Why Public Finance for Climate Matters

Photo-illustration: Pixabay

The Presidents of the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), Odile Renaud-Basso and Werner Hoyer, appealed yesterday for urgent action on climate change, while comparing their complementary work on tackling it in their overlapping regions.

The EBRD works across 38 economies in three continents with a unique mandate that focuses on promoting market-oriented economies and private and entrepreneurial initiative.

The EIB is the investment bank of the European Union (EU), providing banking services throughout the EU and beyond and implementing the EU’s ambitious climate plan, the EU Green Deal.

Both multilateral development banks (MDBs) focus on climate action through climate financing mechanisms, aiming for more than 50 percent green investment by 2025 and for all their investments to be aligned with the goals of the Paris Agreement on limiting climate change well before that.

While public finance actors such as the MDBs play an important role in addressing climate change, said the EBRD’s Renaud-Basso, it is also “very important to get all economic players aligned on this objective. This implies having … clear and convincing market signals that will show the way and trigger action from the private sector.”

Speaking with her EIB counterpart at a joint online sustainability event entitled “Building the Green Consensus,” she added that driving policy to create markets for green and sustainable development was “something that MDBs can help with.”

Crowding in the private sector is widely regarded as the next big step-up in action to address climate change. MDBs like the EBRD and EIB are seen as catalysts for creating conditions that will attract private companies to invest, thereby massively raising the amount of climate capital available.

The EIB and EBRD presidents agreed it was important for regional and global MDBs to align definitions, criteria, and methodology for issuing climate finance, so as to create an orderly environment in which private capital feels comfortable operating.

“I believe that we need all MDBs on board on this issue,” said EIB President Hoyer. “Time is running out.”

Source: EBRD