Banks head for the Med in search of carbon offset rewards

The European Investment Bank (EIB) announced yesterday that it is to team up with a group of financial institutions to launch a Mediterranean Carbon Fund worth up to €200m (£167m) and designed to funnel investment into clean tech projects in the southern and eastern Mediterranean.

The coalition – which includes French Development Agency AFD and French bank Proparco, Italian bank Cassa depositi e prestiti (CDP), German promotional bank KfW, and CDC Climat, the newly formed green investment arm of French bank Caisse des Dépôts – said the new fund would provide money and expertise to support low-carbon projects across the region.

The fund is expected to generate returns by backing projects that are eligible for the UN-backed Clean Development Mechanism (CDM) carbon offsetting scheme. The projects will then be able to generate additional revenue for the banks by issuing and selling carbon credits.

A dedicated team will be set up to try to identify projects and provide developers with support, particularly with regards to gaining approval from the CDM.

The banks said the fund would be set up next year and a decision would then be taken on the overall size of the fund based on the number of potential CDM projects that are suitable for financing.

The announcement comes just weeks after the EIB announced that it is to set up a similar fund for investments in low-carbon projects in Africa, the Caribbean, Asia-Pacific and Latin America.

It also forms part of a wider green investment programme from the bank, which has seen it pump billions of euros into Europe's low-carbon industries, most notably through a series of loans to large-scale wind farm and carbon capture and storage projects.