How to Increase Green Financing in Serbia – Here’s What the World’s Biggest Creditors in This Field Have to Say

The regulatory framework, clear strategies, but also their implementation, as well as including the private sector and creating a bigger market, are the key factors in attracting green investments, is the conclusions of the panel on the financing of the green agenda in Serbia, held two days ago at the Fair of Green Ideas, Projects and Innovations in Belgrade.

The fair was held within the EU Green Week 2023, organized by the EU Delegation to Serbia, the Ministry of Environmental Protection and the United Nations Development Program (UNDP).

Only 21% companies invest in energy efficiency

Alessandro Bragonzi, the head of the Regional Representation for Western Balkans at the European Investment Bank (EIB), had the opening word at the panel.

He said that EIB Global, which helped Serbia advance on its path to EU accession, including Chapter 15 on Energy and Chapter 27 on Environmental Protection and Climate Change, was one of the world’s main financiers of climate projects and sustainable projects – in 2022, the share of EIB investments in these sectors grew to EUR 36.5 billion, or 58% of the annual volume of the bank’s lending.

Talking about including the private sector in the green agenda, Bragonzi said that companies in the Western Balkans were still behind compared to similar countries, according to a company survey carried out by the EIB, EBRD and the World Bank:

– Although 10% of the companies are reporting losses due to extreme weather conditions, only 21% companies invest in energy efficiency, whereas 59% believe that such investments are not a priority. The report shows that companies should upgrade their strategic goals when it comes to the living environment, increase the involvement of the management and access to finance.

– The “EU for Green Agenda in Serbia” project that we support together with the UNDP and other partners in Serbia is certainly the right way forward when it comes to supporting green innovations and the energy transition of the economies in the region – Bragonzi pointed out.

AFD has invested EUR 600 million in Serbia

Maxime Lebovics from the Regional Office for the Western Balkans of the French Development Agency (AFD), said that, since 2020, AFD had invested close to EUR 600 million in green financing in Serbia and EUR 1 billion in the Western Balkans.

– Last year, Serbia was our no. 1 partner in this field in the whole world, so we invested more money in infrastructure and policy reform than in much larger economies, such as Indonesia or Brazil – Lebovics said.

He pointed out that this showed the dynamic of the development of green agenda in Serbia, which, according to his estimate, advanced well.

– By talking to colleagues from other IFI funds, I didn’t get the impression that we were “stealing” each other’s jobs here. On the contrary, we are seeing more and more projects and initiatives – Lebovics said.

According to him, the progress of the green agenda in Serbia is primarily happening because there have not been enough investments in the past 30 years in sectors such as transport, energy and waste treatment and management.

– However, it is also important that Serbia has the resources for the financing of the green agenda and that the government is willing to increase the credit-worthiness of the county so as to be able to attract funds from development banks – Lebovics assessed.

He added that Serbia’s advantage was also that it was deep in the European space, giving assurance to investors.

When asked what is needed for the green agenda to advance even faster in Serbia, Lebovics assessed that some ministries had very ambitious road maps which didn’t match reality in the sense of a sufficient number of people that could be mobilized to work on projects.

– There is quality, but the lack of human resources who can fully meet the demands of the green agenda is the problem – Lebovics believes.

He adds that there is also a general tendency in the Western Balkans, and even in the EU, to adopt strategies which are their own purpose.

– Plenty of strategies lie on the shelves of the ministries, which is frustrating, because the main goal is to adopt documents and not to implement them. Action is needed – Lebovics said.

Talking about the concrete projects of AFD in Serbia, he said that the French Development Agency, together with the Ministry of Environmental Protection, worked on adopting an air quality protection program, and in the field of investments, together with the EBRD and the ministry, on accelerating and completing the program of the remediation of sanitary landfills.

– Also, next month, we are starting a program in cooperation with the World Bank in 125 municipalities in Serbia, which will promote mobile infrastructure, such as the renovation of squares and the construction of bicycle lanes, through the public funds of Serbia.

Lebovics said that AFD also financed the private sector, through Proparco, part of AFD Group, and that, in the same way, it financed commercial banks through credit lines in Serbia, mostly for energy efficiency measures. He added that AFD had the option of directly financing companies as well.

Decarbonization, pollution reduction and circular economy in KfW’s focus

Filip Markovic, a local expert for climate change, talked about the priorities of the German Development Bank (KfW) in the field of green financing.

He said that KfW focused on decarbonization, pollution reduction and circular economy.

Of the projects with the public sector, Markovic highlighted the wind farm Kostolac and the Trans-Balkans Corridor, as well as 7 programs of support to local self-governments of medium size when it comes to waste water treatment, improvement of biodiversity or drinking water and solid waste management.

He also reminded of programs in the field of energy efficiency in public buildings which were in progress and announced programs in education institutions and healthcare facilities, also related to energy efficiency, which were yet to start, one of which is the reconstruction of the Military-Medical Academy, which is soon to start and, as he said, improve the quality of services of that health institution.

– When it comes to the private sector, through cooperation with commercial banks, KfW has invested EUR 380 million in Serbia in the past 20 years, and two programs are currently active, for micro, small and medium enterprises which can get credits for energy efficiency, renewable energy sources and environmental protection – Markovic said.

EBRD to invest EUR 1 billion in Serbia this year

The European Bank for Reconstruction and Development (EBRD), which, as one of the biggest investors in the Western Balkans, invests around EUR 700 million in Serbia each year, had something to say about this topic.

– The active portfolio of the EBRD has around 150 projects worth EUR 2.6 billion, and we plan to invest EUR 1 billion in Serbia this year – said Pavle Milekic, the principal banker at the EBRD, who also pointed out that, from 2023, all EBRD projects needed to be harmonized with the Paris Agreement.

He reminded that, in Serbia, the EBRD had projects of support to the public sector in the field of waste management, such as the Vinca landfill, the field of energy (smart meters), but also projects of development of solar power plants, wind farms and smaller hydro power plants with private investors.

– It is important for the state to have a strategy, to secure regulations for green investments – Milekic said.

He pointed out that the countries which have clear plans for abandoning coal could much more easily attract green investments in energy than those that don’t.

– It is also necessary to continue the European integration and create as big a market as possible. The bigger the market is, the more interesting it will be to investors, attracting them to invest – Milekic concluded.

B. P.

EBRD Evropska banka za obnovu i razvoj Beograd

Evropska investiciona banka EIB

KfW kancelarija Beograd

UNDP Beograd

Delegacija Evropske unije u Republici Srbiji Beograd

Ministarstvo zaštite životne sredine Republike Srbije

Svetska Banka-WB Beograd

EBRD

EIB

EIB Global

German Development Bank KfW

French Development Agency

AFD

Proparco

United Nations Development Program

Maxime Lebovics

Filip Marković

Pavle Milekić

Alessandro Bragonzi

Fair of Green Ideas Projects and Innovations

green agenda

financing of green agenda in Serbia