The European Bank for Reconstruction and Development approved its new five year strategy on October 8, setting ambitious targets for green investment and likely setting the stage for expansion in Sub-Saharan Africa now that its traditional bases of operations are becoming crowded.
“The EBRD is in a tricky position because it is somewhat squeezed for European assets to invest in,” said Thomas Wieser, former president of the EU’s economic and financial committee and president of the Eurogroup Working Group.
“Russian sanctions have been a killer for the EBRD because a lot of its activity was there. It pivoted to Turkey but Turkey can be expected to become an increasingly difficult jurisdiction also due to the political developments there. It’s expanding its footprint in North Africa, but AfDB and World Bank are already there, so there are not huge volumes of business available.”
That leaves Sub-Saharan Africa, which Wieser believes is a more open field, allowing the EBRD to continue expanding its business. It will also be stepping up its activities in Iraq, which became a shareholder of the Bank on October 7.
However, even there, it will not escape competition. The EIB is expanding its operations in Africa, pushing to become the EU’s development bank.
The problem, according to Wieser, is that “there is no overall vision or strategy in place of what European development finance — and a European development finance bank — should look like”. Wieser, as chair of the high level group of wise persons on the European financial architecture for development, published a report recommending the establishment of a European development bank drawing on the resources of both EIB and EBRD.
The EBRD’s five year strategy also includes its new Green Economy transition, which is the EBRD’s framework for supporting its clients in the pursuit of a green recovery from Covid-19. As part of this, the EBRD has committed to dedicating over 50% of its annual investments to green finance projects by 2025.
The EBRD also elected Odile Renaud-Basso as its new president, who beat an unusually senior crop of candidates, most notably Pier Carlo Padoan, former Italian economy and finance minister, and Tadeusz Koscinski, the Polish finance minister.
Wieser remarked that: “Padoan is a well known and respected figure, having been a finance minister while Renaud-Basso was at the deputy minister level. This may have made it somewhat more difficult for a finance minister to come out against a colleague. France will have had to reach out and make contact with all the traditional shareholder groups in order to secure the election.”