European Investment Bank stops fossil funding; Bank of Canada acknowledges the dangers of stranded assets

european investment bank energy_lending_policy_enThe long-awaited decision came on November 13, when the European Investment Bank (EIB) issued a press release announcing that “ We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere.”  Also, “…..The EIB will work closely with the European Commission to support investment by a Just Transition Fund. The EIB will be able to finance up to 75% of the eligible project cost for new energy investment in these countries. These projects will also benefit from both advisory and financial support from the EIB.”  The Guardian summarizes the policy here ; details are in the full document, EIB Energy Lending Policy: Supporting the energy transformation.

The decision ends a long and contentious review process which received more than 149 written submissions and petitions signed by more than 30,000 people.  National members of the EU negotiated and compromised – the German government had been expected to abstain from the vote but ended by supporting the measure.  A press release from WWF-Europe  is generally supportive, stating “All public and private banks must urgently follow suit” – while pointing out that the decision postpones the end of financing for gas projects until 2021, and allows for further financing for any gas infrastructure that could potentially transport so-called “green gas”. A summary in Clean Energy Wire quotes Claudia Kemfert, climate economist at the German Institute for Economic Research, who calls the EIB decision “a game changer”, and says, “Even if there’s still a backdoor for fossil gas included, this is an important and necessary step in the right direction.”

Bank of Canada acknowledges climate change risks to the economy

On November 19, the Bank of Canada published its most complete statement to date about the transitions and risks which climate change will bring, in Researching the Economic Effects of Climate Change , a report prepared by Miguel Molico, senior research director at the bank’s Financial Stability Department.  On November 21, the Governor of the Bank of Canada followed up on this by raising the issue of climate change and the risk of stranded assets during an address to the Ontario Securities Commission .  The National Observer summarizes the development in “Bank of Canada warns of stranded assets and an abrupt transition to clean economy” (Nov. 23).

Also in Canada, on November 19, the Institute for Sustainable Finance was launched Housed at the Smith School of Business at Queen’s University, Kingston Ontario : “ The Institute for Sustainable Finance (ISF) is the first-ever cross-cutting and collaborative hub in Canada that fuses academia, the private sector, and government with the singular focus of increasing Canada’s sustainable finance capacity.” A more formal statement comes in the Institute’s launch report:  Green Finance: New Directions in Sustainable Finance Research & Policy  which states: “the Institute will span a continuum of expertise from across varying disciplines, including finance, economics, environmental studies, political science and others, in order to foster innovative research, education, external collaborations and partnerships. The Institute’s mandate is threefold:

  •  Generate innovative and relevant research on sustainable finance and effectively communicate this research to all pertinent stakeholders.
  • Serve as a platform for collaboration between government, academia and industry.
  • Provide educational opportunities and develop capacity in the field of sustainable finance.”

The Green Finance report summarizes the discussions by financial experts at a conference by the same name, held on June 14-15, 2019, following the release of the Report of the government’s Expert Panel on Sustainable Finance – Mobilizing Finance for Sustainable Growth.  To help readers who are not financial experts,  the Institute website offers useful “primers” to explain some fundamental concepts in sustainable finance, including  Climate-Related Financial Disclosures, Divestment, and Transition Bonds. Not to be confused with Just Transition funding, the primer explains that “Transition Bonds” are corporate financing tools, and the companies who issue them must use the proceeds to fund a business transition towards a reduced environmental impact or reduction in carbon emissions. ( The example given is that a coal-mining company could issue a  transition bond to finance efforts to capture and store carbon.)

Institute for sustainable financeAs one of its first actions, the ISF established the Canadian Sustainable Finance Network (CSFN)  an independent formal research and educational network for academia, industry and government to bring together a talented network of university faculty members and relevant members from industry, government and civil society.  A list of members, here , includes multiple faculty from twelve Canadian universities, one from Yale in the U.S., and other individual academics from universities which are not institutional members (including UBC, HEC Montreal, and Memorial University).

 

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