The second phase of (what remains of) the EU Climate Bank Roadmap

The European Investment Bank (EIB) has just released its climate action strategy for 2026-2030. Despite the relevance of the coming years in meeting the goals of the Paris Agreement,  chiefly to cut fossil fuel consumption and emissions at the European level of 32.5% by 2030, other priorities are progressively superseding climate change commitments. The competitiveness narrative reigning supreme in the European political agenda has fully flooded into the Group’s policy documents, watering down the commitments of the EU Climate Bank.

Since 2021, the EIB’s ambition consisted in targeting at least 50% of its lending operations to “green operations” - projects contributing to climate change mitigation or adaptation according to the EU taxonomy regulation. As part of the EIB Group, only the Bank itself was committed to meet this target, whereas the operations of the European Investment Fund (EIF), the other member of the Group targeting Small and Medium Enterprises and mid-caps, were not computed. Deaf to calls from multiple civil society organisations (CSOs) to increase the climate finance target, the EIB does not have the ambition to scale up their green finance ambition. In the next five years, the 50% target remains in place, but is now expanded to the EIB Group level. This means that financial activities of the EIF are now also taken into account to reach the target, differently from the previous phase of the climate roadmap. Whilst the number of financial operations eligible to meet the 50% climate ambition is increasing, there is no hard guarantee that at least half of the EIB loans will keep on going to climate projects. However, the EIB did increase its climate adaptation financing target.

CSOs could not have a meaningful grasp on the drafting of the policy paper. Despite the Group’s commitment to transparency, the stakeholders’ engagement that preceded the documents’ adoption was limited in scope and time. The EIB requested stakeholders for input during a meeting that was announced with very short notice in the middle of the summer, while failing to provide any draft of the new strategy. This prevented civil society from entering a meaningful and informed discussion on the very content of the policy documents. This comment aims at providing a critical overview of the new phase of the EU Climate Bank Roadmap.

Deregulation of green finance: crowding in private capital while phasing out democratic accountability 

In line with the current European political agenda, the “simplification” of the EIB requirements and reporting methodology ranks amongst the most meaningful aspects of the second phase of the roadmap. This is of great concern as the review of environmental eligibility and sustainability reporting is carried out at a time in which the Bank is set to expand the mobilisation of the private sector in its climate-related investments, paving the way to a decreasing possibility of preventing and tackling the harmful environmental and social consequences of the projects receiving the Bank’s support.

Only a few of the planned reforms of the Bank’s green finance methodology have been put on record. In the past years, some steps were taken to enhance the Group’s tracking methodology, including the introduction of the Do No Significant Harm criteria and minimal social safeguards in both the EIB Environmental and Social Standards and EIF Environmental, Social and Corporate Governance Principles. While the dismantling of the EU taxonomy legislation is currently unfolding, the Bank is planning to update its definitions and technical screening criteria according to the coming developments of the Omnibus I package initiative. Further changes in the Group’s methodology will be updated in the Group’s annual operational plans, raising concerns for the implementation of adequate methodologies tracking the adverse effects of the projects receiving the Group’s support. As these are documents whose drafting does not entail any form of public consultation, the second phase of the roadmap lays the foundation for a shrinking space for transparency and democratic accountability. On top of that, self-assessment instruments are set to be increasingly deployed, while access to information is limited. Both at the project level - Green Checker - and at the counterparty level - Green Gateway -, the Group will implement instruments which are hardly independent and binding.

Finally, substantial changes will be brought about in the Paris Alignment of Counterparties (PATH) framework, originally intended to make sure the Bank steers the operations of the financial institutions and corporations it supports towards a full Paris alignment. But today, the Bank, instead of improving its flaws, paves the way to continued support to dirty corporations and financial intermediaries that even keep on increasing even the most polluting fossil fuel activities.

For this strategy and the previous one, the aim of the Bank is to bring more private sector in climate finance. Between 2021 and 2030, the Bank aimed to catalyse up to €1 trillion in public and private investments. Yet, our recent report finds that in 2023 up to 45,7% of climate loans were secured to the public sector. While the Group is flagging the private sector as a game-changer in European climate finance, these findings suggest a lack of interest from corporations and banks for financing much-needed climate investments in mitigation and adaptation on the scale required to meet climate targets.

The “energy revolution” is set open new profit-making opportunities for high-polluting industries

In line with the Commission’s industrial competitiveness agenda, the EIB Group’s new energy sector policy is set to face the energy crisis while supporting European industrial competitiveness through a diversified array of investment operations in transnational grids enhancement and modernisation, energy storage and renewables, as well as support for clean technologies.

In line with the previous phase, the EIB renewed its commitment to promote energy efficiency projects to reduce the energy consumption in all sectors, introducing plans to reduce fossil fuel consumption for cooling and heating households and support Small and Medium Enterprises (SMEs). No strategy is developed though in support of the efficient electrification of the so-called hard-to-abate industries. The new energy sector strategy doesn’t take the much-needed upgrades of the PATH framework to push these high-polluting industries to endorse adequate and binding transition plans to full decarbonisation. Yet, energy intensive industries will in fact continue to receive substantial financial resources by the EIB despite their low investment in the decarbonisation of their business models and high profitability. The Bank is de facto condoning their lack of climate ambition by mobilising public resources to take on the risk of shifting to renewable energy sources through corporate power-purchase agreements (cPPAs).

To meet the boost in power demand generated by the electrification of these industries, the EIB plans to expand its lending operations towards “low-carbon technologies”, which are oftentimes not renewable-based and implemented by the highest-polluting industries themselves. Examples include Carbon Capture and Storage (CCS), hydrogen and nuclear reactors. CCS is an inefficient and risky technology which only “cleans” the carbon emissions of the fossil fuel industry. Furthermore, the Bank should have adopted a more critical stance on hydrogen infrastructure, especially when it is imported from the Global South (see below).

Continued support for a just transition: good ideas, poor plans

The EIB fails to recognise the full potential of prioritising support for the public energy sector to implement a cheaper energy transition which also applies strong environmental and social conditions to push industry towards full decarbonisation. But it is positive that it explicitly mentions the role of public sector investment in resilient infrastructure and clean services at national, regional and municipal levels to support communities and households in their transitions. The question remains which initiatives the Bank will take to increase and improve support to implement this ambition.

While explicit references to EU wide just transition mechanisms are no longer present in the Commission’s proposal for the next EU budget, the Bank commits to continue supporting and implementing the Just Transition Mechanism. It will do this by focusing on supporting growth in regions where the economy and jobs currently depend on fossil fuels and state access for lower income groups to housing and transport in these regions as a priority.

This is partly related to the Group’s Affordable and Sustainable Housing Plan which aims to increase the availability of affordable and energy efficient housing by scaling up innovation, renovation and construction. The Bank’s special focus on young families and low-income households is a positive step but its broad definition of affordable housing and its focus on mobilising private investments make it unlikely the Bank will provide sufficient investments for the housing needs of the lowest income groups.

Finally, the EIB also wants to support the Social Climate Fund through urban and rural development and where relevant in the provision of affordable renovation loans or social leasing of clean products (such as vehicles, heat pumps) to lower-income households together with local banks. While it is positive that the Bank continues to pay attention to the just transition, both for vulnerable regions and to provide some support for affordable sustainable services to lower income households, this seems only a secondary priority behind competitiveness and the bank failed to commit to increasing dedicated support for the public sector and contribute fully to a just transition.

Not going Green but going Global: the case of critical raw materials and “green” hydrogen

While rightly acknowledging the disproportionate effects of climate change on the Global South, the role of EIB Global seems mainly to be the EU's invisible hand for the supply of critical raw materials (CRMs) and energy to feed a green transition in Europe based on geopolitical and corporate interests. The new Climate Bank Roadmap does not provide any concrete strategy and specific measures to deploy adequate investments with the highest developmental returns and projects meeting local needs. The clear-cut priority is instead related to the new CRM strategic initiative launched in March, setting the scene for an expanding role of the Group in this field, as the new EIB Global strategic orientation suggests.

While presenting it as a silver bullet of the green transition, the critical raw materials strategy does not prioritise resource efficiency and circular economies and risks expanding negative environmental and human rights impacts in the Global South, already well documented with respect to the Global Gateway projects.

The support for the export of hydrogen in the Energy Sector Orientation also creates risks of supporting a corporate-led energy transition in Europe on the back of the Global South - which already carries the largest burden of climate change even though it has far lesser historic responsibilities. Especially worrying is the intent to support interconnection projects of mutual interest with third countries for hydrogen networks. One of the key projects awaiting approval by the Commission is the South H2 corridor, which aims to produce and transport hydrogen from North Africa to Germany via Italy. It would imply building renewable energy and hydrogen production capacity in North African countries, as well as retrofitting gas pipelines to allow for the transportation of hydrogen. There is a big risk that renewables and hydrogen production projects in North African countries will lead to environmental degradation, exclusion of local communities and extracting local renewable energy production capacity for hydrogen production and export instead of meeting local energy needs. In addition, for the moment it is uncertain whether renewable hydrogen projects will take off, and there is a risk that retrofitted or new pipelines will be used for the transport of gas. The EIB should not use its public financing capacity for such extractive and illusive projects. Serving local renewable energy needs and other sustainable activities with a high local added value should be its priority.

In pursuing its operations outside the EU, the Group is able to deviate from applying the EU taxonomy criteria, including the Do No Significant Harm principles, for well justified reasons, but the documents do not provide further information in this respect. The EIB is already falling short on adequate human rights and environmental due diligence assessment to identify and prevent any negative impact on the environment and communities where its projects are located and carried out. We expected more, not less.

Conclusions

The Group’s climate strategy falls short of multiple challenges that the next years pose. In the previous years, the Bank had just taken the first steps on the path to become the EU Climate Bank but it is changing its path. Though some positive steps are noted, particularly in housing and just transition support, the overall roadmap reflects a troubling retreat from climate leadership and social accountability. Whilst it is not a U-turn, the EIB is not critically assessing its previous five years. It is putting a brake on its commitment to continuously support the decarbonisation of the whole business model of its counterparties and enhance its climate tracking and reporting methodologies. As private sector mobilisation goes hand in hand with further deregulation, the risk is that the EIB will expand its support for high-polluting industries and extractive projects—especially in the Global South, instead of demanding binding commitment to a full decarbonisation and the deployment of a global just transition.