The first blue financing loan in Central and Eastern Europe will increase funding for blue economy projects in Romania. The landmark €100 million loan has been provided by IFC for Banca Transilvania SA (BT), the largest bank in the country.
To comply with all the European Union (EU) requirements relating to the water and wastewater sectors, Romania will have to invest about €15 billion by 2027. Out of these at least €3 billion could be provided by private sector financiers. IFC’s support will help the bank establish a blue finance product to extend loans to micro, small, and medium enterprises (MSMEs) in line with IFC’s Guidelines for Blue Finance.
The term blue economy refers to the sustainable use of ocean resources for economic growth, improved livelihoods, and jobs, while preserving the health of ocean ecosystems and water resources. The proceeds from IFC’s investment will be used to finance blue projects in Romania, including sustainable manufacturing, tourism, fishing, sustainable agricultural irrigation, and other areas, contributing to sustainability of oceans and freshwater resources.
“We are pleased to be, through our partnership with IFC, a pioneer in Romania and Central and Eastern Europe for blue economy projects. This is a new area of interest for us, complementing BT’s portfolio of impact financings and supporting Romania’s alignment with EU water management requirements and standards, as well as the increase of water efficiency in all sectors. Romania is fortunate to hold large water resources and to be a maritime transport hub. We need to take better care of what we have so that future generations do not suffer on our account. We thank IFC for this new partnership, which continues what we have already built together,” said Ӧmer Tetik, CEO Banca Transilvania.”
The first blue funding project by a financial institution in the region will help to improve access to water in Romania given the country’s high vulnerability to droughts, to improve water management practices and wastewater treatment. The loan will also comply with the European Union’s Bank Resolution and Recovery Directive (BRRD), helping the bank achieve its regulatory MREL (Minimum Requirement for Own Funds) targets. The concept of MREL was introduced to increase banks’ resilience and to ensure that banks have enough loss-absorbing and recapitalization capacity in case of a bail-in.
Starting in 2004, IFC’s partnership with Banca Transilvania has led to 13 investment and three advisory projects. As part of the current project, IFC will help the bank understand blue finance opportunities and identify blue projects, eventually assisting them with the development of a blue finance strategy and framework.
“Blue lending can be a key instrument for Romania transitioning to a sustainable, circular economy, promoting economic growth while protecting its natural resources, and water quality and availability,” said Vittorio Di Bello, IFC’s Regional Head of Industry for Financial Institutions in Europe. “We are optimistic that IFC’s investment will incite interest in blue finance and attract other banks to venture into this space, boosting the Romanian banking system’s resilience. IFC’s loan also qualifies for meeting regulatory framework targets, being one of the key tools to further strengthen Banca Transilvania’s financial position.”
IFC has built a successful track record in the green bond market and is leading the groundwork for launching and scaling blue finance in other regions, committing $400 million of blue finance globally to date. The ocean economy is expected to double to $3 trillion by 2030, employing 40 million people, as compared to 2010. Innovative financing solutions are key to enhancing ocean and coastal preservation and increasing clean water resources, and blue finance has a huge potential to help realize these goals.