EXCLUSIVE
The European Investment Bank, the international lending institution, is engaged in talks to transfer all its non-EU business to a new entity that will focus on sustainable projects with an aim to be up and running as early as 2020, GlobalMarketshas learned.
It is understood that the new unit, tentatively called the European Bank for Sustainable Development (EBSD), has been warmly received in Brussels, with European Commission officials receptive to the idea. The next stage would be to convince the Council of the European Union and the EU’s member states, with the aim of rolling out the new lending institution over the next one to two years.
It is understood that the new bank will likely be housed under the group’s umbrella and modelled on the structure and style of the European Investment Fund, an EU agency that channels financing to SMEs. It was born out of a pressing internal need to draw together all the strands of the EIB’s non-European lending and suck them into a single subsidiary, GlobalMarkets understands.
Around 10% of the Luxembourg-based EIB’s annual lending — around €7.5bn ($8.4bn) — goes to projects outside the EU, and this number is in turn around a third of total EU development assistance. The aim of the new lending outfit is to a) ensure this capital was invested wisely and visibly, and b) to help to maximise the EU’s impact and influence.
It is perhaps the clearest sign yet that more than a decade after the eurozone debt crisis, and in the wake of the decision by Britain to be the first state to leave the union, the European project is finally regaining some of its power, influence and focus. Beyond that, there is a palpable desire at the development lender to ensure that, at a time when the world was breaking up into competing and co-existing power blocs, the EU gets the credit it deserves for its work outside the single market — including, perhaps, in the long term, in a post-Brexit world, the United Kingdom.
It is hard to understate the political importance of this new project for the European project. The aim inside the EIB, GlobalMarketsunderstands, is to make sure the new unit is a separate lending institution with the autonomy to experiment with new financial tools and instruments in a way that is totally transparent. It would also, at one fell stroke, answer a question that has long lingered inside the development bank: notably, whether the fragmented nature of its our non-EU lending was a help or a hindrance. In the end it was decided that the latter was true, and that hiving off non-EU lending from the main body of the bank would yield a very significant positive margin.
Sustainable projects
While it may be months before full details emerge, a picture is starting to form. The new lender will be driven by a tacit need to direct EU lending into sustainable projects, such as the €2bn Clean Oceans Initiative, launched in 2018 by the EIB in alliance with KfW and Agence Française de Developpement (AFD), the international lending arms of the German and French governments.
While it will be global in nature and scale, including projects in Asia and Latin America, the bulk of its lending will in the first instance focus on Europe’s neighbourhood and Africa. The first part of that sentence points to the uncertainty hanging over the future role of the UK in long-term European projects, including the EIB.
After the EBSD is launched, the near-term aim will be to ensure it works on projects with as many multilateral development banks as possible. GlobalMarkets understands that it has not yet been decided whether the new entity will be open to shareholding by national development banks such as KfW, but nonetheless it is certain that working more efficiently with those lending institutions will be key to its future.