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Accelerate on climate despite ESG pushback, say IFI leaders

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International financial organisations say energy crisis calls for more ambition on low carbon transition

The transition to clean energy must be accelerated, not slowed down, in response to the energy crisis triggered by Russian aggression in Ukraine and hostility to ‘woke’ investing, said leaders of international financial institutions in Washington this week.

They are engaging firmly on one side of a debate raging in financial markets. Some argue energy shortages show there has been under-investment in oil and gas — and they go further, claiming the whole environmental, social and governance movement will wither in the face of this year’s harsh economic realities.

“If I were a minister in whatever country and had to tell my constituents that ‘your house might get a little bit cold this winter, and maybe a couple of blackouts can be expected’, that is a very uncomfortable situation for any politician,” said Werner Hoyer, president of the European Investment Bank. “But on the other hand [at meetings in Washington] everybody today agreed with me when I said that under these circumstances, the need to accelerate the climate transition and the energy transformation is more burning than ever.”

The EIB was the first multilateral development bank to align its financing with the Paris Agreement and ended fossil fuel financing in 2021. Hoyer has stuck firmly to the EIB’s ‘Climate Bank’ mission.

The war on Ukraine was also “a reminder that climate action is not an option, but an imperative,” he said. “We need to get rid of the dependencies from the whims of autocrats. And this flies, even in some of the more Russophile member states.”

On financial institutions backing away from ESG, Hoyer said: “I don’t see that on the markets. When we want to [issue] our bonds, green bonds for instance, the money is lying on the street waiting to be picked up by us.”

Hoyer said the pushback against ESG in some states in the US was “remarkable. It is certainly disappointing when we want to find common ground.”

Jürgen Rigterink, first vice-president of the European Bank for Reconstruction and Development, said: “The current situation actually shows that the acceleration of the renewable energy agenda is on the table.”

Germany might have just switched on a coal-fired power plant, but this was just a short term measure, he said. Energy security, climate and cost all called for renewable energy.

“In many of our countries of operation, in north Africa and beyond, renewable energy is much cheaper and more reliable,” Rigterink said. “We have been discussing green hydrogen for 20 years, but I really see an acceleration on that.”

Rigterink said this was not just his view. “A few years ago with a different US government, they might not have completely embraced the climate agenda of the EBRD. But [now] the vast majority of our shareholders support this, they push us.”

During the Covid crisis, the green share of the EBRD’s lending fell below 30%, but this year it is likely to be above 40%. “We’re talking to our boards about what it will be next year and the ambition level of a minimum of 50% of our financing by 2025 is still there.”

The EBRD has committed to Paris alignment by the end of this year.

On Friday the MDBs produced their 2021 Joint Report on MDBs' Climate Finance.

It showed that in 2021 the MDBs provided $82bn of climate finance.

This included $33bn for mitigation and $17bn for adaptation in low and middle income countries. That mobilised $13bn of private finance.

In high income countries the MDBs provided $29bn of mitigation finance and $1.6bn for adaptation, which mobilised $28bn of private finance.