In October 2020, the European Bank for Reconstruction and Development announced that by 2025 the majority of its investment activity will be dedicated to green projects. Its president outlines the importance of hitting this ambitious target.  

Odile Renaud Basso

Odile Renaud Basso

While the world has rightly been focused on dealing with the coronavirus pandemic and its economic fallout, the biggest challenge on the planet remains averting the much worse climate crisis that threatens unless we radically restructure the way we live and work.

This is why the worldwide policy discussion on economic recovery post-pandemic has focused so strongly on a green recovery, coupling the investments needed to build back now with the investments needed in the crucial decade to come, to achieve the bigger climate goal.

This is why the European Bank for Reconstruction and Development (EBRD) has reinforced its position as a leader in environmental and sustainable finance with an ambitious plan to broaden and deepen our climate activities. Our ambitions are clear: by 2025, the majority of our business will be green.

The EBRD’s new Green Economy Transition (GET) approach for 2021-25 forms part of the bank’s overall strategy for the next five years, approved by the board of governors at the EBRD Annual Meeting in October. GET 2021-25 will be the EBRD’s blueprint for supporting the 38 economies in which it works to pursue a green, inclusive and resilient recovery from the pandemic.

Accelerating transition

Our vision is to support the advance to green, low carbon and resilient economies in our regions of operation, leveraging our strong track record in financing green investments. When the EBRD was founded in 1991, the countries in which we began operations showed the highest levels of energy consumption and carbon intensity in the world. Even today, our regions – stretching from central Europe to central Asia and the southern and eastern Mediterranean – account for 11% of the world’s greenhouse gas emissions while generating only 6% of global gross domestic product, and many of the countries in which we operate are very vulnerable to the impact of climate change.

This means greening our regions has always been at the core of our operations. Over the past 15 years, we have provided €36bn to around 2000 green projects. The new GET 2021-25 approach is the next step on our green journey; it is designed to help our economies and clients identify both climate opportunities and risks.

To achieve this, we have identified a set of strategic priorities that reflect sectors in which a rapid and far-reaching transition is most urgent. In some sectors, we already have a strong track record, for example in decarbonising the energy sector.

Here, we are already working to shift as much economic activity as possible to electricity and to decarbonise that electricity through promoting renewables and leaving coal behind. Thanks to the extraordinary reduction in the cost of wind and solar power, which has made renewable energy the cheapest electricity source in many countries, we know this to be both possible and affordable.

Kick-starting renewables

Our largest renewable energy project to date is the 1.8-gigawatt solar park in Benban in Egypt, stretching over 37 square kilometres of desert, which began operations in 2019. The Benban project grew out of the Egyptian government’s long-term ambition to generate at least 42% of its energy needs from renewable sources by 2035 and to have 20% renewable capacity by 2022. Together with other multilateral development banks, we worked with the Egyptian authorities to develop a regulatory framework that would support bankable projects in this area. Finance followed. The EBRD, as the largest financier, provided $350m and mobilised more than $1bn from others. 

Benban laid the foundation for kick-starting renewables in Egypt. The next round is dependent on competition. In Egypt alone, tenders are now delivering prices that are a third of Benban’s two years ago, and renewables are surging ahead in many of our other countries of operations, including Mongolia, Serbia, Kazakhstan and Jordan. Notably, six renewables deals had been made in Poland alone by the end of 2020.

This example illustrates one practical banking reason for our confidence that our green work can become a major driver for the next five years: the results we are already seeing, revealing the growing appetite there is in the world to find ways to achieve more ambitious targets still.

Industry, finance and cities

Decarbonising industry is another strategic priority under the new GET approach and, like decarbonising the energy sector, it is an area in which we have a strong track record. While our early investments focused mainly on energy efficiency, we have expanded our focus by making finance available for investments in resource efficiency, circular economy business models and investments which improve our clients’ ability to deal with the effects of a changing climate.

Most recently, we have widened our focus by addressing climate risks across value chains. For example, we are working with a global market leader, Louis Dreyfus, to develop new tools for climate risk management of Ukrainian grain harvests and Turkish cotton harvests.

The EBRD’s work with the financial sector is another priority area under the GET approach. While early investments in this sector focused on extending green credit lines to local partner banks for on-lending to small and medium-sized energy efficiency investments, our engagement in this sector has also evolved and we are currently piloting programmes to support partner banks in understanding climate risk in their portfolios.

Other strategic priorities under the GET approach include green buildings, sustainable food systems, sustainable connectivity, cities and environmental infrastructure and natural capital. 

The approach also builds on the concept of policy engagement and more specifically on long-term low-carbon pathways. Again, this is not entirely new to us. Our flagship urban sustainability programme, EBRD Green Cities, already takes a systematic approach to supporting cities, helping them optimise their capital investment plans by looking at the climate and environmental challenges they face. It explores the interdependencies between them, and then suggests priority policy interventions and investments across a range of sectors including buildings, energy, water and transport. As of November 2020, 43 cities have joined the programme, now commanding finance and co-finance of more than €2bn after funding was doubled in December, and 35 deals have been signed, worth €617m.

Developing ambitious national targets

Our policy work does not only include a sector focus, but also support for our countries in developing ambitious national greening targets – Nationally Determined Contributions (NDC) – and long-term strategies that are in line with the objectives of the Paris Agreement. For example, through our NDC Support Programme, we are assisting the government of Ukraine in updating its NDC to include tailored greenhouse gases emissions pathways in line with the country’s sustainable development and climate action ambitions.  

The Paris Agreement objectives are also relevant to our own operations because they enable us to combine our economic development mandate, in particular during the Covid-19 recovery, with the low-carbon transition. We will screen projects based on the Paris Alignment Methodology, developed jointly with multilateral development banks. This will increase transparency and enhance our understanding of our overall effectiveness within the context of the EBRD mandate and operational model.

A just transition

While promoting the transition to green, low-carbon and resilient economies in our regions of operation, we need to ensure that those countries, communities, sectors and employees who stand to lose out economically, as a result of policies associated with decarbonising economies, are protected through new alternatives. The EBRD’s Just Transition Initiative is deeply integrated into the new GET approach. 

In November, for example, the EBRD financed a bond of €60m with Tauron, one of the largest energy providers in Poland, for distribution grid and renewable energy investments. The company committed to the closure of coal plants and an increase in the use of renewable energy. It will also develop a programme to address the potential social impact of closing the plants in the Silesia region.

Our green planning takes into account the context brought about by Covid-19, highlighting needs and areas of opportunity to support a green recovery. To counter the pandemic’s economic effects, large-scale stimulus packages will be needed to kick-start activity. Linking this economic stimulus with ever more effective climate action – and helping the world tilt to green in time to avoid catastrophic levels of global warming – will be vital in accelerating the transition to a low-carbon economy.

GET 2021-25 offers a clear and structured roadmap towards a sustainable future. We are now entering the decade identified by the 2018 IPCC report as the time in which key changes must be made to allow global temperature rises to be kept below 2 degrees Celsius and, if possible, to 1.5 degrees, making it necessary to accelerate the green transition. If we fail, the consequences are disastrous. Meeting this challenge is not just vital, it is also possible, using the EBRD’s ABC: our signature agility, our focus on building back better, and our unrelenting commitment both to our clients, including many in the private sector, and to our countries. And, with the right conditions, it will be financially viable too.

Odile Renaud-Basso is president of the European Bank for Reconstruction and Development.

Top 1000 World Banks 2020: the biggest and the best

Top 1000 World Banks Regional Commentary & Analysis

Top 1000 World Banks ranking

Request a demonstration to The Banker Database

Global Risk Regulator

The Banker on Twitter

Join our community