Financial institutions, including development banks, are important actors in the global effort to speed up the transition towards zero carbon economies. However, rather than meeting the potential to achieve global climate action objectives, these financial actors are still providing support for fossil fuels. At the moment, only few development banks have indicated an exit out of some fossil fuels – namely coal – while none has progressed to phase out all fossil fuels from their investment portfolios.
Attention has grown to the inconsistency between the climate talk of our European leaders and institutions, and the financial decisions that allow for continued support for fossil fuels. Although the financial sector has become more active in mobilising climate finance, it needs to do more to end the provision of negative climate finance, namely investments in the fossil fuel industry.
The main development banks in Europe include the European Investment Bank (EIB) and the European Bank for Reconstruction & Development (EBRD). Both of these banks have committees made up of EU Member State representatives and hold regular consultations with the European Commission on their investment strategies. In addition, national development banks such as Germany’s KfW play an important role in stimulating efforts to phase out fossil fuels through their overseas development partnerships and portfolios.
European development banks must use the Paris Agreement as a compass when they revise their climate and energy strategies. In particular, they should take note of the necessity to align financial flows with low-emission and climate resilient development. The EIB and EBRD should extend their coal phase out plans to tackle other fossil fuel subsidies such as oil and gas.