EBRD and insurer in green bond deal

The European Bank for Reconstruction and Development (EBRD) and trade credit insurer Euler Hermes have signed a risk participation agreement to boost cooperation through the Bank’s Unfunded Risk Participation programme to support investments in green bonds.

In one of the first transactions signed within this framework, Euler Hermes, through its UK branch, has taken on half the risk in an existing EBRD loan to a financial institution in Serbia. The original loan was signed to help the bank on-lend to its small business clients for investments in energy efficiency through the EBRD’s Western Balkans Sustainable Energy Financing Facility (WeBSEFF).

Allianz subsidiary, Euler Hermes, has pledged to use the payments it receives from the EBRD through interest premiums on this agreement to invest in green bonds. Euler Hermes recently launched a Green2Green Single Risk insurance product, which enables it to support green transactions by investing remuneration received through them back into the green economy in the form of green bonds. The bonds are used to finance investments furthering the green economic transition in line with the Paris Agreement on climate change.

“Together with providing funding to support the ‘greening’ of the Western Balkans, the Bank is also engaging with governments to reform legal and policy frameworks to create an environment in which projects can succeed and wider impact is possible,” said the EBRD in a statement announcing the agreement.

“Supporting residential energy efficiency, the EBRD’s Green Economy Financing Facility (GEFF) has reached thousands of families across the six countries of the Western Balkans, providing financing to local banks for on-lending to households to invest in green technologies and solutions such as improving home insulation and installing efficient boilers,” the bank added. “Its sister facility WeBSEFF, which began in 2013, has likewise provided finance for hundreds of successful energy efficiency projects for business and municipalities.

“Across its countries and regions, the EBRD intends to raise the proportion of its annual business volume invested in green projects to more than 50 per cent by 2025.”

The agreement was supported by insurance broker the Texel Group, and came as the EBRD opens its flagship EBRD Green Cities event which will gather experts from around the world this week to explore how cities can address the climate emergency and lead the transition to a low-carbon and climate-resilient future.

The two-day meeting, starting today, will hear from mayors, private sector experts and thought leaders about the role cities and the private sector play in accelerating climate action. Dr Fatih Birol, the executive director of the International Energy Agency, which last month issued a widely praised roadmap to decarbonising the energy sector by 2050, will deliver a keynote address.

“Cities are critical to easing the world’s climate troubles,” added the EBRD. “Globally, cities account for three-quarters of greenhouse gas emissions. The world is urbanising quickly, with 55 per cent of people already living in cities and more urban growth expected. This makes it essential both to ensure that the world’s rapidly expanding metropolises are built with climate-resilient and low-emission infrastructure and to update the underfunded and old-fashioned infrastructure many countries in the EBRD regions have been left with as the legacy of their former leadership systems.

“So cities represent a prime opportunity to tackle climate change. Focusing on improving the way cities invest in municipal infrastructure is increasingly seen as the best way to achieve the 2015 Paris Agreement climate change ambition of keeping temperature rises fuelled by greenhouse gas emissions well below 2C with the goal to limit warming below 1.5C.”

Allianz subsidiary, Euler Hermes, has pledged to use the payments it receives from the EBRD through interest premiums on this agreement to invest in green bonds. Euler Hermes recently launched a Green2Green Single Risk insurance product, which enables it to support green transactions by investing remuneration received through them back into the green economy in the form of green bonds.

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