Supporting investment in climate and energy infrastructure

The investment required to finance the global transition to a low-carbon economy is estimated by McKinsey to be around €8.5 trillion annually until 2050. Ireland’s needs alone are estimated to be €20 billion per year for the next decade. Banks therefore have a crucial role to play in supporting investment in climate and energy infrastructure nationally and internationally.

“Sustainability is a key strategic priority for AIB and we recognise the importance of climate finance in funding the transition to a lower carbon future,” says AIB chief executive Colin Hunt. “The floods and fires we witnessed in Europe and elsewhere this year have reminded us once again that tackling climate change is the major challenge facing our generation.

“We want to ensure a greener tomorrow by backing those building it today, including through major investment in energy and climate-action infrastructure both at home and internationally, while also supporting our personal customers with discounted mortgages to buy energy-efficient homes and green personal loans to fund retrofits or the purchase of electric vehicles.”

Due to a combination of customer demand and the need to do more, AIB has doubled its Climate Action Fund to €10 billion by the end of 2023, further supporting Ireland’s transition to a low-carbon economy.

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AIB is active in financing national and international energy infrastructure deals and has continued to boost its track record as a key international finance partner for sustainable projects following its role as joint lead arranger on a major refinancing deal for US renewable energy company Arevon. The $386 million (€360 million) deal, announced in July 2023, was backed by a number of leading international finance partners for a portfolio of operating solar projects in five US states.

The bank is also a lender to Hornsea II, which is the largest operating wind farm in the world at 1.3GW, with 165 turbines and enough to power 1.4 million homes in the UK with green power. The wind farm, located off the coast of northeast England, was developed by Ørsted, the world’s largest developer and operator in the offshore wind market.

Closer to home, this summer AIB joined a club of lenders committing €125 million in bank facilities to Power Capital Renewable Energy, Ireland’s leading solar independent power producer. The facilities will be used to fund a portfolio of solar projects across counties Cork, Louth and Meath with an aggregate capacity of 150MW and a single solar farm of 85MW located in Co Wexford.

Last year AIB became one of a consortium of banks backing the highly important €500 million Greenlink electricity interconnector linking Ireland and Wales. The project will enable additional renewables on the Irish power system, enhance Ireland’s security of supply and reduce energy pricing volatility by linking the power markets in Ireland and Great Britain via a subsea cable.

In addition, the bank has partnered with the Strategic Banking Corporation of Ireland (SBCI) on the SBCI Energy Efficiency Loan Scheme. The scheme supports qualifying Irish businesses, including primary producers, by providing access to affordable medium to long-term finance, so they can invest in upgrading the energy efficiency of their enterprises.

“It’s essential that AIB supports key green projects and provides products like these to help our customers navigate the low carbon transition and to ensure our activities remain on track,” says Hunt. “AIB has set financed emissions targets for 75 per cent of its loan book. These targets are validated by the Science Based Target Initiative (SBTi). Recognising the existing low-carbon intensity of AIB’s electricity generation loan book, AIB earlier this year became the first bank globally to secure a scientifically validated electricity generation maintenance target from the SBTi.”

As AIB supports its customers to decarbonise, it is essential that it reduces its own carbon footprint too, and this has been under way for several years. A key milestone was achieved late last year when AIB signed a corporate power purchase agreement with NTR plc to source energy generated from two NTR-constructed solar farms in Co Wexford.

AIB was the first Irish company to conclude such an agreement, helping it deliver on its commitment to source 100 per cent of its power requirements from certified renewable energy sources by 2030. The two solar farms at Enniscorthy and Gorey combined will provide up to 80 per cent of AIB Group’s electricity needs while providing welcome additional generation capacity into the national grid at a time when the country faces energy supply challenges.

Green bonds are also a key part of the transition finance toolkit as they enable capital to be directed towards key green and transition activities. “The more green lending AIB does, the more green capital it can attract to support further lending to build the climate action and energy infrastructure of the future,” Hunt points out.

Over the past three years, AIB has raised €3.25 billion from issuing green bonds after becoming the first Irish bank to issue such bonds, as investors are attracted by the bank’s strong green lending credentials.

Last year AIB won the award for ‘Most Impressive Financial Institution ESG Bond Issuer’ at the GlobalCapital Bond Awards in recognition of the fact that funds raised via AIB’s Green and Social bond programmes are used to finance projects that mitigate climate change and provide positive societal impacts.

“As a bank at the very heart of the Irish economy, AIB’s role is to support our customers in the creation and delivery of sustainable economic, social and environmental development in towns and communities across the country,” Hunt concludes.