EU bank tackles investment gaps in #innovation and #development

| January 18, 2018 | 0 Comments

“Since its establishment in 1958 the EU bank, which celebrates its 60th anniversary this year, has invested over €1 trillion based on a cash contribution by the member states of just €14 billion” European Investment Bank (EIB) President Werner Hoyer said today (18 January).

“It is an excellent deal for Europeans. That trillion attracted other investment from the private sector, generating total investment of over three trillion euros. All this money went into making Europe more open, competitive, cohesive and fair, and into doing our part in global development over the decades”, stated Hoyer at the EIB Group’s annual press conference in Brussels. “60 years after it was founded, the EU bank’s mission to invest in viable projects across Europe and across the world, focusing on where investment is most needed, is more relevant than ever. But we are not complacent and continuously work to increase our impact”, he added.

The EU bank also continuously works to improve its governance. This week, the first Gender Action Plan was approved. It reflects the EIB Group’s commitment to supporting the rights of girls and women and their financial inclusion in the EIB’s activities in Europe and beyond.

In 2017, the EU bank:

  • Approved a record number of 901 projects, supporting small and medium-sized companies, fostering innovation, protecting the environment and helping to build crucial infrastructure, and;
  • provided 78.16bn to help deliver on EU policy goals in Europe and worldwide, supporting total investment of around 250bn by crowding in private capital.

Growth capital gap

The record number of projects reflects a stronger focus on smaller deals and increasing support for innovative companies to help them grow. By filling the gap in the European market for growth capital, the EU bank is helping to increase the continent’s competitiveness. In 2017, nearly 30bn of financing went to small and medium-sized companies and nearly 14 billion into innovation. The European Investment Fund (EIF), as part of the EIB Group, plays a crucial role in this area as the biggest single source of venture capital in Europe. The EIF committed 9.34bn of financing last year.

The EIB Group has also been increasing its advisory services aimed at identifying and developing investable projects. By the end of 2017, our ongoing advisory assignments have the potential to generate 40 billion euros of new investment. “Our specialists are working on these assignments mostly in cohesion countries, allowing us to reach a wider range of companies and public entities which need help in making their projects bankable,” Hoyer said.

Delivering on the Juncker Plan

Using the EU budget and the EIB’s own funds under the European Fund for Strategic Investments (EFSI), a guarantee facility managed by the EIB Group, the EU bank engaged in riskier investments, reducing the risk for private investors and addressing the reluctance to invest that had plagued the European economy during the financial crisis. By the end of 2017, EFSI, the financial arm of the Juncker Plan, had mobilised 257bn of investment. This means that EFSI is well on track to achieve 315bn of investment based on a guarantee of 21bn.

“EFSI is a great example of what the EU bank can do to help scarce public resources achieve more”, President Hoyer said. “It shows that the shift from grants and subsidies to loans and guarantees can be a powerful policy tool. We welcome the extension of the Juncker Plan approved earlier this year. Based on the lessons learned during this period and our strong track record, we offered to take on more responsibility under the post-2020 EU Multiannual Financial Framework.”

Increasing the impact of development finance

Development finance can benefit from a similar paradigm shift from grants and subsidies to loans and guarantees. The EIB has unique experience in crowding in private investment. “We have begun discussions with our shareholders, the EU member states, and the European Commission on bundling our development finance activities into a dedicated structure within the Group to deliver EU development policy more efficiently”, President Hoyer said.

“We want to enhance our impact and make sure we get better at partnering with others”. President Hoyer said. “There isn’t enough public money in the world to address global development challenges. Catalyzing private investments is the only way to finance the achievement of the Sustainable Development Goals,” he added.

“Multilateralism has been criticized and attacked recently. The EU bank remains committed to international and multilateral cooperation. No-one is stronger alone. In an interconnected world, it is absurd to think that we can achieve success in delivering global development and prosperity if we don’t work together”, he added.

The EU bank is already one of the largest multilateral development banks: in 2017, it invested almost 8bn, a tenth of its financing volume, in projects outside of the EU.

Tackling climate change

Two focus areas of its investment outside the EU are climate change and economic resilience. The EU bank is the biggest single multilateral financier of projects to fight climate change and mitigate the effects of this man-made global threat. In 2017, it invested 19bn for this cause, more than 27% of its total financing. It stands by its pledge to invest 100 billion euros in this area over the period 2016-2020.

“The EIB is the world’s largest multilateral financer of climate action projects, and we are proud to continue. Last December, at the One Planet Summit convened by President Macron, we announced our partnership with the Global Covenant of Mayors, co-chaired by Michael Bloomberg and European Commission Vice President Maroš Šefčovič,” Hoyer said. “The partnership is an example of multilateral cooperation and climate action, in the face of public policy that is sometimes heading in the opposite direction.”

Helping address migration

At the request of the EU, the Bank launched at the end of 2016 the Economic Resilience Initiative, with a view to providing 6bn in additional investment in the EU’s Southern Neighbourhood and the West Balkans.

“From a humanitarian as well as from an economic perspective, the best solution is to invest into improving people’s living conditions, in order to generate hope and reduce the pressure on them to leave their homes”, Hoyer said.

After one year, the EIB has reached 25% of the additional 6bn volume, as targeted. Additional investment in the region will help improve living conditions and alleviate the causes and consequences of migration. More than half of the financing goes into the private sector, supporting jobs at small and medium-sized companies.

Pioneering new instruments in financing 

The EIB Group is not only the biggest multilateral lender, but also the biggest multilateral borrower worldwide. It is self-financed, with its lending activities being mainly funded via bond issuance in the international capital markets. The Bank successfully raised 56.4bn from investors around the world last year. Ten years after pioneering the first Green Bonds, we remain the largest issuer, with more than 20bn raised for climate projects since 2007.

Following up on the success of the Green Bonds, the EU Bank is considering introducing new kinds of bonds linked to the achievement of Sustainable Development Goals, with the aim of attracting more private capital to projects in developing countries.

The European Investment Bank (EIB) is the long-term lending institution of the European Union, owned by its member states. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized enterprises (SMEs) by helping them to access finance. The EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.

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Category: A Frontpage, Economy, EU, EU, European Investment Bank

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