Green Hydrogen for Sustainable Development: The Role of Multilateral Development Banks
13.08.2024
Industrialised countries are largely relying on imports from countries in the Global South to secure their future supply of green hydrogen. While multilateral development banks are financing green hydrogen projects, they also want to ensure that these investments contribute to sustainable development in the exporting countries. To this end, they are tying their loans to environmental and social indicators. But how effective are these policies? This is what Charlie Choy, a law scholar from Hong Kong, is investigating during a one-year fellowship at RIFS.
"Private investors are still very reluctant to invest in green hydrogen. This is why multilateral development banks have a particularly important role to play in building a viable hydrogen market," says Choy. The banks have recently stepped up their commitment significantly: in the first half of 2023, they committed over four billion US dollars, primarily in the form of loans to governments in developing and emerging countries. This represents a steep increase from the roughly one billion US dollars in loans provided in all of 2022.
Beacon of hope with risks
Green hydrogen is seen as a beacon of hope for efforts to decarbonise the global economy. However, it entails a variety of challenges, including technical risks, regulatory uncertainties, and market fluctuations. Multilateral development banks are trying to mitigate these risks through environmental and social guidelines. To evaluate how effective these are, Choy is undertaking a comparative analysis of the environmental and social policies of selected development banks such as the World Bank, the European Bank for Reconstruction and Development, and the European Investment Bank. She also plans to conduct interviews with representatives of these banks.
The results of her research can strengthen the future environmental and social safeguards of investments in green hydrogen. "The development banks can act as role models for companies and investment funds if they successfully contribute towards sustainable development in the hydrogen producing countries. This includes not only preventing damage, but also prioritising local value creation," says Choy. Importing and exporting countries must both benefit, she adds, only then can green hydrogen make a contribution to sustainability.
Feeling at home in Potsdam
With her RIFS project, the researcher is building on her recently completed doctoral thesis, which also focused on finance and sustainability. At the Chinese University of Hong Kong, she evaluated corporate environmental, social, and governance (ESG) reporting regulations implemented in Hong Kong. She wrote part of her thesis as a visiting scholar at Aarhus University in Denmark. Thanks to this experience, she immediately felt at home in Potsdam, says Charlie Choy: "There are many similarities with Aarhus, both cities are very green and cycling-friendly. I like that, and it makes for a great environment for sustainability research!"