Commissioners, ministers, leading experts, business leaders, MEPs, representatives of NGOs will discuss in Sofia the challenges and opportunities that climate policies and the Green Transition face our economies and societies. For the third consecutive year Dir.bg and 3e-news organize the largest regional forum on Green Transformation, Innovation and Tomorrow’s Industries. For 3 days, from 20th to 22nd of June, more than 130 panelists from 10 countries will participate in various formats and discussions related to all aspects of the environmental transformation of the economy and energy.
Financing the green transition together with sustainable development in Central and Eastern Europe will be the main focus of the second day of tthe key forum Green Transition 2023. And what investment opportunities the Climate Bank of Europe can support, tells us Lilyana Pavlova, Vice-President of the EIB. She will take part in the panel on financing green transformation in the CEE region. The Climate Bank is already setting up mechanisms to assess greenwashing. The introduction of clear standards and definitions through the EU taxonomy will help the public and private sectors to judge when an investment activity is sustainable. This can prevent ‘greenwashing’, which consists of providing misleading or even false information about climate and environmental action.
George Velev, 3e-News
Ms Pavlova, in your opinion, can the EIB be called the green investment bank of Europe?
The European Investment Bank is the EU’s climate bank. We work closely with the European Commission, the private sector and Member States like Bulgaria to set our societies on the path to carbon neutrality, while making sure no one is left behind and supporting the EU’s cohesion objectives.
This year marks the 30th anniversary of the EIB in Bulgaria. So far, we have provided support for investment projects amounting to more than €6 billion, and in 2022 our activities have benefited 7 800 enterprises and provided more than 133 000 jobs. Going forward, the bank is ready to increase its support for the green transition in Bulgaria. We are ready to go and I would like to encourage all potential clients to contact our office in Sofia.
The EIB ranks among the world’s largest climate financiers. In 2007, we introduced green bonds to global capital markets and were the first multilateral lender to align its operations with the Paris Climate Agreement, including by suspending financing for ongoing fossil fuel projects. In November 2020, the EIB Board of Directors adopted our Climate Bank Roadmap to deliver on its ambitious €1 trillion program to support climate action and investment for environmental sustainability. €36.5 billion by 2030 and commit over 50% of EIB funding to climate action and environmental sustainability by 2025. In 2022 alone, we committed €36.5 billion to climate action and environmental sustainability, representing 58% of our funding, exceeding the 50% target three years ahead of schedule.
What are the projects that the bank focuses on?
At the heart of our business is the provision of financing and advisory services for clean energy infrastructure such as solar energy or more energy efficient buildings, green urban development, sustainable transport solutions such as metro, rail and electric car charging infrastructure, projects for climate change adaptation and innovative cutting-edge technologies to decarbonize heavy industry. And in addition, small and medium-sized enterprises play an important role in the fight against climate change. The majority of financing for small and medium-sized enterprises is granted by the European Investment Fund (EIF), which is part of the EIB Group and is profiled in the area of small enterprises and venture capital. The EIF offers loan guarantees to financial intermediaries who provide these funds to companies at favorable interest rates, and invests in venture capital funds supporting clean technologies.
How do you help potential clients to meet the EIB’s sustainability criteria?
Bulgaria is one of the biggest beneficiaries of consulting services by the EIB. The bank works closely with the European Commission and with the government, commercial banks and local authorities of Bulgaria, helping them to identify, prepare and develop green investment projects. We offer a multifaceted support to clients who need help developing a project or finding suitable financing for it. In addition, our teams can support strategy development and provide capacity building in specific sectors. We provide innovative financial products that are not readily available on the market and are able to offer grants and technical assistance to help projects succeed. We also advise many small businesses and help develop financial instruments and investment platforms that combine EU Structural Funds with other sources of funding.
How does the bank avoid “green washing”?
The EIB assesses and monitors all investment projects it finances with regard to their sustainability, such as their environmental, social and governance dimensions. All projects we finance must be aligned with the goals of the Paris Climate Agreement. Some activities, such as fossil fuel projects, are excluded from our funding scope.
The Bank takes an active part in the process of greening the financial system by helping to develop a common language and a set of standards for sustainable financing. We contributed to the development of the EU taxonomy and the draft EU standard for green bonds. The introduction of clear standards and definitions through the EU taxonomy will help the public and private sector to judge when an investment activity is sustainable. In this way, cases of so-called “green delusions” can be prevented, which are expressed in the provision of misleading or even false information about actions in the field of climate and the environment. The EU taxonomy will contribute to the creation of more transparent and sustainable financial markets, which in turn will help mobilize the private capital needed to accelerate the green transition of our economies.
Should we expect a boom in projects related to sustainable development under the European Green Pact? Does the EIB have sufficient resources to ensure the financing of these undertakings? Is using a public-private partnership for this purpose a good idea?
Undoubtedly, in order for the EU to achieve its goal of climate neutrality by mid-century, boost economic growth, employment and well-being, it will need to work closely with the public and private sectors to develop environmental projects in all sectors of the the economy. However, public support from institutions such as the EIB will not be entirely sufficient to support the green transition. It is for this reason that engaging the private sector and building public-private partnerships are key to the success of the transition to a green economy.
The EIB plays an active role in attracting group investors. With the help of innovative financial instruments, we reduce the investment risk for the private sector. For example, we supported the offshore wind sector at its very beginning in the early 2000s, when the technology was too risky for commercial banks. We have recently co-financed the first European giga-factory for the production of lithium-ion batteries in Sweden, as well as plants for the production of green fertilizers and green steel using renewable hydrogen in Spain and Sweden. We hope that very soon we will be able to finance similar projects in Bulgaria as well.
From 2021 until now, the EIB has supported investments in green projects worth around EUR 222 billion. Is the interest in this direction really that great? And how is the EIB dealing with the energy crisis?
In fact, the EIB Group is on its way to achieving the set goal – to support “green” investments worth 1 trillion. EUR this decade, having already supported EUR 222 billion in investment over the past two years. However, the funding required is much more substantial and no single institution can do it alone. According to the European Commission, EU energy investment alone needs to double compared to the last decade and exceed €400 billion per year this decade to meet the EU’s target of reducing greenhouse gas emissions by at least 55% by 2030 compared to 1990. In addition, to stop Europe relying on Russian gas, additional investments of €210 billion will be needed by 2027 in energy efficiency, renewables and power grids.
We are currently in talks with the Electricity System Operator to discuss what projects we could support, for example to expand the electricity grid and integrate more renewable energy sources in order to accelerate the ecological transition and strengthen Bulgaria’s energy security.
To meet the need for financing in the energy sector, the EIB has increased its financial support to the European Commission’s REPowerEU plan to reduce dependence on Russian fossil fuels and accelerate the green transition, increasing to unprecedented levels the amount of financing from the EIB’s Clean Energy Group . In the next five years, additional investments of up to 30 billion euros will be made for companies and public authorities. These funds supplement the already serious EIB support for energy in the EU, which amounts to nearly 11 billion euros per year. According to forecasts, by 2027, the bank’s REPowerEU package will attract additional investments worth up to 115 billion euros, which will make a significant contribution to achieving energy independence and a green transition in Europe.
The EIF will support REPowerEU through investments in venture capital, private equity and infrastructure funds. The EIF’s portfolio of intermediary financing also supports a sustainable environmental transition in the European Union by supporting and investing in energy efficiency, low-carbon and renewable technologies, environmental innovation and increasing the share of the circular economy.
Could you point out some examples of sustainable development projects that would be useful for Bulgarian society? Please also remind us how many investments in green projects the EIB currently supports in Bulgaria?
In 2022, the “green” financing of the EIB in Bulgaria reached 241 million euros, which represents 50% of the bank’s total activity in the country, and this is a very good result. This includes the support given to the extension of the Sofia metro, where we finance almost all sections of the metro in order to reduce harmful emissions, improve urban mobility and create jobs. In addition, we also finance the Sustainable Urban Mobility Plan of Sofia, which increases the share of urban development projects that are aimed at expanding the infrastructure for pedestrian mobility, facilitating the access of people with reduced mobility to public infrastructure, and also air quality improves.
In addition, the EIB is working with the FLAG Fund to support investments for urban improvements and regeneration, such as energy efficiency and improvement in smaller municipalities throughout Bulgaria. In the framework of the previous cooperation with the FLAG Fund, we agreed on the co-financing of projects worth more than 60 million euros. This includes measures for renovation and energy efficiency in schools in Stara Zagora, development of green urban areas in Varna, construction of a medical center in Tsarevo, replacement of sewage infrastructure in Blagoevgrad and measures for renewable energy in Muglizh.
I would also like to mention the Decarbonization Fund, for which our team has done market research, an investment strategy report, proposals for fund structuring options, a human resources plan, a procedural manual. In general, the task for which we were hired by the European Commission has been fulfilled, but we remain available for additional assistance to the Bulgarian government when there is a decision on how the fund should function.
The EIB is committed to increasing its lending for green priorities in Bulgaria in support of the European Green Deal and the goals of the Bulgarian Climate and Energy Framework Program until 2030. One of the most important areas we are ready to support is sustainable transport and more specifically the modernization and expansion of the railway network in Bulgaria. The railway projects co-financed by us under the mechanism for co-financing loans under EU structural programs together with the Ministry of Finance cover both the construction and modernization of railways and stations, as well as the electrification, acquisition and modernization of passenger and freight rolling stock, depots for maintenance and rail terminals that combine rail transport with other modes of transport.
Forestry is also a sector that we could support in Bulgaria. Forests protect our natural capital and make a major contribution to climate change mitigation and adaptation by storing carbon in trees and soil, preventing flooding and soil erosion, and improving ecosystem resilience. The EIB finances the entire forestry value chain, including SMEs and mid-caps working in sustainable forest management, sustainable production of renewable wood materials in the wider bioeconomy and restoration of forests after major natural disasters such as forest fires or floods.
In order to reduce dependence on fossil fuels and decarbonize our economies, we are ready to support projects for renewable energy, energy efficiency and electricity networks in Bulgaria. At the beginning of the month, an eloquent example of the EU’s support for energy in the country was announced. The European Union Modernization Fund will provide €197 million to support the modernization of the electricity distribution network in order to accelerate the electrification of transport, the deployment of smart meters, energy storage, as well as the decarbonization and decentralization of consumption and production. electricity in Southeast Bulgaria. The EIB works closely with the European Commission and EU countries, providing its expertise and services to support the use of the Modernization Fund.
Bulgaria has an urgent need to refurbish the existing buildings, both public and residential buildings, and improve their low energy efficiency. The ELENA Technical Assistance Facility accepts projects from municipalities, energy agencies, one-stop service centers, financial intermediaries and other project promoters, many of whom we are actively discussing potential opportunities with. We believe that the ELENA program could play an important role in removing obstacles such as the high operating costs of energy efficiency investments and the public’s lack of awareness of the possible benefits. We can apply the experience gained by ELENA from the implementation of about 150 projects throughout the EU in the conditions in Bulgaria.
In addition, we are working with the Bulgarian government to support co-financing, including under the Bulgarian Recovery and Resilience Plan, and investments in the transport and energy sectors. For example, Bulgaria assigned the EIF a mandate to manage funds in the amount of about 330 million euros from the Plan for the Recovery and Sustainability of Bulgaria, with which the available financing for small enterprises in the country will exceed 1.5 billion euros. The funds will be dedicated for growth, innovation and investment in climate neutrality and the digital transition.
How do you support the ecological transition of SMEs in Bulgaria?
The EIB Group works together with the leading commercial banks in Bulgaria to support the green transition of small and medium-sized enterprises (SMEs) and mid-cap companies. They are the backbone of the Bulgarian economy. SMEs make up 98% of companies and provide about 60% of economic added value and 75% of employment, which is significantly above the average values for the European Union – about 57% and 66% respectively.
The partner banks of the EIB Group act as financial intermediaries and transfer the favorable terms of the EIB loans to the enterprises. Our loans often contain targeted investment measures so they can be used for climate and environmental sustainability projects. We provide consultancy services to support our financial intermediaries in building capacity to create and expand green credit portfolios. We work with a large number of Bulgarian commercial banks, but as the most recent example I can mention an agreement on synthetic securitization with risk reduction of ProCredit Bank, which is to be finalized in June. This agreement will help smaller companies in Bulgaria affected by inflation and tighter financial conditions.
In the coming months, the EIB is expected to sign an agreement for a targeted loan in the amount of 175 million euros with the Bulgarian Development Bank, which is intended to finance eligible investments of SMEs and companies with medium market capitalization in Bulgaria. The operation will also contribute to alleviating the negative economic consequences of the pandemic and the energy crisis, and at least 20% of the financed sub-projects will be aimed at tackling climate change.
We work closely with the European Commission as the main partner in the implementation of the InvestEU program, which offers financing and advisory services for SMEs. Under the InvestEU fund, we offer direct financing and financing solutions for SMEs, social or micro-enterprises and private and public project organizers. As an example of a project that we hope to announce soon, we can mention the financing of a Bulgarian company that will build an infrastructure for charging electric cars and thus promote electromobility and low-carbon transport in the country.
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The event is organized by Dir.bg and 3E-news in partnership with Electrohold, Euroins, Eurohold, ProCredit Bank, Visa, Glavbolgarstroy Holding, Enery Energy, Geotechmin, GCR, UBB, Artex Engineering AD, Telelink Business Services, TotalEnergy EP Bulgaria, Compass Cargo Airlines, Devnya Cement AD with ANRAV project, UniCredit Bulbank, MET Energy Bulgaria, Dundee Precious Metals, FLAG Fund, European Investment Bank, Platform Brown to Green, TPP “Bobov Dol”, Energeo, Bulgarian Development Bank, Electricity System Operator, Bulgartransgaz, Kärcher, ENplus®,, Bulgarian Atomic Forum – Bulatom, Solvay Sodi Bulgaria JSC, Institute “Big Data for the Benefit of the Intelligent Society” (GATE), DEVIN, BFIEK.
Green Week 2023 is supported by BNT, BTA, BNR, bTV Media Group, Darik Radio, Economic.bg, ESGnews.bg, Euronews.