joint MDB Statement in the margins of the 2019 UN Climate Action Summit
- Joint Report on MDB Climate Finance 2018
- Joint Declaration by the Multilateral Development Banks at Katowice, COP24
- Joint Report on MDB Climate Finance 2017
- Integrating Climate Change Information and Adaptation in Project Development (EUFIWACC)
- Intégration d’informations sur le changement climatique et de l’adaptation dans le développement de projets (EUFIWACC)
- Joint Report on MDB Climate Finance 2016
- Joint Statement by the Multilateral Development Banks at Paris, COP21
- Common Principles for Climate Change Adaptation Finance Tracking
- Common Principles for Climate Mitigation Finance Tracking
- Tracking Climate Co-Finance: Approach Proposed by MDBs
- Joint Report on MDB Climate Finance 2015
- Joint Report on MDB Climate Finance 2014
- Joint Report on MDB Climate Finance 2013
- Joint Report on MDB Climate Finance 2012
- Joint MDB Report on Adaptation Finance 2011
- Joint MDB Report on Mitigation Finance 2011