EBRD unveils new energy strategy without coal or oil, looks to mobilize €1 billion in private sector capital

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The European Bank for Reconstruction and Development’s (EBRD) yesterday unveiled its new five year energy sector strategy, placing decarbonization at its heart.

The key takeaway from the plan is a shift away from investments in coal and oil, to renewables. It will still invest in gas, however.

“… the Bank will no longer finance thermal coal mining or coal-fired electricity generation. The Bank will also stop funding any upstream oil exploration, and will not finance upstream oil development projects except in rare and exceptional circumstances, where such investments reduce greenhouse gas emissions,” it said in a statement released.

Backing the numerous reports that have been released this year, it said that “urgent and decisive steps are needed to address the challenges posed by climate change and poor air quality.” To achieve this, a shift from hydrocarbons to renewables is required, it said, in addition to the electrification of industry, transport and heating, powered predominantly by renewables.

Meanwhile, at an event held this week alongside the COP24 talks in Katowice, Poland, the EBRD announced plans for a direct investment framework targeted at financial institutions, through which it plans to raise €1 billion in private sector investment over the next three years, through the issuance of green bonds.

Plans for the €250 million framework were approved in September, and the bank may now support further issuance of green bonds in the regions where it is active. EBRD states that the objective of the framework is to “incentivise transparency and adherence to high green standards with its financial institution clients and to report on the underlying projects’ quantitative and qualitative environmental benefits and impacts.”

Green bonds have proven an effective way to finance renewable energy and other sustainability related projects, and EBRD estimates that more than $155 billion worth were issued in 2017. The session ‘Extending Green Bonds to New Frontiers’, held at the COP24 conference in Katowice this week, focused on extending green bonds to emerging markets, noting that just 2% of these global issuances came from the 36 countries that receive EBRD funding.

Back in April the EBRD committed $68 million to a green bond fund dedicated to emerging markets; and has launched a technical cooperation program to assist institutions in its regions with successful green bond issuances.