Over 500 public banks, including the European Investment Bank (EIB), are gathering in Italy today on the occasion of the second edition of the Finance in Common Summit. This year’s discussions will have a particular focus on agriculture, agribusiness and food systems.
280 civil society organisations have voiced their concerns in an open statement over this focus on agriculture, as public development banks have a long track record of making investments that benefit private interests and agribusiness corporations at the expense of small-scale farmers, local communities and the environment.
Over the last decades, development banks have been promoting an unsustainable agricultural model, by almost exclusively supporting companies engaged in monocultures, contract growing schemes, factory farms, genetically modified seeds, synthetic fertilizers and pesticides. Unfortunately, while seeking to position itself as a “climate bank” and a prominent development player, the EIB is not doing better than its peers when it comes to the type of agricultural project it supports.
We have historically documented several problematic loans from the EIB to big agriculture businesses. A blatant example is the EIB’s support to the agribusiness company Kernel Group, which is owned by Ukraine’s richest oligarch. In 2017, it became Ukraine’s largest land user, controlling around a quarter of the country's agricultural land.
Also in Ukraine, the EIB gave several loans to the company Myronivsky Hliboproduct Pjsc (MHP). MHP controls all aspects of the poultry production chain and has grown into a monopoly. Affected communities have denounced MHP’s impact on the environment, public health and water resources, and several local activists opposing the company have been subject to intimidation and even violence. Recent research from SOMO, the Dutch Center for Research on Multinational Corporations, added to this long list of concerns, describing how MHP has been entering into elaborate schemes to avoid paying millions of dollars in taxes.
Then in Morocco, the EIB financed a fertilizer company, Office Chérifien des Phosphates (OCP), which is accused of heavily polluting the environment and violating the right to health of workers and people of the local communities.
In addition to directly funding agribusiness, a large portion of the EIB financing to the agriculture sector is channelled through financial intermediaries, often commercial banks and equity funds. The issue is that the EIB provides next to no information on where the money ends up, making it very difficult for civil society to track these funds and for impacted communities to seek access to remedies.
These funds can also have devastating impacts on people and the environment. The EIB for instance provided support to a private equity fund focusing on food and agribusiness in Sub-Saharan Africa, Agri-Vie, which invested in a highly controversial New Forests Company project in Uganda that displaced over 20,000 people.
The signatories of the open statement are calling for an immediate end to the financing of corporate agribusiness operations and ask instead for the creation of fully public and accountable funding mechanisms that can support farmers and communities’ efforts to build food sovereignty and address the climate emergency.
If the EIB wants to become a more responsible and sustainable lender, it must redirect its investments in locally-controlled food systems and agroecological farming, which respect and promote the human rights of food producers, including their rights to seeds and land, and enhance their practices as a means to achieve more diversified and climate-resilient agriculture. A paradigm shift is necessary for public banks to stop supporting an outdated and harmful development model.
An important step will also be for the EIB to fundamentally improve its social and environmental standards, address the massive problems linked to the black box of its intermediated operations, and increase its due diligence to ensure that the projects it finances do not lead to human rights abuses.