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

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.