Sustainability is in the DNA of the Bank
The European Investment Bank is the world’s largest multilateral lender and one of the biggest providers of climate finance. Its 2018 Sustainability Report outlines how sustainability underpins all EIB Group activities. Emma Navarro, the EIB Vice-President responsible for the environment, climate action and circular economy, explains how the Bank is stepping up its climate action and working hard to make the UN Sustainable Development Goals a success.
Interview with Emma Navarro, Vice-President of the European Investment Bank
By Derek Meijers and Gaston Moonen
Familiar with sustainability
When Emma Navarro became a Vice-President of the European Investment Bank in 2018, she was assigned oversight for the environment, climate action and the circular economy, which are key components of the UN’s Sustainable Development Goals. When discussing how this responsibility has changed her perspective on sustainability, she explains that her work involves much more than keeping up with current affairs. ‘Sustainability has always been at the core of the mission of the EIB, in the DNA of the Bank. In my previous position, since the topic of sustainable finance had been gaining more and more importance, I was already familiar with this topic. I was also chair of the National Promotional Bank in Spain, which also focused on sustainability. For instance, we issued sustainable social bonds.’
Sustainability has always been at the core of the mission of the EIB, in the DNA of the Bank.
She is seeing increasing evidence that sustainability needs to be a top priority for Europe. ‘It is of critical importance for the citizens and the planet. And it is clear to me that the private sector is fundamental if you want to achieve the goals of the Paris Agreement and if you want the transition to a less CO2-intensive economy to be successful.’
The EIB’s fundamental role is to attract private investors to the projects it finances, she says. ‘But you need more than that. What we see now is that sustainability is gaining a lot of weight for big and small corporations. But also for the supervisors in the financial sector.’
All investments will be green
The EIB was the first financial institution to issue green bonds, and many other institutions followed suit. The EIB Vice-President explains that the financial world is constantly trying to become greener. In 2015, she participated in discussions on the need to increase the transparency of an investment’s climate impact. Today, there is a global Task Force on Climate-Related Financial Disclosures that has developed recommendations to guide financial institutions on climate reporting. ‘t is a task force for greening the financial system,’ Emma Navarro says. ‘The aim is to oversee how the financial system will be impacted and to explain the need to respond to the challenges of climate change.’
Emma Navarro says the EIB is taking a lead role in transparency, together with the European Commission. One example is the Bank’s contribution to the action plan on sustainable finance. ‘One of the problems we have is that we do not have a common language on what sustainability means,’ she says. ‘Investors need clarity on what is sustainable. The European Commission is developing this taxonomy of sustainability and we are proud to be contributing to this development.’
Sustainability has many dimensions and it is important that one sustainability goal not be pursued at the expense of other goals, she says. ‘In terms of the transition to a lowcarbon future, for example, there will be transition costs. We need to help the people most affected by these transitions. Some sectors and some people will be negatively affected. Others will win, leading to job creation and growth. But for the most impacted sectors, we need to help them undergo this transition.’
Emma Navarro points out that the EIB was created to support economic and social cohesion in Europe. ‘Right now we have a goal to do at least 30 percent of our financing in the EU to increase cohesion, and this will also support the transition to a sustainable economy. In addition to financing sectors such as innovation and energy efficiency, we also support education and social cohesion.’
Sustainable Development Goals
When asked which Sustainable Development Goals are the most important for the Bank, Emma Navarro smiles. ‘My first responsibility is the climate. But at the end of the day most of the SDGs are interrelated. We are contributing to SDGs linked to water, climate, food, or gender. When helping one SDG, you also help indirectly other SDGs. For example, take climate change or life below water. For many people, their life depends on the oceans. If we can clean up the oceans and help ocean communities, we also affect SDG 1, regarding poverty.’
My first responsibility is the climate. But at the end of the day most of the SDGs are interrelated. We are contributing to SDGs linked to water, climate, food, or gender.
She shares an example of how EIB financing can even support SDG 16 — peace, justice and strong institutions. ‘In Colombia, where they have an ongoing peace process, we are supporting them in this transition by investing in a project which will have a clear social impact in the region most affected.’
Emma Navarro says it may appear that the EIB focuses only on climate and the environment, but it depends on the region. ‘For example, in the EU neighbourhood countries we do a lot to help social inclusion. And in other regions, such as in Asia, our focus is perhaps more on climate. About 10% to 12% of our financing is invested outside Europe and around 40% of that goes to climate issues.’
Aligning with the Paris Agreement
When asked how the Bank selects environmentally sound projects, the Vice-President brings up two issues. ‘First, in the assessment and appraisal of our projects we have an emission performance standard. We look at how projects affect greenhouse emissions and how much we can save. And we publish both absolute and relative emissions. I think no other multilateral development bank publishes absolute emissions of projects. We have a system also to price carbon in the appraisal process.’
On the second issue, she points out that all multilateral development banks are aligning with the Paris Agreement. ‘We are currently working with the rest of the MDBs to develop a joint framework to see what it means to be ‘aligned.’ The idea is to present the joint framework in the next climate conference, the next COP in Chile, in December 2019. We need to make sure that everything we finance is compatible with the Paris Agreement. We still need to refine how this is done.’
The EIB’s approach is solid and consistent with the Paris Agreement, she says. ‘Even if you do a great job financing climate action, the rest of what you do should not be detrimental to the climate. And that is Paris alignment.’
Even if you do a great job financing climate action, the rest of what you do should not be detrimental to the climate.
When discussing how the Bank assures investors about the use of its green bonds proceeds, Emma Navarro explains that the EIB also uses third parties. ‘When it comes to tracking green bonds proceeds, we are also subject to external audits. This provides reassurance that what we do is indeed green.’ The funding from green bonds needs to be tracked to make sure that the proceeds are devoted to green projects, she says. ‘We are subject to an external assurance and we also have a methodology which is harmonised with all the multilateral development banks on what can be called green.’
‘What is also important here is the fiduciary duty of institutional investors,” she adds. “Investors should be informing their clients about what they invest in, what the results are, and the climate impact of the activities they finance.’
From threat to opportunity
It is no surprise to Emma Navarro that climate is being integrated into many new areas and activities. ‘Climate is perhaps one of the biggest threats we face. But it is also an opportunity. One of the problems we have is that we see climate change only as a threat and I think that it is important to change your mind-set, to also see it as an opportunity for the modernisation of our economies. For example, many jobs will go away because of automation, but at the same time new jobs will be created. I think that in terms of climate change, first it is protecting the planet, but it is also a long-term investment in the economy.’
For Emma Navarro, climate change is a global challenge that needs a global response. ‘And Europe needs to lead this response. For Europe, this is an opportunity to lead.’ She says that in the US, despite some statements at international meetings, there is progress at corporate and State level, such as in New York and California, that are very ambitious. Europe has an opportunity to be ambitious across the EU, she says. ‘Companies are well aware of the challenges we face and want to be perceived by consumers as sustainable and green. So threats can also create opportunities, and Europe needs to seize them. The EIB is eager to play its role, responsibly and actively, to deliver sustainable impact where it is needed.’
This article was first published on the 3/2019 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.