EIB struggles to move needle on climate adaptation finance

The European Investment Bank is struggling to boost the share of its climate lending spent on helping countries adapt to the effects of climate change. In late 2021, EIB committed to roughly triple the share of its climate finance for adaptation projects to 15% by 2025. Adaptation refers to projects addressing the effects of climate change, whereas mitigation covers those aimed at reducing greenhouse gas emissions. Development experts and climate-vulnerable countries have long called for more international funding for adaptation projects, though these are often perceived as less profitable. The world’s major multilateral development banks now have a joint methodology to track climate adaptation finance, and Cinzia Losenno, a senior climate change specialist at EIB, recently outlined some of EIB’s adaptation projects. These include rehabilitating rainwater drainage systems and related road projects in Benin, improving port infrastructure in the Gambia, and investing in cold-chain solutions in Kenya to help preserve food and pharmaceutical products. EIB, which is owned by the 27 European Union member states, provided €10.8 billion ($11.4 billion) of financing outside the EU in 2022 and often refers to itself as the bloc’s climate bank due to its ambition to help lead Europe and the world’s green transition. So far, however, the share of financing going to adaptation work has struggled to keep up with the overall increase in the bank’s climate lending. In 2021, some €1.3 billion went to adaptation, or 4.9% of the bank’s total climate finance. In 2022, the adaptation figure rose to 5.4% of the bank’s overall climate finance. Data from the 2021 Joint Report on Multilateral Development Banks’ Climate Finance indicates that of EIB’s climate finance to low- and middle-income countries in 2021, 11% went to adaptation. For multilateral development banks as a group, adaptation accounted for 34% of climate finance to those countries — though only one, the African Development Bank, saw more than half dedicated to adaptation. “Over the last 3 years we have reported the three highest annual volumes to support adaptation,” Stephen O'Driscoll, EIB head of environmental, climate and social policy, told Devex by email. “But increasingly EIB adaptation finance even further is a priority.” As part of this, O’Driscoll wrote that EIB is looking to expand its ADAPT advisory service — designed to help EU clients assess their climate risk — internationally. And he added that the bank was working with the European Commission and other multilateral development banks, including the Africa Adaptation Acceleration Program of the African Development Bank, “to build a project pipeline and increase capacity of vulnerable countries to prepare and invest in adaptation.” Reacting to the latest EIB figures, which were made available this month along with the bank’s annual results, Enrique Madereel, senior researcher at the E3G think tank, told Devex that it was too early to judge the bank’s effort to boost adaptation finance. “I expect that the main barrier to reaching the 15% target is not the EIB’s ability to finance more adaptation projects (the money is there),” Madereel emailed. Instead, he wrote that the challenges were to “1. Connect fast and effectively with new clients and 2. Limited capacity for sovereign / sub-sovereign lenders to take on (concessional) loans for adaptation projects.” On the first challenge, Madereel suggested EIB work more closely with the London-based European Bank for Reconstruction and Development, “especially since the EBRD has a somewhat different client profile, which might help the EIB to connect to a broader range of clients.” The second challenge, Madereel wrote, was “problematic,” though not specific to EIB, and “partly out of the scope of what EIB can solve in the coming years.” Update, June 28, 2024: This article has been updated with EIB’s final climate adaptation numbers for 2022.