The European Investment Bank (EIB), an important funder of Irish transport infrastructure, will cut its support for road building in favour of alternatives as it shifts focus to meet climate change goals.
The EIB has been a significant funder of Irish road infrastructure, which accounts for the bulk of its €3.8bn of transport lending here over a number of decades including backing the national motorways roll out. The bank has also helped fund rail, ports and airport infrastructure including the Luas and new Dublin Airport runway.
Transport accounts for just under €1 in every €5 invested in Ireland by the EIB, an EU institution that can use clout of the combined backing of member states to raise money cheaply on the markets and lend it to public authorities including schools and universities and the private sector as long as targets help meet EU policy goals.
The change in focus was revealed by EIB vice-president Kris Peeters in an interview with the Financial Times on the sidelines of the G20 summit in Bali. Mr Peeters said he was “convinced” the EIB would invest less in roads and more in other elements of transport infrastructure.
The EIB is due to publish a new five-year transport lending policy this month.
A change in the EIB’s focus will potentially create a funding gap if national governments and local authorities continue to pursue new road infrastructure schemes. Rail, cycle and other alternatives could become easier to secure backing for, however.
The EIB is likely to be an early mover in a wider trend for all lenders as environmental, societal and governance criteria take on greater importance in lending decisions.
Banks and corporations can already secure cheaper financing on the bond markets if they commit to use the money raised only on projects that meet ESG criteria including mortgage lending only for higher building energy rated homes. Many in financial markets expect that to be complemented in time by a regulatory push against less ESG friendly lending.
Earlier this month the ECB said its first climate stress test of the euro area banking sector had found many lenders significantly understated potential losses they face from climate change, a signal
less environmentally secure lending will be discouraged by regulators.