21 September 2021

More than a third of the European Investment Bank (EIB)’s EU lending is carried out via intermediaries. Yet most of this money disappears into a black hole, with no information published about the final beneficiaries and no checks by the EIB about their environmental and social impacts. The EIB’s new safeguard framework is supposed to address this, but the draft text leaves the Bank far behind its peers.

The EIB’s financial intermediaries take various forms, including private equity funds, investment funds, commercial banks and state-owned development banks. These help the EIB to reach smaller clients than it would otherwise be able to finance.

The EIB’s global lending via intermediaries amounted to EUR 22.6 billion in 2020. In the EU, credit lines accounted for over one-third of the Bank’s operations in the same year. In addition, the European Investment Fund, a risk finance facility which is a part of the EIB Group, reached almost EUR 13 billion in financing entirely directed through financial intermediaries...

There is a common perception that sub-projects financed via intermediaries are small projects with low risks. But the examples we have uncovered so far show that such projects come in all different shapes and sizes with all sorts of impacts. For example, small hydropower plants have wrought immense damage across southeast Europe. The EIB has financed more than 27 such plants through financial intermediaries since 2010...

In addition, private equity funds financed by the EIB can invest in companies of any size, including those with serious environmental and social impacts. For example, in October 2019 the EIB confirmed that it had decided not to go ahead with direct financing for the 340,000 tonnes per year Vinča municipal waste incinerator in Serbia, after its own due diligence confirmed that the project would likely interfere with Serbia’s ability to meet EU circular economy targets for recycling. The EIB’s decision was welcomed by civil society organisations, but it turned out that the EIB-financed Marguerite II Fund has remained a shareholder in the project company despite the EIB pulling out. The case clearly shows how little influence the EIB has over its intermediaries’ investments in reality...