Energy efficiency presents an enormous potential to mitigate climate change while contributing to sustainable development and resource efficiency. According to the International Energy Agency, energy efficiency accounts for 49% of the measures needed to stay in line with a 2°C degrees scenario globally (and 56 % in G20 countries). It also generates multiple benefits including local jobs, increased productivity and competitiveness of companies, improvements in air quality and health, energy access and energy security. A significant scaling up of investment in energy efficiency is urgently needed to meet global objectives.

The UN Environment Finance Initiative (UNEP FI) is engaged in cross-cutting work on energy efficiency finance, with investors, banks and insurers, steering international policy dialogues including in the G20 and with the European Commission. In parallel, UNEP FI reaches out to financial institutions, individually or through various networks, to support this developing work, give more importance to energy efficiency, and scale up their energy efficiency financing.

UNEP FI’s main areas of work on energy efficiency finance include:

  • Promotion of Energy Efficiency Finance in the G20
  • Global mobilization of investors and banks on energy efficiency
  • Policy dialogue at the European level – the Energy Efficiency Financial Institutions Group (EEFIG)
  • Exchange of information between financial institutions from all world regions – the UNEP FI Energy Efficiency Finance Platform

UNEP FI is also a member in committees of several peer initiatives on the topic:

  • In the Advisory Committee of the project led by the European Mortgage Federation and European Covered Bond Council (EMF-ECBC) on energy efficiency mortgages,
  • In the Low Carbon Buildings Technical Working Group of the Climate Bond Initiative
Promoting Energy Efficiency Investment in the G20

The topic of energy efficiency and its financing entered the G20 agenda with the adoption of the Energy Efficiency Action Plan at the 2014 G20 Leaders Summit in Brisbane. The Internal Partnership for Energy Efficiency Cooperation (IPEEC) was mandated to support the G20 energy efficiency collaboration and it coordinates a work stream dedicated to finance, the Energy Efficiency Finance Task Group (EEFTG). Co-chaired by France and Mexico, EEFTG currently counts 15 member countries and aims to create awareness on the need to scale up energy efficiency investments and put in place supportive policy environments. UNEP FI is part of the Secretariat of this working group, along with the co-Chairs, IPEEC, and Climate & Strategy Partners. As the global partnership between United Nations Environment and the financial sector, UNEP FI is a credible partner to represent the financial sector in this policy dialogue, reaching out to its members globally, as well as to peer finance networks.

EEFTG has developed G20 Voluntary Energy Efficiency Investment Principles for Participating Countries, a policy framework to catalyze public and private investments in energy efficiency. These five principles were welcomed by the G20 Energy Ministers in their 2015 Communiqué. Under its G20 Presidency, China put the spotlight on energy efficiency with the proposal of new G20 energy efficiency strategy. Adopted in June 2016 by G20 countries, the Energy Efficiency Leading Program refers to the Voluntary Energy Efficiency Investment Principles, consolidating their impact. The topic of energy efficiency investment was also specifically mentioned in the 2016 Energy Communiqué.

EEFTG 2016 Activity Report
EEFTG 2015 Activity Report

As a further major development, the G20 EEFTG released the G20 Energy Efficiency Investment Toolkit in 2017, which provides a collaborative architecture for countries to exchange best practices in scaling up energy efficiency investment and aims to establish a structured dialogue between private financial institutions, public development banks and policy-makers. The Toolkit was referenced in the G20 Climate and Energy Action Plan for Growth adopted at the G20 summit 2017 in Hamburg.

Global mobilization of financial institutions (G20, COP)

In conjunction with several partners, UNEP FI is leading a global mobilization of banks and investors committing to enhance their energy efficiency financing activities. Initiated in 2015, this mobilization gathers investors managing more than USD 4 trillion of assets and over 120 banks from over 40 countries. Unprecedented in nature and scale, this initiative is promoted in the G20 process, COPs and other international platforms in order to send a strong signal on the interest and readiness of the private financial sector to scale up energy efficiency investments. It also allows to constitute a community of committed financial institutions among which to facilitate knowledge and experience sharing and disseminate of best practices to increase energy efficiency financing.

Investors

Supported by investors managing more than USD 4 trillion of assets, the ‘G20 Energy Efficiency Investor Statement‘ highlights six areas where investors can act to increase energy efficiency in their portfolios of investments in companies (as shareholders) and/or directly in projects. UNEP FI partnered with CERES and the PRI for the first global mobilization on the topic.

Banks

In 2015, UNEP FI partnered with the European Bank for Reconstruction and Development (EBRD) to reach out to commercial banks on energy efficiency. Launched at a dedicated event in Istanbul before COP21, the Statement by Financial Institutions on Energy Efficiency and has since then received the support of more than 120 banks from more than 40 countries. This sends a highly positive message from banks on the increasing relevance of energy efficiency finance for all countries to mitigate climate change and meet the Sustainable Development Goals.

Chinese banks joining the mobilization

Policy dialogue at the European level

Energy efficiency is crucial to the EU’s climate and energy strategy and provides attractive opportunities for financial institutions. Presently, however, there is largely insufficient public and private investment in energy efficiency in buildings, industry and SMEs. In 2013, UNEP FI initiated a policy/finance dialogue with the European Commission as co-convener of the Energy Efficiency Financial Institution Group (EEFIG), which gathered over 100 participants, to discuss the barriers and drivers of energy efficiency financing in buildings, industry and SMEs. The first phase of that work led to the publication of a landmark report in 2015 “Energy Efficiency – The first fuel for the EU economy” formulating key recommendations to policy makers and financial institutions, for buildings and for industry/SMEs, to overcome existing challenges and scale up energy efficiency investments across the EU. In a second phase started in 2016, the ‘Energy Efficiency De-risking Project’ was launched to develop an open source database on performance monitoring and benchmarking of energy efficiency investments. The aim of the De-Risking Energy Efficiency Platform (DEEP) is to strengthen the trust of financial institutions as well as of policy-makers in energy efficiency investment opportunities.

The de-risking project recently developed a common risk and value appraisal framework, the EEFIG Underwriting Toolkit.

Executive Summary of the Report
Full report: Energy Efficiency – The first fuel for the EU economy

In late 2018, the European Commmission and UNEP FI launched the third phase of EEFIG. For its third phase, EEFIG will adopt a flexible working group format which will both continue maintaining the valuable assets produced during the second phase, such as the DEEP database and the Underwriting Toolkit, and focus on new emerging issues which link closely with the EU’s sustainable finance agenda: these include a new working group on the development of an energy efficiency taxonomy and of green tagging, as well as a new working group on the relationship between energy efficiency improvements and loan performance. The third phase of EEFIG was launched during a plenary session in late February 2019, alongside the first meeting of the new steering commitee which will be providing strategic direction to EEFIG.

UNEP FI is also closely associated and supporting other follow-up work post EEFIG report:

  • With banks at European level, UNEP FI brings its support and experience by participating in the Advisory Committee of the EMF-ECBC project on energy efficient mortgages.
  • UNEP FI is also partnering with the European Commission in organising a series of regional conferences within Europe which bring best practices to boost large-scale capital provision for energy efficiency (Sustainable Energy Investment Forums)
UNEP FI Energy Efficiency Finance Platform

UNEP FI has set up the Energy Efficiency Finance Platform (see brochure), which offers information exchange on leading practices between financial institutions from all world regions. The Platform will benefit from the inputs of leading financial institutions, recognised as knowledge partners, but is available to the entire UNEP FI membership. The platform launched on March 28th 2019.

Please contact Remco Fischer for more information on UNEP FI’s work on energy efficiency.