EBRD tackles climate change with new Green Economy Transition approach

By Josué  Tanaka

EBRD Loans $21 million to Al Jazeera Agricultural Company

1000 projects under the Sustainable Resource Initiative are just the start!

The EBRD is looking ahead to an ambitious future and back at the achievements of the recent past as we boost our contribution to global efforts to combat climate change.

We have just announced the adoption of a Green Economy Transition approach which will increase the level of our financing in the sphere of sustainable resources to some €18 billion over the next five years.

The new approach is in part our response to this year’s appeal by G7 leaders for multilateral development banks such as ourselves to ‘use to the fullest extent possible their balance sheets’ to deliver climate finance and speed up the transition to low carbon economies.

The announcement also comes at a key moment in the broader movement to counter climate change:  the run-up to the crucial COP21 meeting in Paris at the end of this year which will seek to secure a legally binding and universal agreement in this area.

But our new approach was not conceived overnight. It builds on years of experience of successful investment in energy efficiency and renewable energy.

Just as we reveal the scale of our plans for this field for the years to come, we have also passed an important milestone in our history.

The recent signing of a deal with Turkey’s Ege Profil was the 1000th project within our Sustainable Resource Initiative (SRI), and we are particularly proud that we shared this with a key donor, the Clean Technology Fund.

What started life in 2006 as the Sustainable Energy Initiative (SEI) with an investment volume of €748 million in its first year has developed into the leading climate finance initiative in the EBRD’s many regions.

Last year annual investment volume reached €3 billion, more than a third of the EBRD’s total investment for 2014.

Investments are diverse and range from the construction of the first large-scale wind farm in Kazakhstan to the first alternative fuel project in the cement industry in Egypt.

They also encompass everything from a light rail project in Turkey to several district heating rehabilitations in Ukraine and Central Asia.

The business model at the core of the SRI is now tried and tested.  We provide finance for clients to invest in sustainable resource projects, including energy efficiency, renewable energy, water efficiency and waste minimisation projects.

When required, we also arrange technical support. This can include the provision of resource efficiency audits to support clients in identifying the technically optimal investment solution or training clients in energy management.

In addition, the EBRD engages with governments in the countries where it works to assist in developing policies and regulations to scale up investment.

Over the years the SRI has remained close to the market, recognising business dynamics and trends and developing innovative responses.

In 2009 we started piloting climate change adaptation projects. Investments include making hydropower rehabilitations in Tajikistan more climate resilient.  The EBRD is now the largest provider of private sector adaptation finance among the multilateral development banks.

In 2012 we began promoting efficiency and innovation in two more areas, water and materials. The introduction of these new spheres – which turned the Sustainable Energy Initiative into the Sustainable Resource Initiative – was a response to rapidly increasing demand coupled with volatile prices and growing environmental concerns.

Besides expanding the scope of our activities, the SRI has also consolidated ties with climate finance partners such as the Climate Investment Funds (CIF), the Global Environment Facility (GEF) and the EU. They all provide concessional finance and technical assistance when market barriers remain high.

Our investments have contributed to carbon emission reductions totalling 72 million tonnes, equivalent to the combined emissions of Azerbaijan and the Slovak Republic.

Renewable energy projects under the SRI have generated MWh 60 million, which is equivalent to the annual electricity production of Romania.

SRI projects also help to create markets. For instance, the introduction of the Turkish Sustainable Energy Financing Facility (TurSEFF) created an opportunity for Turkish financial institutions to pilot and scale up energy efficiency finance products.

Most are now offering various financial products ranging from project finance for renewable energy to household loans for home improvements.

In fact, last month seven of Turkey’s largest banks were amongst financial institutions which endorsed a joint declaration pledging to further incorporate energy efficiency finance into their businesses.

Overall, since we launched the SEI in 2006, our investments have amounted to more than €18 billion. That is, of course, the same figure we are aiming to hit in the next five years alone (in the process raising our green financing to around 40 per cent of total annual investments).

It’s an ambitious target but one that I am sure we will reach.

Josué Tanaka is the EBRD’s Managing Director, Operational Strategy and Planning, Energy Efficiency and Climate Change