Emerging economies in particular should start looking at growth and development with a green lens, instead of through conventional measures such as gross domestic product, Maier told Devex in an exclusive interview on the sidelines of the Asian Infrastructure Investment Bank's inaugural annual meeting in Beijing, China, last month.
“Being energy efficient is not just something nice to have for the world community, it's actually a prerequisite for global competitiveness,” he said. “Green really means business. It's not just a slogan.”
Maier, who joined the EBRD two years after the bank’s 1991 establishment, explained this overall mandate of the green agenda — from energy efficiency to green infrastructure — is what his institution is trying to address in the countries where they operate. EBRD has invested around 20 billion euros ($22.12 billion) in over 1,000 sustainable energy and resource projects over the last decade.
“We have such demanding green targets in our lending programs because our job is to make these countries and economies competitive in a globalized world,” he said. “All aspects of the green agenda ... will be even more important for us going forward.”
Read the excerpt of our exclusive interview with EBRD Managing Director for Infrastructure Thomas Maier for insights on multilateralism, the importance of bankable projects, and sustainable and green infrastructure, among others.
Over the last year, the international development community welcomed two new multilateral institutions, the AIIB and the BRICS' New Development Bank. What can you say about these new players and their prospective impact on development as a whole?
We are very excited about their emergence because the combined total financing ability of [existing] MDBs stands in no comparison with the infrastructure gap.
Our annual ability to lend and invest is $60 billion to $80 billion.
The infrastructure gap estimate is upwards of a trillion dollar, so it's very clear that the MDB community needs to do two things: first, work together better to leverage each other, and second, bring in more of the private sector because only through leveraging the private sector can we make a real upscale in impactful projects.
[There are also] advantages to new players. The first one is that [the new banks have] a lot of local knowledge and local leverage. But if we combine our leverage, we will be more successful. Secondly, it's not just the financing that is important. [There is] also project preparation, policy dialogue, and the improv[ement] of legal and regulatory frameworks. Successful projects require the public sector to make certain hard decisions. Together with partners, EBRD is happy to work [with them] to instigate these changes that make it possible for more successful infrastructure projects to emerge and for the private sector to engage.
There are discussions in terms of the abundance of interest from the private sector and other development stakeholders to finance and invest in projects, but there's just a lack of bankable ones. Does this emphasize the need for more project preparation programs — particularly in green finance — for client countries?
Absolutely. It's the key bottleneck and this is why all [international financial institutions] now have these project preparation facilities, including [multilaterals like us], the Asian Development Bank, the World Bank, the African Development Bank, and now AIIB's $50 million [preparation] facility. There's a lot happening now, and we hope that, collectively, the emergence of all these facilities will create more projects that will be interesting for the institutional investor community. But of course very often the institutional investor community also wants IFIs to partly finance [some projects] as a seal of approval to bring their institutional investor money to them. So I think an interesting cooperation [is needed] to develop more and [become] better.
EBRD has a target for green finance. Forty percent of our finance has to meet climate change mitigation criteria, and that will be increasingly important because we face not only an infrastructure gap but also the climate change challenge. Green infrastructure is one of the key ways in which we can fight climate change. So we have to do much more collectively. That means to prepare more energy efficiency projects, engage much more in public transport to generate a modal change from car usage to public transport. These are the activities that we need to focus on.
How do you convince countries — especially developing and least developed ones — to focus and have interest in financing and pursuing green and sustainable infrastructure despite the cost consideration?
It's a very interesting and demanding issue. For example, Taiwan has provided EBRD with funding on what is called clean energy special fund [in which] they provide — on an untied basis — subsidized financing for innovative energy efficiency technologies, because very clearly some of these technologies are relatively expensive. Unless you have the right financing instruments of either subsidized financing or grants, it will be very difficult for client [countries] to implement them.
I can say that fundamentally if the government makes the right decision in terms of [creating the necessary] legal and regulatory framework, identifying risk allocation [management], providing stability in terms of pipeline and infrastructure planning and incentives, investors and other stakeholders will come.
Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. Prior to joining Devex, he covered Philippine and international business and economic news, sports and politics. Lean is based in Manila.
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