Tuesday

30th Nov 2021

Opinion

Will EU stop its investment bank hiding a third of its lending?

  • The European Investment Bank (EIB) is not even willing to commit to matching its peers - the European Bank for Reconstruction and Development or the World Bank (Photo: EIB)
Listen to article

The European Investment Bank, the EU's house bank, has just published a shocking new draft of its transparency policy that would allow it to continue keeping one third of its lending secret and hiding decision-making from public scrutiny.

This week, the bank's board of directors, comprised of European Commission and member state representatives, will decide on the policy. It must seize this opportunity to salvage the EU bank's image by drastically improving the bank's information disclosure.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

In 2020, a third of the EIB's portfolio was made up of credit lines for financial intermediaries, completely hidden from the public eye. The Bank considers these 'low risk' projects and leaves it up to the intermediaries - commercial banks, equity funds or state-owned banks - whether to disclose information on them or not.

But our research has revealed that such lending has supported high-risk projects including small hydropower projects in sensitive areas in southeast Europe, a waste incinerator in Serbia, and a mine in a UNESCO site in Senegal.

In 2016 and 2017 Bankwatch asked 43 of EIB financial intermediaries in the Western Balkans whether they had published environmental information about any small hydropower projects they had financed.

Not one of them had done so, despite the severe damage done by such plants to southeast Europe's unique nature and biodiversity.

The new transparency policy would not remedy this issue because the hydropower loans amounted to around €1-5m each, whereas the new draft policy requires disclosure only for projects costing more than €50m.

The idea of openness in decision-making has not met with much understanding among the bankers in Luxembourg, even for larger, directly-financed projects.

'Transparency is the currency of trust'

The EU bank shares only scant information on its investments before making final decisions. Transparency is the currency of trust, as the bank says in one of its promotional videos, but where is this trust if the public has no information before the bank makes its decisions?

This is no academic debate - ill-advised investments devastate people's lives. The EIB's refusal to disclose an expert report on whether the Svan people, who live in the Svaneti region of Georgia, are an indigenous people, is a clear example of failure to share information with potentially life-changing consequences.

According to the EIB's policies, if the Svans are indigenous, their consent must be sought to build the Nenskra dam, destroy their river and flood their lands. If not, only a regular consultation procedure is required and their wishes could be overruled if the project was deemed important enough.

The EU Ombudsman's intervention finally led to the partial disclosure of the report. But the EU Ombudsman cannot be approached every time the public needs access to information impacting their lives.

The draft policy fails to align the EU house bank and its new development branch with the Treaty on the Functioning of the EU (TFEU). This requires EU institutions to "conduct their work as openly as possible" to promote good governance and ensure civil society participation.

It also boldly ignores the EU Ombudsman's transparency suggestions on EIB direct lending and financial intermediaries as well as a call from 50 civil society organisations to strengthen its transparency.

The EIB is not even willing to commit to matching its peers.

The European Bank for Reconstruction and Development or the World Bank, publish environmental and social appraisal information in advance of project approval and often seek public opinion on the proposed operations.

While the EIB usually publishes project names in advance, it is often not clear what exactly is being financed, like in the case of the South Mostar section of the Corridor Vc in Bosnia and Herzegovina. From the information published it is almost impossible to understand what sub-section the EIB is financing. Thus people whose property is to be expropriated can hardly know which bank to turn to for redress.

With this warped approach, the EIB undercuts its claims of supporting human rights or being a climate leader. Without sharing information and engaging early with those impacted, ambitious initiatives to become the 'climate bank' or 'development bank' will not succeed.

Investing with this level of secrecy puts not only the EIB at risk. It puts the whole EU's image at risk. The bank must commit to disclose more project information, end its habitual use of exemptions to disclosure and require its clients - including intermediaries - to disclose more information on their projects.

Everything is now in the board of directors' hands. It is high time to make the EU house bank worthy of its name.

Author bio

Pippa Gallop is southeast Europe energy advisor specialising in coal and hydropower in the Western Balkans and Aleksandra Antonowicz-Cyglicka specialises in human rights due diligence of the financial institutions, both at CEE Bankwatch Network.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

EIB warns of €10bn investment gap in AI and blockchain

The European Investment Bank identified an annual investment shortfall of up to €10bn in artificial intelligence and blockchain in the EU - a gap that may hinder the bloc's attempts to catch China and the United States in these sectors.

Exclusive

EIB blames Ombudsman for not helping redact VW report

Volkswagen Group duped the European Investment Bank, from which it borrowed €400m, by not disclosing it was cheating on emissions tests. Requests by EUobserver to see the anti-fraud report however have been consistently rejected.

Auditors slam EU Commission on green investments

The European Court of Auditors called for more consistent EU action on sustainable finance. The European Commission, by its own estimation, will need to invest €1 trillion a year to transition to a zero-carbon economy by 2050.

This 'Black Friday' is a turning point in corporate accountability

Much supply-chain abuse remains hidden from plain sight – not only to consumers but to the companies themselves, who have built increasingly longer, more complicated, and more opaque supply chains, which have become harder to monitor, control and account for.

News in Brief

  1. Ukraine eyes end of EU gas transit from 2024
  2. France says ready to talk about migrants if UK serious
  3. Latvia calls for permanent US troops to guard against Russia
  4. OPCW members urge Russia to come clean on Navalny
  5. Japan bars foreign arrivals as omicron spreads
  6. US to expel 54 more Russian diplomats, Moscow says
  7. Chinese president promises Africa one billion Covid vaccines
  8. Andersson elected as Swedish PM for second time in one week

Have the Polish people finally had enough?

Sitting justice minister Zbigniew Ziobro down on the same bench as Congolese warlord Thomas Lubanga or Sudanese dictator Omar al-Bashir might seem like a longshot, if not overkill - but shows just how desperate the Polish people have become.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew report reveals bad environmental habits
  2. Nordic Council of MinistersImproving the integration of young refugees
  3. Nordic Council of MinistersNATO Secretary General guest at the Session of the Nordic Council
  4. Nordic Council of MinistersCan you love whoever you want in care homes?
  5. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  6. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals

Latest News

  1. Frontex implicated 'to some extent' in violations, says officer
  2. Omicron shows need for pandemic global pact, WHO says
  3. Pesticides 'cost double the amount they yield', study finds
  4. Scholz's first job? Work with Poland on Belarus crisis
  5. Why Is Italy struggling to convert its anti-vaxxers?
  6. Consultancies pocketing EU millions prompts MEP grilling
  7. Russian mercenaries using EU-trained soldiers in Africa
  8. EUobserver wins right to keep VIP-jet story online

Join EUobserver

Support quality EU news

Join us