The European Investment Bank (EIB), a major financier of Irish transport infrastructure, will scale back its support for road construction in favor of alternatives as it shifts its focus to meeting climate change targets.
he EIB has been a major financier of Irish road infrastructure, accounting for the bulk of its €3.8bn of loans for transport here over several decades, including supporting the rollout of national motorways. The bank has also helped finance rail, port and airport infrastructure, including the new Luas runway and Dublin Airport.
Transport accounts for just under €1 of every €5 invested in Ireland by the EIB, an EU institution that can use the leverage of the combined backing of member states to raise money cheaply on the markets and lend it to the authorities. public, including schools and universities and the private sector as long as the objectives help to meet the EU’s political objectives.
The change in approach was revealed by EIB Vice President Kris Peeters in an interview with the financial times on the sidelines of the G20 summit in Bali. Peeters said that he was “convinced” that the EIB would invest less in roads and more in other elements of transport infrastructure.
The EIB is due to publish this month a new five-year transport loan policy.
A change in the EIB’s approach will potentially create a financing gap if national governments and local authorities continue to pursue new road infrastructure schemes. However, rail, cycle and other alternatives could become easier to get support for.
The EIB is likely to be one of the pioneers in a broader trend for all lenders as environmental, social and governance criteria become more important in lending decisions.
Banks and corporations can already get cheaper financing on the bond markets if they commit to using the money raised only on projects that meet ESG criteria, including home loans only for higher energy-rated homes. Many in financial markets expect that to be supplemented over time by a regulatory push against less ESG-friendly lending.
Earlier this month, the ECB said its first climate stress test of the euro zone banking sector had found that many lenders significantly underestimated the potential losses they face from climate change, a sign
regulators will discourage less environmentally sound loans.
