EIB tracks increase in low-carbon investments from businesses despite financial challenges

The Bank has today (13 April) published its latest annual climate investment report – a resource tracking investment made in activities that improve climate mitigation and/or adaptation from both public and private sources.

From public sources, the report outlines how the impacts of increased funding from the EU and from member states in a bid to end Russian fossil fuel imports are taking shape. Under the RePowerEU package, funding has been increased for improving energy efficiency in buildings, self-generating more clean electricity and improving energy transmission and storage infrastructure.

But the report throws out some fascinating findings on how the current energy cost crisis and related economic turmoil is impacting how businesses are investing in environmental sustainability.

According to the report, 88% of EU-based companies have already implemented at least one measure to reduce their emissions, with recycling and improving energy efficiency being the most common starting points.

And 53% of firms have invested in either climate mitigation (emissions reductions) or climate adaptation – or both – within the past 12 months. This is a 10% year-on-year increase.

The EIB documented a slightly steeper uptick in investment among SMEs, despite the fact that these firms are hardest squeezed by current economic turmoil. 11% more SMEs disclosed climate-related investment this year than last.

The EIB has documented how businesses’ ability to make long-term investments is, in many cases, being majorly challenged at present. However, it notes that “high energy prices provide an opportunity and an incentive for firms to increase their investment in energy efficiency, balancing out the decline in other investment”. This is particularly true in energy-intensive industries such as manufacturing.

All in all, 40% of EU-based firms have invested in energy efficiency over the past 12 months.

Nonetheless, the report reveals that a significant share of firms are pessimistic about their ability to invest in the low-carbon transition – including investments in energy efficiency, despite quicker payback periods. 32% of firms are pessimistic, either because of the current financial outlook or because of confusion over which solutions are suitable. The EIB has recorded a 4% year-on-year decrease in perceived readiness to invest in energy efficiency.

Adaptation and resilience

Regarding climate adaptation, the EIB has found that almost 60% of EU-based firms have faced at least one physical climate risk to their operations and/or supply chain over the past 12 months. The proportion was highest in Southern Europe.

Last summer was a record-breaking season for extreme weather events across the world, and Europe was no exception. Summer 2022 was the hottest on record for the continent and 2022, as a whole, the second-hottest year. This fed the worst droughts for Europe in more than 500 years. Also, July and August 2022 have been described as an ‘exceptional’ season for wildfires in Portugal, Spain, Greece and France.

EIB research has found that one-third of businesses took at least one step to improve climate resilience within the past 12 months, proving that investment in resilience and adaptation is less of a priority and less of a mature field than investment in mitigation.

“EU firms have realised that climate change is not a distant reality anymore,” said the EIBs’ chief economist Debora Revoltella. “Europe’s future depends on our ability to transform and embrace the digital and green transitions. This calls for bold investment in climate action.”

Research published by Deloitte in January revealed that 82% of senior business leaders were personally impacted by climate-related events within the past year. The research polled more than 2,000 C-suite business leaders across 204 nations.