The European Bank for Reconstruction and Development (EBRD) announced today that it is considering a new goal of devoting over 50 per cent of its annual investments to the green economy by 2025.
Founded in 1991, the EBRD was created to help develop Central and Eastern Europe in the post-Cold War era. The bank has since expanded its mandate, and now is currently active in nearly 40 countries from central Europe to central Asia and the southern and eastern Mediterranean, focusing on countries in which domestic capital on its own is insufficient to finance transition. The EBRD is owned by 69 countries, as well as the European Union and the European Investment Bank.
While the EBRD is already active in climate and environmental finance work, its new goal would significantly increase its focus on sustainable development and finance. In 2015, The EBRD launched its Green Economy Transition (GET) approach. Since that time, the company’s green finance ratio increased from 25% to 40%.
The Bank’s Board of Directors approved the new Green Economy Transition (GET 2.1) plan at its meeting on 8 July, forming part of the EBRD’s overall strategy for the next five years. It will become effective, subject to shareholder approval at the Bank’s Annual Meeting, scheduled for 7-8 October.
GET 2.1 defines clear action areas to support a green economic recovery in its regions of operations taking account of the impact of the coronavirus pandemic. Under GET 2.1, the EBRD would also step up policy work to ensure its 38 emerging economies can effectively achieve climate and environmental goals.
In addition to the aim of making more than 50 per cent of its financing green, the plan would also target specific emission reductions over the next five years and specify a date for a decision on when all the EBRD’s projects are aligned to the Paris Climate Agreement.
The EBRD’s new strategy would scale up investment by innovating across a set of specific environmental and climate mitigation and adaptation thematic areas such as greening the financial sector and energy systems, industrial decarbonisation, sustainable cities, food systems and connectivity, and natural capital preservation. In developing these thematic areas, particular attention would be given to just transition, gender considerations, circular economy opportunities, green digital solutions and the role of energy efficiency.
The EBRD estimates its new goals could achieve cumulative greenhouse gas (GHG) emissions reduction of 25 to 40 million tonnes per year by 2025.
Under the new strategy, the EBRD would screen all investments for alignment with the Paris Agreement and national climate-related action plans, taking into consideration the priorities set in country and sector strategies. It would also increase its capacity to support countries, regions and sectors to develop low carbon and climate resilience strategies and scale up its efforts to mobilise climate finance.
The EBRD would work towards full alignment with the Paris Agreement, on which a decision would be taken no later than 2022, taking into account the lessons learned from the initial phase of implementation of the methodology jointly developed by the Multilateral Development Banks.