By Ricardo Mourinho Félix, Vice President of the European Investment Bank
Increased urbanization and demand-driven industrial expansion across Latin America and the Caribbean are putting pressure on natural resources, including energy, food, and clean water supplies. Cities across the region are working around the clock to provide clean water and wastewater facilities for a growing population. Efficient water supply and sewerage systems lead to substantial energy savings, reducing water losses, and building resilience to mitigate the effects of climate change and increase resilience.
This is not an easy task, however. Still, it is vital for Latin America and the Caribbean to take on this challenge so that this region can face the biggest challenge to humankind. International financial institutions must back the continent in all these dimensions of the fight against climate change. The European Investment Bank has taken a major step forward in setting out its commitment to be part of the global solution with the Climate Bank Roadmap.
The plan of the EU bank steers European investment in the right direction to rise to the challenge of climate change—at a global scale, including in Latin America and the Caribbean. The Climate Bank Roadmap, approved in November by all 27 EU member states on our Board, represents our strong commitment to making a success of the European Green Deal and meeting the targets of the Paris Agreement.
Our plan calls for big changes in the way we finance projects, assess risk and support innovation. It seeks to ensure that communities currently based on fossil fuel industries will experience a smooth and sustainable transition. The Roadmap reveals the far-reaching and difficult decisions we have made. Stopping financing for fossil fuel projects and devoting even more funding and tools to renewable energy and breakthrough technologies will not be an easy task.
Globally, stopping climate change will require trillions of euros in investment from both the private and public sectors. The new path may be riskier and more costly in the short term, but “business as usual” will be infinitely more expensive for humankind in the long run.
Our Roadmap is a strong commitment by the European Investment Bank and the European Union to meet the urgency of addressing climate change around the globe. It represents our commitment, as the EU climate bank, to align all our activities with the Paris Agreement. We will significantly boost our climate financing, aiming to unlock €1 trillion in climate and environmental investments during the critical decade ahead. We will gradually increase the share of our financing devoted to climate action and environmental sustainability to at least 50% by 2025 from 30% today.
The Roadmap targets our backing at more sustainable projects by creating new investment products and offering high-quality advisory services. We will focus on clean energy, on the most innovative technologies, and on digitalization to modernize industries. We will introduce new tools that draw on robust climate data to deepen our knowledge-based research on climate risks to offer better services to our clients.
We will increase support for developing countries that are adapting to the ongoing climate change dynamics. Sustainable social and economic development will continue to be a priority for us, in particular in Latin America and the Caribbean.
The region is one of the world’s areas most prone to natural disasters and has been particularly impacted by climate change, in particular, extreme weather events, with increasing intensity and frequency of hurricanes. All of these have potentially adverse environmental, social, and economic consequences for the countries concerned. The recent tragic impacts of extreme weather events in Honduras are a dramatic example of the impact climate change is already having on the suffering of millions of citizens. We need to go beyond expressing our deep sorrow.
To ensure effective and broad regional coverage, the EIB has established a partnership with the Caribbean Development Bank, the Caribbean region’s multilateral development bank, to address climate action through resilience projects. In 2016, the bank announced a new initiative for climate change mitigation, adaptation, and resilience projects across the Caribbean. This helps countries to lower energy costs and achieve greater energy security whilst assisting countries in building resilience into their development. Some key projects have already been supported, including the construction of an all-weather resistant highway, water supply enhancement, street lightning retrofitting, and a solar photovoltaic plant.
We are also committed to a global approach to a solution for the pandemic. During the Finance in Common summit in November, we announced our support for businesses affected by COVID-19, as part of the climate action partnership with Banco de Desenvolvimento de Minas Gerais in Brazil.
Finally, the Roadmap calls for a sweeping internal review at the European Investment Bank Group to integrate all our environmental, climate, and social activities. We pledge to continue improving our reporting and transparency on climate action projects and to make sure all operations are aligned with a global warming scenario of 1.5º C at most.
Five years ago, during the 2015 UN Climate Conference in Paris, we committed to finance $20 billion annually for the following five years towards the climate emergency. We are well on our way to go beyond that goal. Since 2012, we have provided €170 billion of climate finance, which mobilized over €600 billion for projects that reduce emissions and help people adapt to climate change.
Many of these projects are in Latin America. We are proud to have supported clean water and wastewater management projects in Argentina, Bolivia, Panama and another one will soon be signed in Ecuador.
The next five years represent a great leap forward at the EIB Group, committing all our efforts to protecting the future of humankind. I am eager to get started this new journey. There are many ways I can tell you that we have no time to lose. This is the time to rise to the challenge of climate change. This is a time for action. This is the time.