Inteview by Raquel Luna and Antoniya Argirova
Counter Balance is a coalition of 9 NGOs whose mission is to make European public finance a key driver of the transition towards socially and environmentally sustainable and equitable societies. Over the last decade, they have monitored extensively the operations of the European Investment Bank (EIB).The EIB is the lending arm of the European Union. It is the biggest multilateral financial institution in the world and one of the largest providers of climate finance.
According to the EIB’s website, the Bank finances sustainable investment projects which focus, among other things, on climate and development. Civil society organizations argue though that its business model privileges the financial and economic viability of a project over the social and environmental development of the populations concerned by the projects. What is your stand on that?
Xavier Sol (Counter Balance): This issue is indeed central. What the EIB is particularly strong at is ensuring the financial and economic viability of the projects it finances, so that it ultimately gets the money from its loans back. That being said, we struggle to see the bank undertaking a similar effort to really make a difference in terms of having a positive impact on development, social inequality and the environment. Too often, the EIB ends up financing projects that have negative consequences on both people and the environment. Our research and the testimonies from communities that are directly impacted by the EIB operations clearly indicate this.
Despite its public mission, the EIB has a long way to go when it comes to prioritising the public good over corporate interests and truly becoming a sustainable, transparent, and accountable institution. Over the years we have identified a number of structural issues ranging from insufficient attention to human rights and environmental impacts, to a lack of public ownership, transparency, and control over funds. These issues still need to be addressed.
The EIB relies too heavily on the private sector by channeling funds through commercial banks and equity funds that often do not pay very close attention to the development impact of their operations. At the end of the day, public money is largely used to leverage private investments, hoping that at some point this will benefit the people on the ground and in turn lead to sustainable development. However, doubt is being cast on this model as growing evidence demonstrates that too often these promised benefits do not materialize.
An overarching question concerns the future of EIB operations outside Europe: will it increasingly become a tool for EU foreign policy and economic diplomacy, which comes with an inherent and significant risk that geopolitical interests will end up prevailing over social and environmental considerations? Or will it really try to become a more responsible and accountable institution? We think that the second option is the only desirable one if the European Union is serious about its development policies.
EIB: As the EU Bank, the EIB supports investment projects that contribute to the EU policy objectives. About 90% of our funding goes to EU Member States to support continued development and integration. Our global financial operations help build a stable and open world economy. The EIB’s international financial operations around the world help address imbalances and establish closer collaborative partnerships, stimulate a stable and open world economy and enable the cross-pollination of expertise and technologies.
Our projects are subject to stringent due diligence process to ensure that they are, not only economically and financially sound, but also technically, environmentally, and socially viable, and that they comply with the applicable EU and national laws and regulations, as well as with the Bank’s policies and procedures.
Recently, Counter Balance published a report called “The EIB’s empty promises on human rights”, which presents case studies of projects financed by the bank which have resulted in human rights violations. What should be done in order to avoid these abuses?
XS: Much more needs to be done to ensure that the EIB does not contribute to human rights abuses. This is an area in which the bank has not been willing to improve until now. Together with CEE Bankwatch Network and other Human Rights NGOs, we developed a concrete set of recommendations for the EIB to raise the bar on the protection and promotion of human rights in its standards and operations.
Our key recommendation is for the EIB to adopt a new comprehensive and overarching human rights strategy with a sound due diligence system at the project level and reinforced environmental and social standards. The EIB also does not have sufficient capacity to monitor the situation on the ground and it also lacks human rights specialists on payroll. There is a clear gap between what is included in the EIB’s standards and their real-world implementation. Currently, the EIB does not have either the political willingness or sufficient staff to respond to this.
The EIB claims that they assess the environmental and human rights risks related to the projects they finance and that if there are significant risks they do not provide the financing. Recently, the organization Counterbalance published a report called “the EIB’s empty promises on human rights”, which presents case studies of projects financed by the Bank which have resulted in human rights violations. What is your response to that? does that mean that the policies should be changed?
EIB: In the context of EIB operations, human rights principles drawn from the EU’s Charter of Fundamental Rights and international human rights law are integrated into the Bank’s key due diligence procedures as defined by the ElB’s Statement on Environmental and Social Principles and Standards and reflected in the Bank’s Environmental and Social Handbook.
In the practice of EIB financed operations, among the most relevant aspects of the EIB’s commitment to human rights is the upholding of EIB’s Environmental and Social Standards by managing and duly remedying adverse impacts caused at the investment level. Respect for these standards is safeguarded not only at the due-diligence stage but also through the inclusion of contractual obligations and project monitoring.
The EIB has a robust and human rights-responsive social due diligence framework, adequately integrated in the relevant standards, management systems and toolboxes. Naturally, there is always room for improvement, and this is why we are revising our Standards and submitting them to a public consultation.
What is the feedback Counterbalance is getting from affected communities regarding the engagement of the Bank with them and whether the Bank takes their demands into account?
XS: We have been contacted for over a decade by citizens and local organizations affected by projects financed by the bank. Many have shared their frustration about the fact that their voices are not being heard.
For instance, in Nepal, the EIB is financing the Marsyangdi Corridor, an electric transmission line, which is being built without proper consultation of indigenous communities. This is taking place despite the fact that the project will heavily impact their communal land. This, therefore, breaches the EIB’s own environmental and social standards which include the right to Free Prior and Informed Consent (FPIC). Impacted communities led a complaint to the EIB’s complaints mechanism (CM), but the process is slow and the bank has so far reacted inadequately. The CM was not even able to convince the promoter, the Nepal Electricity Agency, to participate in a mediation process. Furthermore, following a monitoring visit, the EIB-CM shared a corrective point which included a “suggestion to review the possibility of carrying out a free prior and informed consent process when needed” clearly not treating it as the requirement that it is in international law and the EIB’s own social and environmental standards.
In Kenya, a geothermal project tells a similar story. As a result of relocation, the community of pastoralist Maasai lost access to at least 2500 acres of pastures. The land they received in return is also less fertile and the requests for more pastures have been categorically ignored. While the EIB assumes that the issues resulting from the project have been resolved, impacted Maasai communities continue to complain about the failure to fully address their loss of livelihoods. There are many more examples of this.
A fundamental problem is that even if affected communities can in theory use the EIB Complaints Mechanism to try to seek remedy, these problems should be anticipated and prevented before harm is already done. This is why it is crucial for the EIB to ensure proper human rights due diligence so that it can identify and address human rights risks for all of its operations.
When the EIB assesses the human rights and environmental impacts on local populations, do they visit those concerned on the ground? Does the Bank consult local human rights and environmental defenders?
EIB: While the primary responsibility for information and the engagement with local stakeholders on a project basis lies with the project promoter and/ or borrower in line with the Bank’s Environmental and Social Standards, the EIB strives to engage with stakeholders during on-site missions. The Bank recognizes that it can benefit from the establishment of a constructive dialogue with well-informed stakeholders in the appraisal and monitoring of projects. Stakeholders can contribute to the legitimacy of a project and their knowledge and understanding of local issues can help improve the performance and minimize the risks of a project.
Recently, the directors of the EIB adopted a Climate Bank Roadmap 2021-2025. Counter Balance says that it is weak. Why? Do you think that it is related to the pandemic and its impact on the economy? Are we going backwards?
XS: While the EIB new Climate Roadmap is inarguably a step forward compared to its previous climate strategy, it simply falls short of ensuring that the Bank will deliver on its climate commitment to align all its operations with the objectives of the Paris Agreement. That is why we call it weak.
As it stands, we do welcome recent steps taken by the EIB on the climate front, for example, the ban on fossil fuels adopted in 2019 or the decision to stop funding the expansion of airports. However, we don’t think it can be considered as a true “EU Climate Bank”, a name the bank loves to brand and market itself with, because there are still many steps that the bank needs to take in light of the looming climate crisis and the urgency of the issue.
What the pandemic highlights is the need to transform our economies and societies. We regret that the new Roadmap does not specify any binding conditions for its clients, including large corporates and private banks, to adopt decarbonisation plans aligned with a 1.5°C global warming scenario. Especially in a context where public money is owing to rescue companies in the face of the pandemic.
The EIB is also not ruling out support for many high-carbon projects, including motorways, industrial agriculture, and biomass projects, despite the obvious fact that these projects are fueling the climate crisis and consequently are destroying ever more of our common resources. Last but not least, the EIB can still support climaticide projects all the way until the end of 2022. It can do this under a so-called “transition period” that in reality only serves to delay real progress.
In the COVID-19 era, there should be no room left for public funding to keep feeding a high-carbon and unfair economic system whose major weaknesses have been highlighted during the past year.
Recently, the directors of the EIB adopted a Climate Bank Roadmap 2021- 2025. Civil society organizations claim that it is not strong enough? What is your stand on this?
EIB: The EIB welcomes constructive comments and criticism from all stakeholders regarding its activities, and appreciates the active contribution of civil society organizations to the stakeholder engagement process that led to the adoption of the EIB Group Climate Bank Roadmap 2021-2025 by the EIB Board of Directors in November 2020.
The EIB Group Climate Bank Roadmap 2021-2025 maps the next stages in the Bank’s journey to sustainable investment, and outlines our bold ambitions for climate and environmental sustainability finance to support a Green Recovery from the COVID-19 crisis, to fully back the European Green Deal, including its ‘Just Transition’, to keep supporting countries in need outside the EU, and making sure our work contributes to the achievement of the sustainable development goals.
Within this context, we appreciate the constructive comments from all stakeholders and count on their continuous engagement in the coming months and years, in order to help us turn these ambitions into reality.
In November 2020, the first global summit of all Public Development Banks took place in Paris. The organization of the summit was criticized because representatives of local communities were not invited to participate in the panels and civil society organizations could not attend the summit. What is your perspective on that?
XS: We joined many other NGOs in pointing out the fact that the voice of civil society, and especially of those directly impacted by development projects, has been ignored in the Finance in Common Summit. This clearly begs the question of who gets to sit at the table, and who is being left out.
The EIB should carry a certain responsibility in its role as a public institution. An example of a lack of this responsibility is the fact that the bank invited a representative from the controversial company KenGen as a speaker to a side event it hosted on climate change. It’s important to know that KenGen is the very promoter of the earlier mentioned geothermal projects in Kenya that are leading to human rights abuses.
We reacted by sending a letter to the EIB suggesting to invite representatives of impacted communities to discuss lessons learned and means to truly ensure inclusive and sustainable climate action, instead of KenGen. In its response to our request, the EIB refused to admit any fault or responsibility and argued that KenGen properly handled the social impacts from the project and was therefore well placed to speak at the summit. This claim is completely opposite to testimonies from the Maasai communities, illustrating the EIB’s lack of engagement with impacted populations and constant dismissal of the impacts of its project on the ground.
Public banks hold the potential to steer our economies and societies to a more sustainable and fair path. However, in order to do so, they need to become more democratic, accountable and develop public participation mechanisms allowing citizens and impacted communities to be properly involved in their decision-making. In our view, the Finance in Common Summit showed that it is high time to collectively reclaim public development banks for the common good.
EIB: NGOs were invited and did attend the summit. The EIB organised one of the ten high-level events of Finance in Common, the overall event being organised by Agence Française de Développement. We had several NGOs interacting with our panellists during our session dedicated to climate and we particularly addressed the question of human rights and the rights of indigenous people for instance, in relation with the implementation of climate projects. We engaged into an open discussion and we valued the numerous questions that were raised by NGOs on this matter. We will be further engaging this year during the public consultation on the revision of our Environmental and Social standards and Policy and we look forward to engaging with representatives of local communities and civil society.