Dimitrios KOUFOS
Head of Sustainable Business, Industry, Agribusiness and Commerce (ICA), EBRD
The EBRD, at the request of Industry and Ministry of Environment, has developed detailed low-carbon strategies for key industrial sectors, revealing that achieving net-zero alignment by 2050 will require over $100 billion in investments. To address this, the recently launched low-carbon pathway investment platform aims to stimulate investment and facilitate financing for decarbonization and sustainability projects.
As part of this initiative, EBRD plans to collaborate with the Turkish government to submit an expression of interest to the Clean Investment Financing Platform for industrial decarbonization by January. If successful, this proposal could lead to the development of a comprehensive investment platform, mobilizing $300–400 million to advance Türkiye’s industrial decarbonization efforts.
Could you tell us about the purpose and mission of the European Bank for Reconstruction and Development (EBRD)?
EBRD was established nearly 30 years ago, following the fall of the Soviet Union, with the goal of supporting countries transitioning into market economies, particularly in Europe. Initially, the bank’s mission focused more on market-oriented development and integration into the European Union. Over time, EBRD has evolved into a development finance institution that prioritizes market creation and efficiency. We have a strong mandate in the green sector, particularly within the context of climate action. One of the distinctive features of EBRD is its commitment to the Paris Agreement, ensuring that every transaction is assessed for alignment with the Paris goals. Additionally, we have set a target for at least 50% of our investments to be classified as green, meaning they have a significant positive environmental impact. This rate is usually between 55% and 60%. And based on that, as a climate strategy delivery team, we have the mandate to follow, make sure that we meet this Paris alignment commitment and the green agenda for the climate ambition of 50%. Beyond that, we have also a catalytic role to play in attracting finance to mobilize and make these investments happen. We are one of the largest lenders of the climate funds in the world. We are the largest lender of the Green Climate Fund, of the CTF, the CIF, the GEF. And we are the largest lender of record for B lenders in the countries, including in Türkiye. So we have a clear mandate on developing finance and developing finance in the climate space.
Could you elaborate on the sectors EBRD prioritizes and why these particular areas?
The sectors that EBRD prioritizes depend largely on the country strategy for each of our member countries. For each country, we develop a strategic document that outlines focus areas for the next five years. These priorities are determined through extensive analysis by our internal teams, including economists and sector specialists. While the climate agenda is central to all of our strategies, we also emphasize sectors that are critical for economic growth and transition, such as energy efficiency, sustainable agriculture, and infrastructure. We place a special focus on green initiatives because climate change is a global issue that affects all the regions where we operate.
How does EBRD adapt its strategies to different countries and sectors?
Every five years, we review and update our country strategies. This involves a thorough assessment of the country’s progress, including reforms in areas such as fiscal policy, legal frameworks, and environmental practices. These strategies are adapted to reflect the evolving needs of the country, while ensuring that we continue to meet our development mandate. This mandate encompasses not only climate goals but also broader objectives such as gender inclusion, legal transition, corporate governance, and banking reforms.
Can you provide an overview of EBRD’s governance and decision-making structure?
EBRD operates under a board of directors, with each member country represented by a shareholder. The board is responsible for overseeing the endorsement of all projects. The president of EBRD, supported by a team of vice presidents, leads the institution. Operational aspects are handled by a team of managing directors and directors. We have various departments, including banking operations, risk management, compliance, audit, and finance, each of which plays a critical role in the decision-making process.
One of the primary challenges facing the cement sector today is decarbonization. It is more clear particularly in countries like Türkiye, which is introducing an emissions trading system (ETS) and is exposed to the Carbon Border Adjustment Mechanism (CBAM). We are actively working to help companies align with the decarbonization agenda while considering the economic and market volatility that can affect project cash flows.
What financing options does EBRD offer to the cement sector, and what criteria must projects meet to access these funds?
The European Bank for Reconstruction and Development (EBRD) has an extensive history of financing projects within the cement sector across all its countries of operation. Like all sectors supported by the EBRD, the cement industry is eligible for a variety of financing options offered by the Bank. These include both debt and equity financing, tailored to the specific needs of the sponsor.
Equity Financing: Equity financing is structured based on a mutually agreed valuation with the sponsor, alongside an exit strategy. The exit horizon typically spans five to eight years and may include a call option, depending on the structure established.
Debt Financing: Debt financing options generally range from seven to nine years, contingent on the scope and scale of the investment. EBRD strives to align market rates with preferential terms, incorporating features such as grace periods or extended repayment tenors. The financing amounts range from as low as $500,000 to as high as $200–300 million (or the euro equivalent), depending on the project’s requirements.
Climate Finance: Complementary to its traditional financing mechanisms, EBRD facilitates access to climate finance. These funds typically cover 10% to 30% of the total capital expenditure of a project and are provided under highly preferential terms. They may take the form of grants or concessional loans with interest rates as low as 1% for the duration of the loan. However, such financing is contingent on the project meeting specific climate eligibility criteria, as defined by the respective donors. EBRD ensures compliance with these criteria and monitors project implementation to confirm its success, subsequently reporting outcomes to the donors.
Financing Structure: For instance, in a typical $100 million project, EBRD might finance 30–35% of the total cost. An additional 15– 20% may be sourced from climate finance provided by donors, while the remaining portion is secured through other banking institutions. This approach ensures a balanced and sustainable financing framework that supports the successful execution of the project.
By combining traditional financing instruments with climatefocused funding, EBRD aims to support the cement sector in achieving its investment objectives while advancing environmental sustainability goals.
Could you provide examples of recent projects that EBRD has financed in the cement sector?
One of the recent examples involves a project in Türkiye where we financed Çimsa Cement for their energy efficiency capital expenditures. This project included the implementation of alternative fuels in their cement plants, waste heat recovery systems, and the installation of small-scale photovoltaic systems. The total investment was around EURO 25 million, with EBRD providing a significant portion of the financing, including a small component of grant funding.
How does EBRD conduct risk assessments for financing projects in the cement sector, especially considering market fluctuations and environmental regulations?
Risk assessments for cement sector projects are conducted similarly to all our projects. We assess environmental and social risks, which lead to the creation of an Environmental and Social Action Plan that the company must adhere to. Additionally, we perform due diligence on the project’s credit profile, market conditions, and technical feasibility. We ensure that the project’s costs align with market expectations and that it is technically sound. Finally, we conduct a financial and legal due diligence of the sponsor to verify their creditworthiness and legal standing.
Can you explain the typical financing structure that EBRD employs in the cement sector?
The financing structure varies depending on the project and the sponsor’s needs. We offer both debt and equity financing and work closely with the sponsor to determine the most suitable approach. This often depends on the sponsor’s credit profile and the project’s financial viability. We strive to offer flexible terms, balancing market conditions with the sponsor’s requirements.
How does EBRD structure repayment terms for capitalintensive projects in the cement sector?
For capital-intensive projects, repayment terms are typically structured with semi-annual repayments, often starting with a two-year grace period. The repayment period can be extended up to eight or nine years, depending on the size and capital expenditure of the project.
What financial indicators or ratios are most important when establishing a financing structure in the cement sector?
We focus on typical financial ratios such as debt-to-equity ratio for capital structure, and cash flow indicators including net debtto- EBITDA, debt-to-EBITDA, and debt service coverage ratios. These are standard metrics used by commercial institutions to assess the financial health and viability of a project.
What are the primary challenges EBRD faces when financing cement projects, and how does it address these challenges?
One of the primary challenges facing the cement sector today is decarbonization, particularly in countries like Türkiye, which is introducing an emissions trading system (ETS) and is exposed to the Carbon Border Adjustment Mechanism (CBAM). We are actively working to help companies align with the decarbonization agenda while considering the economic and market volatility that can affect project cash flows. Ensuring that cement companies can meet these decarbonization goals while remaining financially viable is a key challenge we address through our financing and advisory support.
Looking forward, how does EBRD view the future of the cement sector, especially in light of the European Green Deal and other sustainability initiatives?
The future of the cement sector is heavily tied to the global decarbonization agenda. EBRD works closely with major industrial associations, including, the Global Cement and Concrete Initiative, with Cembureau and other associations, to ensure that the decarbonization goals are integrated into their long-term strategies. We hope that every company in the sector will develop a low-carbon pathway to meet these challenges in the medium to long term.
How does EBRD plan to support the transition to low-carbon production in the cement sector?
Our objective is for every cement company to establish and present a comprehensive low-carbon pathway or strategy. Once such a strategy is proposed, we work to ensure its alignment with environmental and sustainability standards. To support these efforts, the European Bank for Reconstruction and Development (EBRD) provides access to various climate funds and technical assistance programs.
Specifically in Türkiye, we have been collaborating with the Ministry of Industry and the Ministry of Environment and have helped establish an industrial decarbonization platform that was launched after COP29. This platform is designed to act as a facilitator, bringing together key stakeholders, including financiers, cement industry representatives, and government bodies, to advance the necessary reforms and financial mechanisms required for successful implementation.
As a catalytic institution, EBRD will mobilize the requisite technical cooperation funds to aid not only in the facilitation of the platform but also in executing pre-feasibility studies, feasibility studies, and comprehensive project development assistance. The ultimate goal is to create credible and bankable projects that can attract additional financing.
This initiative builds on the extensive work we have undertaken over the past two years to develop low-carbon pathways for the industrial sector in Türkiye. At the request of the Ministry of Industry and the Ministry of Environment, EBRD has completed detailed low-carbon strategies for the cement, steel, fertilizer, and aluminum sectors. These strategies have revealed that achieving a net-zero-aligned pathway by 2050 for these sectors will require an investment package exceeding $100 billion.
To address this significant investment need, the low-carbon investment platform aims to serve as a central mechanism to stimulate investment and facilitate financing for projects that advance decarbonization and sustainability objectives.
Are there any new initiatives or funding mechanisms that EBRD is planning to launch to encourage sustainable practices in the cement sector?
Yes, as part of this initiative, the low-carbon pathway investment platform for Türkiye, which was launched after COP29, we are planning to collaborate with the Government of Türkiye to submit an expression of interest to the Clean Investment Financing Platform for industrial decarbonization by January next year.
Should this proposal be successful, we anticipate being invited to develop and promote a comprehensive investment platform, building upon our foundational work. This platform is expected to mobilize funding in the range of $300 to $400 million, specifically targeted at advancing industrial decarbonization efforts in Türkiye.
At the request of the Ministry of Industry and the Ministry of Environment, EBRD has completed detailed low-carbon strategies for the cement, steel, fertilizer, and aluminum sectors. These strategies have revealed that achieving a net-zero-aligned pathway by 2050 for these sectors will require an investment package exceeding $100 billion.
Those are truly ambitious and impactful plans. Thank you for sharing these insights. To conclude, could you provide your perspective on how EBRD collaborates with stakeholders, such as industry professionals and governments, to achieve these goals?
Collaboration with stakeholders is at the heart of EBRD’s operations. For instance, we actively work with industrial associations, technology providers, and governmental bodies to align sectoral goals with broader national and international agendas, such as the Paris Agreement. Through initiatives like the low-carbon investment platform in Türkiye, we aim to bring together financiers, industry players, and policymakers to create synergies. This involves not only financing but also providing technical assistance and supporting the development of appropriate regulatory frameworks to enable long-term sustainability.
Could you please introduce yourself and describe your role at the European Bank for Reconstruction and Development (EBRD)?
I am a part of the Climate Policy, Strategy, and Delivery team at EBRD, which is a cross-sectional unit within the bank. I oversee the Sustainable Business, Industry, and Agri portfolio, as well as several other sectors. My role involves managing all economic activities and transactions that the bank undertakes, except for those related to the power sector—such as transmission, distribution, generation—and infrastructure projects. I have been with the bank for over 10 years now. By training, I am a chemical engineer, holding a master’s degree in process control and chemical engineering. Additionally, I have obtained a number of diplomas from Oxford University. Before joining EBRD, I worked in various production management roles within the cement, oil and gas, and pulp and paper industries, focusing on energy efficiency, production optimization, and process management.
Thank you, Mr. Dimitri, for sharing your insights and taking the time to engage with us today. Your contributions have provided valuable perspectives on EBRD’s work and its alignment with the cement sector’s sustainability goals. We look forward to following EBRD’s initiatives closely.
Thank you for having me. It has been a pleasure to discuss these important topics with you. I appreciate the opportunity to share EBRD’s vision and ongoing efforts. I look forward to staying connected and collaborating further.
