After months of contentious negotiations, the governing board of the European Investment Bank, the EU’s lending arm, voted yesterday to convert itself into a ‘climate bank’ – delivering a major policy promise of incoming EU Commission President Ursula Von Der Leyen.
With this decision, the EIB becomes the first multilateral development bank to commit to phasing out lending to all fossil fuels. The bank already ended its lending to coal in 2013, and this decision extends the policy to oil and gas.
Under the new energy lending policy, the bank will end all lending to fossil fuels by the end of 2021 and align all financing decisions with the Paris climate agreement. The new policy will unlock €1 trillion in financing for climate action and environmental sustainable investment in the next decade, according to the bank.
“Climate is the top issue on the political agenda of our time,” said EIB President Werner Hoyer. “We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere.”
The governing board of the bank, made up of representatives from each of the EU’s 28 member states, has been in disagreement over how ambitious the bank’s new energy lending policy should be. A decision scheduled for October had to be delayed because of divisions over whether gas, which has lower emissions intensity than other fossil fuels, should remain eligible for funding. Germany and some parts of the European Commission were pushing for this to be the case.
But Berlin and Brussels were convinced to back a complete phase-out after a compromise was agreed to delay the cut-off by one year. The original proposal had foreseen a phase-out by 2020.
Climate campaigners welcomed the EIB’s new policy. “Today, Europe is sending a clear signal that it intends to move away from risky fossil fuel investments, toward the climate-neutral future that its citizens want,” said Nick Mabey, chief executive of the environmental think-tank E3G. “The EIB is sending a message to other financial institutions that investment in fossil fuels is drawing to an end.”
The European Corporate Leaders Group, a coalition of climate-friendly CEOs, also welcomed the news. “For the EIB to stop funding fossil fuel projects is a gamechanger that begins to deliver the EU’s vision for climate leadership as laid out in the Green Deal,” said Eliot Whittington, the group’s director. “We need this to act as an unequivocal signal into the financial system to encourage other multilateral lenders to follow suit.”
“As we approach the litmus test of 2020, institutions must act according to the legal steer given by the Paris Agreement, and this is a significant precedent. In the context of urgently needed transition to a net zero economy, financing clean energy needs to be the absolute focus, and public finance should not be used for fossil fuel infrastructure.”