The role of international finance institutions in the transition to low-carbon steel production

This report examines the role of international finance institutions (IFIs) in supporting the transition to low-carbon steel production, particularly in emerging and developing economies. It finds that IFIs have historically had limited exposure to the steel sector and are only in the early stages of developing green industrial strategies. However, the report argues that IFIs can accelerate the transition by de-risking first movers, supporting the development of green hydrogen and circular economy strategies, and creating demand for green steel through sustainable procurement in infrastructure projects.

• International finance institutions (IFIs) have historically had very limited engagement with the steel sector, with investments primarily focused on business-as-usual modernization rather than transformative decarbonization. Between 2000 and 2021, only nine IFIs approved 79 steel projects totaling EUR 3.4 billion, with the majority of these funds used for "modernizing existing plants through new equipment" such as rolling mills and capacity expansion.
• There is a significant investment gap in low-carbon steel capacity for the 2020–2030 period. While the total estimated need for re-investment and new investment is 1091 million tons (Mt) of capacity, announced low-carbon plants and shutdowns only amount to 236 Mt, leaving a gap of 855 Mt. This is particularly critical as most existing plants built between 1990 and 2010 will need to be relined in this decade.
• IFIs face several structural barriers when investing in steel, including the large size of steel firms which typically rely on corporate banks and capital markets, and the high capital intensity of projects that may lead to over-exposure for some institutions. Additionally, IFI sustainability mandates can create hesitation due to the environmental and social issues associated with iron ore mining and the current lack of a pipeline of "bankable projects" using proven low-carbon technologies.
• IFIs can play a critical role in the transition by de-risking early adopters of low-carbon technologies and supporting the development of green value chains. Specific opportunities include financing green hydrogen production, supporting small and medium-sized enterprises (SMEs) in the value chain, and promoting scrap-based secondary steel production, which is viewed as a "good fit with IFI priorities" due to its climate benefits and project scale.
• Demand creation is a primary lever for the steel transition due to the "green premium" (estimated at 20% to 40% for DRI-EAF-H2 for first plants). IFIs can stimulate this demand by setting greenhouse gas targets, including embodied emissions, for the steel-intensive infrastructure projects they fund and by helping governments develop green public procurement frameworks.
• Most IFIs are in the early stages of developing industrial decarbonization strategies. Out of 12 reviewed IFIs, only four have published specific strategies for heavy industry and only two have strategies specifically for steel. The EBRD is noted as having the most developed strategies, while the BSTDB continues to support projects involving metallurgical coal.

APA

Maltais, A., Linde, L., Sanchez, F., & Mete, G. (2022). The role of international finance institutions in the transition to low-carbon steel production. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2022/11/report-2209a-ifis-lhv2.pdf

Chicago

Maltais, Aaron, Linus Linde, Felipe Sanchez, and Gökçe Mete. The role of international finance institutions in the transition to low-carbon steel production. Stockholm Environment Institute, 2022. https://www.sei.org/wp-content/uploads/2022/11/report-2209a-ifis-lhv2.pdf.

Wikipedia

{{cite report |last1=Maltais |first1=Aaron |last2=Linde |first2=Linus |last3=Sanchez |first3=Felipe |last4=Mete |first4=Gökçe |title=The role of international finance institutions in the transition to low-carbon steel production |publisher=Stockholm Environment Institute |date=November 2022 |url=https://www.sei.org/wp-content/uploads/2022/11/report-2209a-ifis-lhv2.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{maltais2022role, author = {Maltais, Aaron and Linde, Linus and Sanchez, Felipe and Mete, Gökçe}, title = {{The role of international finance institutions in the transition to low-carbon steel production}}, institution = {Stockholm Environment Institute}, year = {2022}, month = nov, url = {https://www.sei.org/wp-content/uploads/2022/11/report-2209a-ifis-lhv2.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }