EU bank’s new environmental and social policy not fit for lofty development ambitions

Brussels - 2 February 2022

The European Investment Bank (EIB) - the financial arm of the EU - has approved a set of new environmental and social standards that, despite some last-minute changes, leave the door open to human rights abuses and biodiversity destruction, warn civil society groups.

On 2 February 2022, the EIB’s Board of Directors approved a new Environmental and Social Sustainability Framework [1], which lays out the bank's social, environmental and climate standards and requirements for its clients.

The revision comes as the bank just launched “EIB Global”, a branch of the EIB which will cover all its operations outside of Europe in a tentative bid to raise its profile in the world of development finance.

Despite some improvements, the new standards fail to address many of the concerns raised by civil society organisations during the revision process. In a letter to the EIB Board [2] sent last week, 22 civil society groups urged the Directors representing EU Member States and the European Commission to include explicit procedures in the policy to prevent human rights violations in its projects, to end the Bank’s hands-off approach to projects financed via secretive financial intermediaries and to avoid double standards for biodiversity rules depending on whether a project is in the EU or not.

Human rights violations still possible with EU money

The new policy includes no significant improvement in human rights promotion and protection. Without a clear system of human rights due diligence and explicit requirements for the bank’s clients to conduct human rights impact assessments, the EIB is in danger of continuing to inadvertently fund human rights abuse.

In Kenya, a road connecting Mombasa and Mariakani, which is co-financed by the EIB, resulted in more than 500 complaints related to rights violations against the individuals and communities living along the road [3]. Many people have been left without proper and timely compensation or the possibility to work, families were forcibly evicted overnight, and others faced intimidation.

In Nepal, the construction of an electricity transmission grid funded by the EIB threatens to intrude on ancestral lands of indigenous communities, damaging their forests, community resources, livelihoods, health, and spiritual practices [4]. In April 2021, the EIB Complaint Mechanism concluded that the bank overlooked the project’s impact on Indigenous Peoples, despite the concerns raised by impacted communities.

One third of the EIB’s lending disappears into a black hole

A third of the EIB’s investments in 2020 – a total of EUR 22.6 billion – was carried out through financial intermediaries. Due to the secrecy of commercial banks, the public has little idea of what happens to this money, whether it is effectively used and whether it causes environmental and social damage.

The EIB has introduced a long-awaited new standard on financial intermediaries. Yet the standard still perpetuates the bank’s hands-off approach to risky projects funded via unaccountable banks or funds. Even environmentally and socially risky projects will not be subject to public disclosure. The rules require financial intermediaries to comply with social and environmental standards, but the EIB fails to commit to systematically checking and ensuring compliance, leaving intermediaries to police themselves [5].

Biodiversity outside Europe threatened by double standards

The new policy offers better protection for biodiversity in many ways, but applies double standards regarding protected areas and internationally recognised areas of biodiversity such as Emerald, Ramsar and UNESCO sites. In the EU and accession countries, an appropriate assessment in line with the EU Habitat Directive is required in order to decide whether a project can be implemented without damaging the area, while in the rest of the world no equivalent is prescribed.

Anna Roggenbuck, policy officer with CEE Bankwatch Network, said: “The EIB’s self-proclaimed leadership in EU development finance has disappeared in a haze of understatements with the new policy. With no clear EIB role in safeguarding human rights and requirements for promoters to conduct human rights impact assessments, a complete lack of responsibility for its financial intermediary investments and double standards in assessing projects impacting biodiversity inside and outside of the EU, the EIB is not ready to become ‘EIB Global’.”

Xavier Sol, Counter Balance Director, said:“The bank’s commitments on protecting and promoting human rights will be toothless if it refuses to back them up with concrete actions. By refusing to develop specific tools to check that the projects it finances do not harm local communities, the EIB has given the green light for human rights violations to be funded with EU public money for years to come.”

For additional information please contact:

Anna Roggenbuck

Policy Officer, CEE Bankwatch Network

+48 509970424

annar@bankwatch.org

Xavier Sol

Director, Counter Balance

+32 473 223 893

xavier.sol@counter-balance.org

Notes for editors:

[1] https://www.eib.org/en/publica...

[2] https://bankwatch.org/wp-conte...

[3] Briefing on the Regional Mombasa Port Access Road project "Highway of Destruction” https://bankwatch.org/publicat...

[4] Accountability Counsel’s article "Nepal Indigenous communities vindicated in rare European human rights victory" https://accountabilitycounsel....

[5] In southeast Europe alone, the EIB has provided at least 27 intermediated loans for destructive small hydropower plants since 2010, though the names of many of the projects remain unknown. Just last week, a complaint was submitted to the EIB’s complaint mechanism on two hydropower plants on the Crni Rzav river in Serbia, which have damaged over 9 km of river in a protected area. Ten months after being informed of the issues, the EIB has still not responded to the evidence submitted by civil society organisations. For more examples see Bankwatch’s recent report on EIB hydropower financing in central and eastern Europe: https://bankwatch.org/publicat...