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

The report finds that IFIs have historically had limited exposure to the steel sector, with most investments focused on business-as-usual modernization rather than transformative decarbonization. While barriers such as the high capital intensity of steel projects and a lack of national policy frameworks in developing countries exist, the authors argue that IFIs can accelerate the transition by de-risking first movers, supporting green hydrogen strategies, and creating demand through green public procurement standards for infrastructure projects.

• International finance institutions (IFIs) have historically had minimal engagement with the steel sector, and their existing investments have largely avoided transformative climate action. Between 2000 and 2021, nine IFIs approved 79 steel projects totaling EUR 3.4 billion, but 73% of these funds went toward 'New equipment' for modernization and process optimization rather than radical decarbonization.
• There is a significant 'green gap' in steel investments, particularly in emerging economies. While 1091 Mt of capacity requires re-investment or new investment between 2020 and 2030, only 236 Mt of low-carbon capacity has been announced, leaving a gap of 855 Mt. Most low-carbon projects are currently concentrated in China and high-income countries, while countries like India, Viet Nam, and Malaysia have high-carbon assets in their pipelines.
• IFIs face several structural barriers to investing in the steel transition, including the massive scale of required capital, which can lead to over-exposure for a single institution. Additionally, the large size of steel firms often makes them better suited for corporate banks than IFIs, and the 'green premium'—estimated at 20% to 40% for hydrogen-based production (DRI-EAF-H2)—increases financial risk.
• IFIs can play a critical role in the transition by acting as 'knowledge partners' and de-risking investments for early adopters. They can support the development of national hydrogen road maps, provide technical assistance for policy frameworks, and finance innovative small and medium-sized enterprises (SMEs) within green value chains, such as hydrogen production and transport.
• A primary lever for IFIs to accelerate the transition is the creation of demand for green steel. Because IFIs fund large-scale infrastructure, they can stimulate the market by implementing their own green procurement standards and helping governments establish similar frameworks to overcome the price premium of low-carbon steel.
• The report emphasizes that scrap-based steel production (secondary steel) is a highly suitable area for IFI investment due to its lower emissions and alignment with circular economy goals. Global scrap-based production needs to increase from 26% in 2019 to 46% by 2050 to meet climate targets.

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} }