“At the heart of our Paris alignment commitment is our ambition to support the clients and countries with whom we work in delivering the vital low carbon transition. For us this commitment is far more than a compliance standard; it is a transformative approach and a springboard to help our countries and clients on to a genuinely sustainable pathway.
"We are delighted to be one of the first multilateral development banks to achieve this milestone and release the details of how we will implement our pledge,” said EBRD President Odile Renaud-Basso.
The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP21 in Paris, on December 12, 2015, and entered into force on November 4, 2016.
From now on, all the Bank’s investments – whether lending directly to clients or providing indirect financing for sub-projects through Financial Institutions - will be aligned with and assessed according to climate goals, aiming to limit global warming to 1.5C to be resilient to the impacts of climate change.
This complements the Bank’s existing ambition to ensure that at least half its investment volumes are green by 2025 to accelerate the sustainable transition of the Bank’s clients and countries of operations. The Bank will also adopt a plan to ensure that the emissions from its buildings, travel, procurement, Treasury and retirement plan activities are aligned with the Paris Agreement goals.
Importantly, the EBRD’s Paris alignment enabling framework, published here, will have a catalytic effect in encouraging its own clients align their activities with the goals of the Paris Agreement.
The transformative approach includes targeting the EBRD’s 300-plus partner banks and their sub-clients across three continents.
Here the essence of the Bank’s climate-related reform is to move from a “use of proceeds” model - where a partner bank that borrows EBRD money must use those funds for a stated purpose and cannot finance investments contrary to the Bank’s principles with them - to a broader “transition plan” approach.
Under this, the EBRD will support reforms of its partner banks’ business practices to ensure their entire portfolio aligns with green transition, impacting lending well beyond EBRD’s own financial support for that bank.
The Bank has already signed a few pioneering banks into a “transition planning approach”, to green their entire operations, while assessing and declaring the climate risk on their books. By 2027, the aim is to have the overwhelming majority of partner banks using the new approach.
Earlier in December, Jordan’s Bank al-Etihad became the first EBRD partner bank to sign up to adopting a transition plan, incorporating the EBRD’s Paris alignment methodology alongside a US$ 35 million loan to strengthen its lending capacity for businesses and individuals as well as women-led micro, small and medium-sized enterprises in Jordan. Other banks are expected to sign before year-end.
The impact on direct lending will be equally transformational, whether it comes through promoting greener urban transport in Egypt, financing 1GW of renewable energy generation in Uzbekistan, or supporting a “hard to abate” industrial sector develop and implement a low-carbon strategy.