Parliament votes for a more transparent and accountable EIB

The European Investment Bank found itself at the centre of the debate in the European Parliament this week. MEPs had the opportunity to give direction to the EU’s house bank by assessing its past activities (through a resolution on the EIB’s annual report) and designing the guidelines for the bank’s role in the future (by amending the external lending mandate of the bank until 2020).

The main topics put forward for debate came as no surprise. Given the current economic situation in Europe the EIB’s role in combatting the crisis was a hot topic. MEPs recognised the potential of the EIB in stirring growth and job creation but demanded more detailed information on where the money went and the concrete impact of the bank’s activities. By calling for more transparency, demanding better results and clearer development goals, MEPs keep referring to the bank’s weak spots.

By stating that “the EIB has a duty to enhance transparency regarding the use of financial intermediaries, and especially regarding the final beneficiaries of those loans”, Marian-Jean Marinescu (EPP), rapporteur on the EIB resolution, raised an issue echoed by MEPs from different political families.

Bart Staes (Greens) added his concern regarding the related risks of money laundering, tax evasion and corruption by referring to the Ibori case as a clear illustration of what could go wrong with EIB lending. He also urged the bank to “push the balance towards renewable energy, energy efficiency and smart energy infrastructure”.

Resolution on the 2012 Annual Report

After those interventions the full report[1] was approved in plenary on Monday. Counter Balance concurs with several of the recommendations and we would like to highlight the following:

• Concerns expressed regarding the Project Bonds Initiative and a “call on the EIB to ensure that the Project Bond Initiative will be consistent with the EU long-term climate target, i.e., focusing on low carbon infrastructures." In addition, the resolution states that MEPs are “concerned about the poor project performance in relation to the Castor Project” and demand that the EIB “provides details on the soundness of its due diligence”.
• The request that the “EIB keeps its emission performance standard under review and considers more restrictive commitments in the future" and “ performs a climate assessment and review of all its activities in 2014 ,leading to a renewed climate protection policy“.
• The view that a “considerable numberof outstanding issues remain unresolved” in the area of EIB intermediated lending, including its “lack of transparency (especially concerning information about the final beneficiaries), the difficulty in assessing the economic and social impact of the loans (resulting in a flawed targeted approach) and the reliance, via outsourcing of responsibilities, on financial intermediaries for carrying out the due diligence”. Indeed, Counter Balance research showed the existing black hole in the EIB lending portfolio when it operates through financial intermediaries.
• As a consequence, the resolution “urges the Bank to provide details on its approach to accelerate measures addressing these issues and asks for a stringent list of criteria for selection of these financial intermediaries to be established by the EIB jointly with the Commission and be made publicly available” and asks for “ a public exclusion list for financial intermediaries to be developed jointly with the EC, based on their track record in terms of transparency, fraud, links to offshore jurisdictions and social and environmental impacts".
• Echoing demands from civil society organisations, MEPs call “on EIB to immediately engage in an inclusive revision process of its Non-Cooperative Jurisdictions policy” and to take steps regarding the issues of beneficial ownership and country by country reporting.

Final agreement on the External Lending Mandate (2014-2020)

The day after, on Tuesday the vote on the External Lending Mandate of the EIB took place after another round of interventions.

The MEP speaking on behalf of rapporteur Ivailo Kalfin reminded the bank of its developing role by calling for explicit environmental social and human rights regulation in the contracts with project promoters, a better dialogue with stakeholders and better alignments with EU goals and development objectives.

Here again more transparency, zero tolerance for corruption and tax evasion and better reporting of the results should be the key focus according to several MEPs.

Remarkably, in light of the recent events in Ukraine, the parliament sees the EIB also as a geopolitical tool. They applauded the political signal that the EIB gave, first by freezing its activities and by promising more money for the transitional government.

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The External Lending Mandate (ELM) sets out the guidelines and priorities for the bank when lending outside of the EU. It determines the eligibility criteria for an EU guarantee for losses under loans when lending outside of the EU - except for ACP countries where the bank operates under the Cotonou agreement. The next ELM will cover the period 2014-2020, with a mid-term review to take place in 2016

This mandate is a binding legal file going through the so-called co-decision procedure at EU level: on a proposal made by the European Commission, the European Parliament and the Council come to an agreement about the final text to be adopted.

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By calling for stronger standards and transparency and by referring to the development objectives of the EU that the EIB is supposed to follow, the Members of the Parliament indicated the direction which they see for the bank. Here are two concrete examples from the mandate:

• Reinforcing alignment with EU development and human rights objectives:

Since the ruling of the European Court of Justice in 2008 and the enforcement of the Lisbon Treaty, the EIB has a development mandate as defined in both Article 21 and 208 of the EU treaties. This is confirmed by the new ELM which states that the “EIB indirectly contributes to the general principles and policy objectives of the Union, which include reducing poverty through inclusive growth and sustainable economy, environmental and social development, and the prosperity of the Union in changing global economic circumstances”. Furthermore, the EU institutions specifically refer to EIB role in “consolidating and supporting democracy and the rule of law, human rights and fundamental freedoms”. An additional reference to necessary coherence with the EU Strategic Framework and Action Plan on Human Rights and Democracy comes in a context of raising doubts on the impact of EIB lending in countries such as Egypt.

• More stringent transparency and evaluation requirements:

- Counter Balance concerns are conveyed through provisions such as “In the interests of transparency, the EIB should draw up, to the extent possible, in cooperation with the local financial intermediaries, a list of the final borrowers”.

- EU institutions require the EIB to carry out ex-ante assessment and thorough due diligence “at project planning stage and implementation stage on social, human rights, environmental, economic and development-related aspects of investment projects covered by the EU guarantee” to ensure that its investments are “environmentally and socially sustainable”.

This vote vindicates Counter Balance positions and concerns related to EIB operations outside of the EU. A key challenge is now to fill the gap between binding EU legislation and the reality of the EIB’s operations on the ground. Indeed, with a ceiling of 30 bn EUR for the EU guarantee, the EIB will remain a key development player in the next seven years.

Counter Balance will monitor in the coming years how the mandate of the bank will be implemented and if it will secure major changes in the institutional culture and practice of the EIB – at the benefit of affected communities, recipient countries and the bank itself.

A next crucial step for civil society organisations will be to ensure that those clear demands from the EU institutions are reflected into the upcoming policy processes at the EU bank: the revision of EIB transparency policy, Climate change policy and Tax havens policy.

[1] Full procedure and texts on the motion for resolution on the European Investment Bank’s annual report for 2012 ((2013/2131(INI)) available here