One year in, an assessment of the EBRD’s ambitious environmental plan
Last autumn, the EBRD unveiled its most ambitious plan yet to put investments that bring environmental benefits at the heart of our mandate with the Green Economy Transition (GET) approach.
GET – approved in September 2015 and shown to the world at the COP21 Paris Climate Conference last December – aims to bring the volume of green financing from an average of 24 per cent of the EBRD’s annual business investment in the 10 years to 2016 up to 40 per cent by 2020.
GET was part of the buzz at a historic gathering on climate change that, after years of delay, succeeded in agreeing a treaty to keep global temperatures from rising more than two degrees above pre-industrial levels. US President Barack Obama called the Treaty “the best chance we have to save the one planet we have”.
Now, with the next global conference on climate change set to assess progress in implementing the Paris Agreement on November 7-18 in Marrakesh, Morocco, the EBRD is on track in developing its own first GET targets.
“GET is off to a positive start with broad interest both from countries of operations and Bank teams,” said Josué Tanaka, Managing Director, Energy Efficiency and Climate Change (E2C2), who has been steering the GET approach.
“The positive interest across teams is reflected in a broad range of activities for GET scaling-up, innovation and policy-strengthening during the first half of 2016,” added Mr Tanaka.
The mid-point of the target range for this first year is 32 per cent (the target will then rise by 2 percentage points a year until it reaches 40 per cent by 2020). And, Mr Tanaka said, “the current GET pipeline should be sufficient to reach a 2016 GET annual Bank investment ratio of 32 per cent.”
“Overall, GET activity is well distributed across regions and sectors. The GET pipeline includes non-sovereign and sovereign debt. The size of GET financing varies from a small component of a large project to large GET projects.”
Measuring success as a percentage of the EBRD’s overall financing will always mean there is uncertainty over the proportion of green to other deals.
But making clear how climate finance contributes to the transition process at the heart of the EBRD’s work will help to incentivise the development of green projects. And work is far advanced on an internal methodology for measuring the green component of all prospective deals. This will make it easier to measure the GET approach as the target levels rise.
“Momentum needs to be maintained and accelerated,” Mr Tanaka continued.
“We will support the development of a strong pipeline consistent with GET standards and objectives for the end of 2016 and beyond. A sustained effort will also be needed to mobilise concessional funding,” according to Mr Tanaka.
Five drivers will power the rise in the proportion of green deals: scaling up existing activity, enhancing innovation, broadening the environmental dimension, widening the use of private and public delivery channels, and policy dialogue.
One clear opportunity for scaling up GET activity is provided by renewable energy, particularly in the southern and eastern Mediterranean (SEMED) region, reflecting the increased cost competitiveness of wind and solar energy. Others include growing emphasis on energy efficiency in many areas.
Innovations include the development of the EBRD’s Green Cities Programme being deployed in the Caucasus and Albania, which is intended to lead to the formulation of a larger-scale framework. Substantial work is also being undertaken with the Green Climate Fund to set up a large sustainable energy financing facility (SEFF) framework that now covers 24 EBRD countries, with the potential for further expansion.
On broadening the environmental dimension, the EBRD’s Environment and Sustainability Department and its Energy Efficiency and Climate Change teams are working to develop specific categories of eligible GET projects. Work is also being done by these teams and EBRD Industry, Commerce and Agriculture bankers to identify project opportunities to drive implementation of the European Union’s Industrial Emissions Directive (IED).
Developments in diversifying delivery channels include, on the private side, a Green TFP product, and, on the public side, work with a public financial intermediary in Kazakhstan, the Kazakhstan State Development Bank.
Among results achieved in 2016 in policy work, Mr Tanaka mentions the signing in Kazakhstan of a Green Economy Law as well as developments in energy efficiency policy in the Western Balkans and advances in Turkey and Ukraine.
“The scale of the work is vast, especially given the EBRD region’s legacy of widespread environmental neglect and wasteful energy use. Yet this is a job well worth doing, since the rewards are equally vast,” said Mr Tanaka. “Transitioning to a green economy affords numerous opportunities for growth.”