Very often referred as the green bank of the EU, Gunter Fischer, principal advisor at the European Investment Bank commented during Deloitte’s Momentum 2024 conference on 18 April 2024 that the main activities of the EIB are financing renewable activities inside and outside the EU, supporting sustainable business models involved in adaptation and linking actors through, for instance, the Climate Leadership Network connecting .

A greater focus on risk reduction than on return, for now

Beyond providing financing that promotes climate action and environmental sustainability, Fischer suggested that the EIB proposes solutions to de-risk the financing of its private partners through layered funds. The structure enables the private sector to invest in the senior tranche (less risky layer) while the junior tranche (the risky bit) is retained by the public sector.

EIB is cooperating in finding investments, sourcing these investments and do[ing] the due diligence on these investments. Then, we have checks and balances coming from the private sector that is asking us questions… about risk-return profile under development, the potential, etc.

Gunter Fischer, principal advisor, European Investment Bank

Fischer described another alternative--the simplified model--where private investors hold the senior tranche which gives them a priority on distribution. That means they “take less risk than the public investors and that helps them first of all, to get into [a new] field.” Such deals were structured to finance climate mitigation projects in developing countries. Yet he wishes to mobilise more capital for adaptation, “which is still very challenging.”

Fischer added: The “EIB is cooperating in finding investments, sourcing these investments and do[ing] the due diligence on these investments. Then, we have checks and balances coming from the private sector that is asking us questions… about risk-return profile under development, the potential, etc.”

Finally, he explained that the EIB promotes green financial instruments to investors, claiming that it was the first financial institution to issue green bonds and .

He thinks that its sustainability credentials have been further enhanced by issuing , which are usually used to finance marine and ocean-based projects that have positive environmental, climate and economic benefits.

Policy and challenges in emerging markets

“GGGI typically works in most of the emerging markets in building a low carbon resilient and inclusive economies,” said Srinath Komarina, programme manager at Global Green Growth Institute, a treaty-based international intergovernmental organisation set up in 2012.

The goal of GGGI is to keep “bringing growth and sustainability at the centre of the economic growth of the governments” by working with government officials at the policy level and ensuring a pipeline of scalable public-private projects, some of which with innovative technologies.

In emerging markets, Komarina noted it would not be unusual to be confronted with “the absence of a policy, or misguided policies probably because of the different priorities of the government or they're not thought through for the need of this.”

“There's a huge gap between what the government wants to do but doesn't have the capability to do that to the ground level,” said Komarina. Despite having the right policies, he encountered problems with “the manpower and the capacity building” to implement policies.

Komarina comment that the mobilisation of climate finance is also challenged by the global taxonomy systems that come with different shades of green. Moreover, GGGI needs to work with different guarantee agencies, because most emerging economies are not investment grade. Yet he noted they could get additional guarantees from partners such as the EIB.

One country programme scaled up to 20

When working with the government of Luxembourg in the past as programme manager for Vietnam for the climate and green bond projects, Komarina noted “a lot of demand from other neighbouring countries like Mongolia, Cambodia and Laos for access to climate finance” given their lack of technical capacities.

Komarina praised the “proactiveness” of the minister of environment, finance, and foreign affairs in Luxembourg for setting up the on sustainable finance instruments. “As we speak, we are activating 14 emerging market countries with six more in pipeline.”

Developing local ecosystems is key

“I built microfinance banks from scratch in emerging markets in Eastern Europe and SME banks,” said Borislav Kostadinov, director, at Finance in Motion (FIM). He noted that FIM is an impact manager focusing on environmental and social aspects that started its operations in 2009. He explained that FIM has deployed more than €7bn of capital and currently has €3.6bn in assets under management.

Kostadinov mentioned that he is the director for the Green for Growth Fund that his firm structured to provide advice. Also initiated in 2009 by the European Investment Bank and the German development bank KFW, the GGF has a blended finance structure “that is basically a platform for collaboration and exchanges between governments” in a public-private partnership leveraging capital to increase investment volumes to its targeted regions and sectors.

Besides, FIM is managing other SFDR article 9 funds in emerging markets such as in Eastern Europe, North, Central and South America, the Middle East and North Africa out of 16 offices.

Kostadinov explained the FIM is trying to create an ecosystem on the ground with the help of more than 25 local engineering companies across 19 geographies that are helping to originate impactful projects and to ensure “that the integrity of the projects is maintained.”

Kostadinov noted that its GGF can also benefit from the creation of local taxonomy. For instance, he reported that Georgia has “a very progressive and proactive” central bank regulator which has created a sustainable green taxonomy through which they can basically track the performance and progress of its banks.