ENERGY TRANSITION
OF Q : What is EBRD’s approach to risk management, as it relates to the green economy? HI: EBRD has a comprehensive approach to risk management that includes credit risk, as well as operational and reputational risk management. Our policies ensure risks are managed within acceptable levels and the bank regularly reviews its risk management framework to ensure our policies remain e ff ective and in line with global best practice. We assess all our transactions for climate-related financial risk under the Task Force on Climate-Related Financial Disclosures (TCFD) / International Sustainability Standards Board (ISSB) as well as for alignment with mitigation and adaptation objectives of the Paris agreement. These help us avoid the risk of stranded assets and ensure long-term competitiveness. Overall, climate impacts have led to higher food prices with knock-on e ff ects for food security, as smallholders struggle with increased costs for seeds and fertilizers. That’s why we regularly stress-test our portfolio based on these shocks and macroeconomic changes. OF Q : Now that EBRD has become a green bank, how has your portfolio changed? HI: We have become more ambitious and so require more ambitious climate and sustainability targets from our clients. This is reflected in a very strong shift across our energy portfolio, where we’re focusing on renewables and the business side for hard-to-abate industries like steel and cement. We’re also looking for alliance investments and strong commitments from clients to be eligible for EBRD financing on sustainability science-based initiatives or climate targets. Is the green portfolio profitable? Yes, because we rely on sound banking principles when we’re investing. We also assess counterparty risk and don’t believe that green finance has any detrimental impact on corporate profitability. We believe that it’ll make them more competitive in the long term. OF Q : EBRD always had a very strong private sector mandate. Now that you’re focusing on green
next 20 years, carbon intensity will make an economy uncompetitive. Under our current Green Economy Transition, we made two bold commitments. First, we’re scaling up our green financing to at least 50 percent of our annual business investments by 2025. We’ve achieved that target every year – despite COVID-19. Second, we wanted to become Paris-aligned by the end of 2022, which we also achieved ahead of schedule. But we’re not only screening our investments to match the mitigation and adaptation goals, we’re adapting all our internal operations at EBRD. Our role is to catalyze systemic change so that climate investments become economically viable, meaning that the private sector can be confident that there will be good returns on green investments. Our policy activities support the development of the regulatory and market environment for green transition; and this sends strong signals to the private sector, project developers and investors on the needs and timelines for deploying green technologies. We’re also channeling concessional finance from green donors and bilateral climate funds, which helps reduce the a ff ordability constraints of early movers. Finally, we’re making investments to kick-start new markets. We’re usually the first and largest green investor in our countries of operations, across the whole economy. Policy support, technical assistance and finance – including concessional finance – work best when combined. Our Green Economy Financing Facilities (GEFF) channel funding and technical assistance to small and medium-sized enterprises (SMEs) and households via more than 180 partner financial institutions. Since 2006, we’ve committed over € 6 billion to investments under GEFF, avoiding almost 10 million tonnes of CO 2 emissions per year. We work with cities to develop Green City Action Plans, covering priority investments and policy actions. To date, 60 cities have joined EBRD Green Cities, representing 77 million residents. The program has cumulatively financed 89 green and sustainable infrastructure projects in 50 cities, totaling € 2.7 billion.
“Is the green portfolio profitable? Yes, because we rely on sound banking principles when we’re investing. We don’t believe that green finance has any detrimental impact on corporate profitability.”
Hande I ş lak, EBRD, Director of Corporate Debt Portfolio
investments, does this have an impact on the ratio between public and private sector engagements? HI: The private sector share of our cumulative investments in 2023 was around 80 percent and every year we’re putting strong targets to further increase our ratio. In some countries, we don’t even do any sovereign transactions. For example, in Türkiye we only invest in the private sector. In some countries, it’s
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