Comment: The bank has committed to end fossil fuel financing by the end of the year but has handed out billions in support for companies wedded to the industry
The European Investment Bank’s aspiration to become the EU’s climate bank is falling short because of its consistent support for major polluters.
This is down to EIB president Werner Hoyer’s failure to honour the legally-binding Paris Agreement.
The way the bank distributes money starkly contrasts with its climate commitments. Instead of becoming a true climate leader among financial institutions, the EIB is focusing on greenwashing. It appears much more concerned about pleasing carbon-emitting clients than ensuring a vital green and just post-Covid-19 recovery.
The EIB announced in 2019 that it would align all of its operations with the Paris Agreement’s goal to restrict global heating to 1.5C. Since then, there has been little action, bar its notably disappointing Climate Bank Roadmap.
Financing is still handed out to companies developing new fossil fuel infrastructure and high-carbon transport infrastructure. This shows the EU’s financial arm has little intention of ending support for the fossil fuel industry and carbon-emitting companies from other sectors. And all of this is under EIB president Hoyer’s watch.
Fossil gas is one of the EIB’s major stumbling blocks. Simply declaring that “gas is over”, as president Hoyer has done, is at the very least deceptive, if it is not followed up with credible steps to end support for gas.
The bank has invested €890 million in fossil gas projects since its 2019 announcement that it will end its fossil fuel financing by the end of 2021. At this rate, fossil gas is fast-becoming the new coal for Europe.
While going against its word and welcoming more fossil gas, the EIB also refuses to bid farewell to coal. In 2013, direct investments in coal were ruled out, but since then the bank has provided €4.7 billion in indirect finance to companies active in the coal industry and developing coal power capacity
A case in point is Polish state company PGE, which regularly benefits from EIB funding, despite its extremely poor climate credentials and continued development of new coal infrastructure.
Green hypocrisy envelopes the world’s largest multilateral public lender.
What the EIB lacks is a strong corporate-level engagement strategy to ensure that all of its clients have a solid plan to decarbonise. And there lies a chance for the EIB to amend its ways.
This year, the bank is developing action plans for its Climate Bank Roadmap, which will include measures to ensure that all of its clients, including financial intermediaries, are Paris-aligned. This process can be used to close many loopholes and put a full stop to the EIB’s blank cheques for climate killers.
Eight environmental organisations have provided robust recommendations to the EIB. Firstly, the groups urge the bank to demonstrate its climate commitments by making financial support conditional on companies having clear climate targets and credible decarbonisation plans in line with science and limiting global temperature rise to 1.5C.
President Hoyer and the EIB’s vice-president Kris Peeters, who is in charge of this year’s lending policy review for the transport sector, must ensure the EIB delivers on its climate commitments. It’s a responsibility they must own if the bank stands a chance of becoming a climate leader.
Continuing to support heavy polluters directly contradicts the EIB’s climate commitments. And it hampers the its ability to steer the European economy towards full decarbonisation by 2050.
To build back better after Covid-19, the EIB can set an example for other public banks within Europe and beyond by using its weight to accelerate the transformation and decarbonisation of our economies. The question remains as to whether the EIB and its president will choose greenwashing over taking ambitious climate action. They must embrace the latter.
Jennifer Morgan is executive director at Greenpeace International and Xavier Sol is director of Counter Balance