EIB supports transition to low-carbon and climate-resilient economy

Dubravka Negre, Head of the European Investment Bank (EIB) Regional Representation for the Western Balkans, speaks in an interview for the Balkan Green Energy News about EIB’s priorities and plans in the region in coming years. She also reveals how the EIB supports the transition to a low-carbon, environment friendly and climate-resilient economy, by committing at least 25 percent of its lending portfolio to this goal. In the Western Balkans, the EIB has so far invested EUR 80 million through the Green for Growth Fund in the renewable energy sector. The Bank plans to invest more than EUR 3 billion under the Resilience Initiative in the Western Balkans in the next three years, and plans to widen further lending activities to sectors which have a positive impact on climate change.

How much the EIB plans to invest in development of the Western Balkans in the upcoming period and which areas will have priority?

The Bank’s support to the Region started in 2001 and today we are one of the largest lenders to Western Balkan economies with EUR 8.7 billion of the approved financing. We are financing the construction of motorways and by-passes, rehabilitating the national road and railway networks, refurbishing and building of new schools, hospitals, judiciary facilities, municipal infrastructure, as well as providing support to the scientific community through our research and development loan program. Significant funding has already been channeled into those sectors and we still have numerous ongoing projects where significant funds are to be released.

In the future, we intend to widen further our lending activities under the new Economic Resilience Initiative to sectors such as renewable energy and energy efficiency and the environment, which have a positive impact on climate change. This year and beyond, the Bank will continue to support health and judiciary infrastructure projects, as well as the railways and road sectors but we also envisage continuing support of SMEs, through the commercial banks and national promotional banks. More support for Serbia’s resilience to migrant crisis is also being envisaged in the upcoming period.

Under the Resilience Initiative we plan to invest over EUR 3 billion in the Western Balkans in the next three years. We expect that a significant proportion of those funds will be channeled to projects in Serbia, as the largest country of the region.

To which extent are sustainable development and climate change represented in the EIB portfolio for the Western Balkans?

The EIB supports the transition to a low-carbon, environmental friendly and climate-resilient economy. As the EU bank, we understand the need to promote environmental goals in both developed and developing countries in order to support sustainable development around the world.  As one of the largest providers of climate finance worldwide, we commit at least 25 percent of our lending portfolio to low-carbon and climate-resilient growth.

The EIB has up to date invested in Western Balkans in the renewable energy sector some EUR 80 million through the contribution to the Green for Growth Fund, which aims to support small scale renewable energy projects such as hydro power plants and wind farms of less than 30 MW, solar energy (thermal and photovoltaic), biogas and biomass, (no food-crops) and geothermal projects, through financial intermediaries.

In the Western Balkan region in the last couple of years we have supported the rehabilitation of several hydro power plants in Bosnia with a credit of EUR 90 million, and we are currently involved in the construction of a new hydro power plant of 20 MW. We are also providing technical assistance, through the Western Balkan Investment Framework, for the preparation of the irrigation project in Former Yugoslav Republic of Macedonia, as well as for the two wind parks in Bosnia and Herzegovina.

We are very interested to continue be involved in the Climate Change projects in the region, including renewable energy. In addition to the renewable energy and energy efficiency projects, we are interested, against the low carbon limits, to contribute to the refurbishment of the existing distribution and transmission networks.

With the new Economic Resilience Initiative, the EIB will contribute to achieving sustainable development in the Western Balkans and in Serbia by, interalia, mobilizing investments by the private sector for projects financed on Public-Private Partnership and Project Finance basis. Our intention is to target investments in infrastructure, including energy, among other sectors, with a particular focus on job creation.

You recently stated that as part of the support of the WB6 Connectivity Agenda the EIB is working on evaluating new projects in Serbia and Bosnia and Herzegovina and in the energy sector. Can you tell us more about these new projects?

The EIB is supporting the Connectivity Agenda and we already have several projects signed in the road and rail sectors starting to be implemented in Montenegro and Bosnia. We are working on appraising new projects in Serbia and Bosnia-Herzegovina in rail, road and energy sectors. All these projects will contribute to connect people and countries of the Western Balkans and with the Member States, and are very important from the connectivity and regional cooperation point of view which are also important for the EU integration process. In Serbia concretely, we are starting the appraisal of the gas interconnection project. We are looking into similar opportunities in FYR of Macedonia.

What are your impressions of the recent summit of the six Western Balkan countries in Trieste in the field of energy? Are you satisfied with the results?

The Trieste Summit offered the opportunity to build on the achievements of previous Summits in Berlin (2014), Vienna (2015) and Paris (2016) – and to progress further in several areas of cooperation, in particular in the connectivity agenda, which is and will remain the core element of the process, and in the regional integration process. The Summit recalled the need to provide appropriate responses to global challenges and confirmed the importance of strengthening reforms on the rule of law, fundamental rights, economic development and competitiveness in order to deliver results to citizens.

The Connectivity agenda focusing on regional and TEN-T relevant transport and energy infrastructure and reforms is moving forward and delivering results. It will remain the key item on our agenda: well-connected and functioning infrastructure energy and transport networks drive economic growth, provide business opportunities, attract investments and generate jobs.

The Trieste Summit reviewed progress in the implementation of the projects that were launched at the 2015 and 2016 summits and welcomed the start of important construction works. More will follow before the end of the year.

The participants agreed on 7 additional connectivity projects, including those in the energy sector, with a total investment of over 500 million, of which €194 million in EU grant co-financing and the balance loans from the EIB and other IFIs and national funding by the Western Balkans. This brings total connectivity funding since 2015 to more than €1.4 billion for a total of 20 investment projects.

As far as the EIB Group has been concerned, the Summit was also an opportunity to sign additional finance contacts with our counterparts in the region in the health sector, private equity and guarantee facility for SMEs, in addition to bilateral meetings, among witch with the new Serbian Prime Minister Ana Brnabic.

How much is the environmental protection component taken into account when the Bank is deciding to finance the project?

As the long-term financing body of the European Union, the European Investment Bank promotes EU policies through its financial and other support to sustainable investment projects. The increasing prominence given to environmental and social considerations within the EU and throughout the other regions of operation of the Bank is reflected in its priority lending objectives as well as in the regular review and revision of its environmental and social requirements and operational practices.

The environmental and social policies, principles and standards as well as the operational practices of the EIB derive from and reflect the evolving EU approach and that of other international institutions towards the promotion of environmental sustainability and social well-being, in the broader context of the goal of sustainable development.

The EIB aims to add value by enhancing the environmental and social sustainability of all the projects that it finances and all such projects must comply with the environmental and social requirements of the Bank. In particular, climate change, biodiversity and ecosystems considerations are integrated into the lending policies and practices of EIB. The ability of the Bank to contribute positively in these respects is an important element of the non-financial value added that it brings to the projects we are financing.

Do projects that positively affect climate change have better lending conditions?

The financing conditions of EIB depend on our funding conditions on capital markets. As a “AAA” rated organisation and the largest multilateral financial institution in the world by borrowing and lending activities, we are able to finance ourselves under very favourable terms. As non-profit organisation, we only recover our operational costs besides our funding costs, especially when we work with the public sector when we don’t have any applicable commitment or management fees.

All projects that we finance are subject to environmental due diligence and need to comply with our environmental requirements and standards (“Environmental and Social Standards-Overview” can be found on our website www.eib.org).  Thus we don’t have particular financing conditions for the projects that influence positively climate change, but we pay high attention to climate change in general and environmental standards in all projects that we finance.

The EIB intends to expand credit activities in the field of environment, renewable energy and energy efficiency in the Western Balkans. What are you planning to do exactly?

The EIB has launched its Economic Resilience Initiative (ERI) to increase its support and help build resilience in countries hit by the recent refugee and migration  crisis, namely in the Western Balkans and Southern Neighbourhood.

The countries in both regions are already facing significant economic challenges, including high levels of public debt, low growth and high levels of unemployment, especially among young people. The influx of large numbers of refugees is putting poor infrastructure under additional strain. Existing financial instruments do not adequately meet the regions’ requirements. Nor do they provide financing on sufficiently favorable terms for the critical investments required to stimulate growth and job opportunities and ensure basic public services to both the local and refugee populations.

The ERI is evidence of EIB’s determination to help meet these challenges. It is a new initiative endorsed by the European Council in June 2016. It will focus on raising additional investments to support of sustainable growth, vital infrastructure and social cohesion, including creation of new jobs opportunities. This will involve support both for the public and the private sectors.

With these investments, we could improve services like clean water, energy and electricity, and improve education, healthcare, local transport and urban services. We can also support the creation of jobs through more support for small businesses and micro-enterprises, encouraging them and other companies to grow their businesses and in so doing to increase job opportunities.

The ERI will support efforts by the public sector including municipalities and public sector entities, but also by providing support to the private sector through additional risk taking capacity and more volume as well as Concessional lending (combining loans and grants). In addition the ERI would allow the Bank to accelerate the finalization of key infrastructure projects and provide additional financial and technical support on the ground where it is needed

So far, have there been sufficient quality projects in the field of environment, renewable energy and energy efficiency in the region?

Yes there was. However, better project preparation and project management are some of the areas for improvement which we are successfully addressing with our partners. Under ERI, the EIB plans to put aside a budget for project preparation which will be provided as grants to our partners in the Western Balkans to prepare adequately projects for EIB financing.

By positioning you as the Director of the Office for the Western Balkans, the EIB has shown that gender equality is highly positioned on the Bank’s agenda. Are there special programs that strengthen the role of women, especially when it comes to projects in sustainable energy and climate change?

Gender equality is one of the founding values of the European Union, and a key objective of the Sustainable Development Goals.

It is also smart economics: the role of women and girls in development is vital. Greater gender equality stands to enhance productivity, improve development outcomes for the next generation and make institutions more representative.

In December 2016, we approved the first EIB Group strategy on gender equality and women’s economic empowerment. The strategy,”“Protect, Impact, Invest” aims to embed gender equality and women’s economic empowerment in the EIB Group’s activities, covering lending, blending and advisory activity both inside and outside the European Union.

It is structured around compulsory and voluntary elements with three strategic action areas for the EIB Group: the protection of women’s rights in the due diligence framework and in the requirements for our clients and promoters; increasing our operations’ positive impact on gender equality; the targeted promotion of women’s economic empowerment, including women’s increased access to employment and to credit/financial services, as well as support for female entrepreneurship.

The Gender Strategy took effect in January 2017 and is being implemented in a phased manner. A Gender Action Plan aimed at guiding implementation will be elaborated over the course of 2017, defining the milestones, prioritisation and phasing of activities.