EU development bank chief sees ending gas funding as test of ‘market credibility’

The European Investment Bank will not let its 'ambitions slip away' at a key meeting this week when national delegates will vote on ending support for fossil fuel projects, says president Werner Hoyer

Finance: the European Investment Bank (EIB) (Image: Ingenhoven Architects / Flickr)

The European Investment Bank (EIB) will not let its 'ambitions slip away' at a key board meeting later this week when national delegates will vote on ending support for fossil fuel infrastructure and exploration, president Werner Hoyer has said.

The EIB proposed halting such financing from 2020 in a draft energy lending policy unveiled in July. However, a vote on the matter was postponed last month, amid reports of pressure from Germany and member states to make exceptions in the case of natural gas.

“Our credibility on the market is now with these ambitions,” Hoyer told reporters in Luxembourg on Monday, four days ahead of a board meeting on 15 November where national delegates are due to return to the matter. “Obviously we are coming more and more to the conclusion that a departure from fossil fuels is unavoidable.

“We need to act now,” he added, citing a UN report that last suggested the cut off point to prevent a global temperature rise of 1.5 degrees from pre-industrial levels could be as early as 2030.

Hoyer acknowledged the political reality of jobs and the economy in regions that are currently dependent on fossil fuels, and said the EIB was focussing development funding on such regions. “This is politically important because those governments are under huge pressure to preserve as much transition time as possible.”

However, the decision to end fossil fuel funding was also based on hard economic reality, he implied. “We have to act as reasonable and responsible bankers,” Hoyer said.

“We can maintain a balance sheet of €600bn only if we have the trust of the investors,” he said, giving the example of investing in a coal plant with a planned lifetime of 40 years that would “have to be written off within 10 to 15 years”.

“A proactive decision in favour of such an investment is programming stranded assets,” Hoyer said.

“The basic question is do we agree on the need to move away from fossil fuels, this seems to be [supported by] the overriding majority of the member states of the EU,” Hoyer said, referring to a meeting on EU finance ministers last Friday.

He also restated the EIB's intention to increase the share of its funding directed at climate action from 28% to 50% by 2025.

The EIB looks forward to working with incoming European Commission, but took issue with incoming president-elect Ursula van der Leyen's pledge to turn it into a ‘climate bank’.

“This is the wrong comprehension of what is happening here: we are the climate bank, and the climate part of our activities is going to increase, and there will be no other player in the world whose role is bigger than this,” Hoyer said.

He stressed that climate impact must be considered in all the bank's activities: it would be a “catastrophe” to separate the bank's business into 50% climate action while “with the other 50% we finance the dirty stuff that remains”.