The European Investment Bank has vowed to end its multibillion euro financing for fossil fuel projects by the end of next year in order to align its strategy with climate targets.
The EU’s lending arm has drafted plans, seen by the Guardian, which propose cutting support for energy infrastructure projects which rely on oil, gas or coal by barring companies from applying for loans beyond the end of 2020.
The EIB said its focus on long-term investments means that it must align with the Paris Agreement which aims to cap global heating at 1.5C above 1990 levels by cutting greenhouse gas emissions.
“This transition will be profound. Solidarity is required to ensure that potentially vulnerable groups or regions are supported,” the EIB report said.
The lender said it will set up an energy transitions fund to support projects which help EU member states to transition to a cleaner economy. In the past the EIB has funded fossil fuel projects including the Trans Adriatic gas pipeline and oil storage facilities in Cyprus.
The crackdown on fossil fuel lending comes amid growing pressure on financial institutions to cut their exposure to high-carbon projects.
Last month 80 civil society organisations and academics published an open letter to the EIB calling on the bank to end its fossil fuel financing, which topped €2.4bn (£2.1bn) in 2018.
The letter, which was coordinated by the campaign group Counter-Balance, accused the bank of “lagging behind the science” underpinning the climate crisis.
The UK has also come under criticism for increasing its support for fossil fuel projects by 11-fold to almost £2bn last year through the agency UK Export Finance.