EBRD’s New Strategy Overlaps With Paris Agreement

Energy Efficiency and Climate Change Manager of European Bank for Reconstruction and Development (EBRD) of Turkey branch, Mr. Emre Oğuzöncül shared their new green economic transition strategy and their works to maintain climate change adapted sustainable finance with EKOIQ readers.

Interview: Burcu Genç

With the new Green Economic Transition 2021-2025, the EBRD aims to increase green investments to more than %50 by 2025. Could you please tell us more about GET 2021-2025? In particular, what makes it different from the previous GET approach.

GET 2021-2025 intends to accelerate the transition to green, low-carbon and resilient economies and to contribute to achieving a net-zero carbon world by 2050. Besides aiming to increase the share of green finance to more than 50 per cent of the EBRD’s annual business volume by 2025, the new approach also targets emissions reductions of at least 25 million tons over the same period. Given the climate urgency that the world is facing, GET 2021-2025 comes timely and it takes account of another major challenge, the current COVID19 pandemic.

Under GET 2021-2025 the Bank has identified eight strategic priority areas which reflect those sectors in which a rapid and far-reaching transition is most urgent. This includes greening the financial sector, decarbonising the energy sector and industry, sustainable food systems and connectivity, green buildings, natural capital and cities and environmental infrastructure. Energy efficiency and climate resilience have been defined as cross-cutting themes which will be incorporated widely into investment plans. Whilst some strategic priorities are new to the Bank, others, such as decarbonising the energy sector, are already well served: in 2019 alone, the Bank financed over 2.2 GW of new renewable power capacity.

Under GET 2021-2025, the EBRD will also step up its policy work, and especially the development of long-term, low-carbon pathways, to ensure its 38 emerging economies can effectively achieve climate and environmental goals. Aligning with the Paris Agreement is also part of the new approach. This means that projects will be screened using a methodology developed jointly with the multilateral development banks.

In implementing GET 2021-2025, the EBRD will pay particular attention to just transition and gender considerations, as well as to circular economy opportunities and green digital solutions.

The EBRD operates in regions from Central Asia to Eastern Europe and the Southern and Mediterranean. These regions generate around 6% of global GDP and emit 11% of global GHG emissions. GET 2021-2025 is designed to support these regions accelerate the transition to low-carbon and resilient economies. The new approach builds on a long track record of financing green investments. To date, the EBRD has signed €36 billion in green investments and financed over 2,000 green projects, which are estimated to avoid 104 million tonnes of carbon emissions yearly.

The EU has recently released the European Green Deal for a more sustainable economy within the EU. How does that fit into your strategies? How does EBRD work with the EU?

The EU Green Deal is very much aligned with the EBRD’s recently launched GET 2021-2025 approach in that strategic priorities and key work streams overlap significantly. Because of the EBRD’s well-established client relationships, its local presence, its private sector focus, and its proven green financing tools, the Bank is well placed to take a key role in contributing to the implementation of the Green Deal in our EU countries of operation and support green policies and investments in line with the Green Deal spirit outside the EU.

There are many ties between the EU and the EBRD. The EBRD is a multilateral development bank and just like Turkey, the EU is also a shareholder in the EBRD. The EU, the European Investment Bank and the EU member states combined own 54 per cent of the EBRD’s capital.

With €3.1 billion in total, the EU is also the largest single donor to the EBRD and it has also been at the forefront of providing funds to support the Bank’s green investments, policy and technical cooperation activities. Between 2015 and 2020, the EU provided approximately €307 million of grant co-financing for green investments with a total project value of €1.88 billion. In addition, the EU also provided approximately €89 million for green technical cooperation activities over the same period. These funding partnerships are a result of our close cooperation with the European Commission in Brussels as well as the EU Delegations in our countries of operation.

The EU and the EBRD also work together on different topics ranging from sustainable finance, development of green financing mechanisms, sector reforms, and industry collaborations. For instance, the EBRD has actively supported the European Expert Group on Sustainable Finance. Our collaboration on technical and financial issues includes being part of working groups on the circular economy, energy-intensive industries, and the Energy Efficiency Financing Institutions Group (EEFIG) which has been working in exciting new areas such as energy-efficient mortgages. The EBRD is also closely cooperating with the EU on a number of industry initiatives including the European Battery Alliance, the Clean Hydrogen Alliance, Bio-Based Industries Joint Initiative and many others.

As Turkey isn’t a part of the Paris Agreement, I would like to ask what are the disadvantages that may affect the Turkish borrowers of EBRD with this new GET 2021-2025? I’m asking this because with the new European Green Deal, there are some sanctions upon Turkey (or upon non-signers of Paris Agreement) like while exporting Turkish goods will face carbon taxing. 

To meet the Paris Agreement target of limit global warming to well below 2 degrees Celsius, we must curb carbon emissions by almost half by the end of this decade. This requires an acceleration of the green transition that is already underway in EBRD economies including Turkey. We are talking about a transition that leads us into a world where renewables and low carbon fuels dominate energy systems; industries are lean, circular and green; buildings are heated and cooled efficiently, and in which nature is protected and enhanced to provide us with clean air, water and soil.

At the One Planet Summit in 2017 in Paris, the EBRD, together with the other Multinational Development Banks, announced its intention to align its financial flows to support the Paris Alignment objectives. At COP24 in Katowice in December 2018, the MDBs presented a common framework to the Paris alignment approach, which includes areas related to:  mitigation, adaptation; climate finance; policy development; reporting; and internal activities. At COP25, the MDBs jointly presented the methodological development and progress under this alignment approach.

Within our GET 2021-2025 approach, Paris alignment means aligning our financial flows with the objectives of the Paris Agreement, based on the joint-MDB Paris Alignment approach. In this journey, we will scale up our efforts to mobilise climate finance and increase our capacity to support our clients, countries and regions of operations, including Turkey to develop, enhance and implement low-carbon and climate-resilient strategies and plans.

As far as I know, EBRD Turkey already supports climate change mitigation and adaptation projects of the major cities in Turkey and while supporting you also offer a climate change adaptation agenda in the long-term. How this strategy will affect the plans in-progress and future plans?

Cities account for more than 70 per cent of carbon emissions, thus they are at the forefront of dealing with the climate crisis. At the EBRD, we see cities as the ground for accelerated climate action which is why we have developed EBRD Green Cities.

We have been supporting municipal infrastructure and urban transportation investments in Turkey for many years. To date, we have invested in more than €450 million to 11 green municipal projects around the country.

EBRD Green Cities is one of our new flagship programmes to support cities optimise their capital investment plans by looking at the climate and environmental challenges they face. Together with our Green Cities, we work towards a city-specific Green City Action Plan (GCAPs) that prioritises and tackles these challenges through policy interventions and sustainable investments across a range of municipal sectors including buildings, energy, water, and transport.

We are working with more than 40 cities in our region and Izmir Metropolitan Municipality has been the first municipality in Turkey to join EBRD Green Cities in 2019. In Izmir, we are looking at ways to mitigate and adapt to the risks of climate change and preserve the quality of the City’s environmental assets ranging from marine biodiversity, varied coastal landscapes to fertile farmlands and forests. The roadmap aims to improve Izmir’s resilience and climate-focused sustainable development. It identifies green urban planning initiatives in several priority sectors including but not limited to water and wastewater, solid waste, urban transport and energy efficiency.

With Izmir’s action plan soon to be completed, we are most certainly looking at the prospect of having more Turkish Cities joining the Green Cities programme.

And if it is possible, could you please talk about on-going and future green projects in Turkey?

Accelerating Turkey’s green economy transition and regional energy connectivity is one of our strategic priorities in the country. We have a strong track record of green projects since 2009 and provided approximately € 6 billion for 150 green projects which are half of our total investment in the country. The EBRD has invested across different areas ranging from corporate energy efficiency to waste minimisation in the industry and from green infrastructure to renewables and cleaner energy production.

We support small and medium-sized sustainable energy investments in Turkey through dedicated credit lines to financial institutions which on-lend to private households, businesses and municipalities. These credit line facilities include TurSEFF, MidSEFF and TuREEFF and have been running for over a decade. For example, TurSEFF has been developing financial solutions focusing on implementing sustainable energy and resource efficiency projects since the day it started its activities, and these financial solutions take their place as financial products among the product range of contracted banks and leasing institutions.

Through our donor-financed and in-house policy dialogue activities, we have had the chance to work with Turkish Ministries and other public institutions sharing international best practices that support project and policy development. These included support for National Energy Efficiency Action Plan, Renewable Energy Action Plan as well as studies on biofuels in transport, waste minimisation and circular economy.

We have developed Turkey’s first Circular Economy Platform, which has been running for almost 5 years. The platform serves as a one-stop-shop for circular economy and aims to promote active engagement of industrial companies located in Turkey with waste minimisation practices and more broadly with the circular economy. Currently, we have more than 130 member companies across the various sector.  Within the platform, we have an e-commerce material exchange site named Turkey Materials Marketplace that enables the exchange of by-products and wastes between Turkish companies. The platform also provides circular performance measurement tools, as well as offering training, financial opportunities, and technical consultancy services for the private sector companies that are interested in circular business practices.

With our updated targets under GET 2021-2025 and Turkey country strategy focusing on green, we aim to maintain and improve our contribution to green investments in Turkey. We are looking forward to strengthening our partnerships and working with our clients and stakeholders for low carbon and climate-resilient economy in Turkey and other countries of operations.