This focus area relates to three overall topics that our Legal Transition Team strives to improve in our countries of operations in support of environmentally friendly initiatives. They are energy market legal reform, climate change legislation and climate action, and sustainability governance and regulation.
Energy regulations are required to reduce carbon emissions and other pollutants, especially in economies that have relied on non-sustainable sources of energy. Sustainability of natural resource consumption is a major concern for ensuring future prosperity.
Why reform is needed
The focus on environmental and climate risks to the global economy has grown in prominence in recent years. The 2015 Paris Agreement aims to keep the average global temperature rise “well below 2 degrees Celsius” compared with pre-industrial levels and increase the ability of countries to adapt to the adverse impacts of climate change. How each country contributes to the enormous collective endeavour is set out in its Nationally Determined Contributions (NDCs), which identify the climate actions that individual governments should be taking following the 2015 agreement. The Paris Agreement includes a call for action by all with explicit reference to the critical role of non-state actors, including businesses, in its implementation. For a truly sustainable economy, investors and companies should understand and measure their environmental impact. In order to limit the effect climate change will have on companies’ portfolios and operations, it is critical to identify, assess and mitigate companies’ climate risk exposures.
EBRD promoting environmentally sound and sustainable development
The EBRD’s foundation document, the Agreement Establishing the Bank, specifically highlights the Bank’s commitment to promoting environmentally sound and sustainable development. In 2016, the Bank reviewed the transition concept, and the “green” dimension was explicitly recognised and prioritised as an integral aspect of economic decision-making.
In 2018, the EBRD signed a joint declaration with other multilateral development banks aligning their activities with the goals of the Paris Agreement, and in 2019, the MDBs announced plans to increase the global climate action investment they support each year to US$ 175 billion by 2025. This increases the EBRDs capacity to support countries, regions and sectors to develop low-carbon climate resilient strategies and scale up our efforts to mobilise climate finance.
The LTP’s role
The Legal Transition Programme (LTP) is the EBRD’s landmark initiative to create a stable, predictable and investor-friendly legal environment in the Bank’s economies of operation. The LTP’s work on environment and climate change issues contributes to achieving the objectives of the Paris Agreement. The Sustainable Development Goals (SDGs) focusing on climate change complement the EBRD’s Green Economy Transition (GET) 2.1 approach and revised transition qualities. The LTP seeks to advance the efforts under the Paris Agreement and to promote good practices and innovative legal instruments, as well as influence policy-makers, societal and business actors and prompt them into climate action and broader sustainability efforts.
In terms of policy and legal reform work, the LTP has provided policy advice and technical assistance to develop strategies, legislation and regulations. These measures have had a significant impact on national legal and institutional frameworks, have opened up new market opportunities, and incentivised green innovation. Such activities have ranged from developing energy efficiency legislation and national action plans, environmental legislation, energy regulation, to improving environmental, social and governance (ESG) disclosure, as well as assessments of countries’ climate strategies or nationally determined contributions and the existing policy and legislative framework supporting them.
Furthermore, the LTP plays a key role in engaging with the Bank’s clients to respond to their climate-related risks and opportunities. There is an increasing expectation of transparency from both regulated and non-regulated reporting and a need to develop the necessary governance and risk management tools to integrate assessment and management of climate-related impacts into decision-making. The EBRD can play a significant role in working with companies in emerging markets to promote an enabling environment for the transition to a low-carbon economy and strengthen their corporate climate governance in order to manage and disclose their exposure to climate-related risks and opportunities.
For further details, please see “Ramping Up Climate Action by Enhancing Companies’ Governance Framework” in the EBRD’s Law in Transition journal.
For more information on the LTT’s work on Environment and Climate Change, please contact Vesselina Haralampieva, Senior Counsel. Email: HaralamV@ebrd.com