The European Investment Bank is a public institution—yet the public good is not its agenda.
Hidden in the valleys of Luxembourg is a bank Europeans own yet most have never heard of it. What the European Investment Bank (EIB) lacks in profile it however makes up for in financial clout. The lending arm of the European Union, it is the world’s biggest multilateral financial institution, dispensing over €65 billion last year alone and over a trillion euro since its foundation in 1958.
On the surface, this might seem a straightforwardly good thing. Yet money invested is not necessarily well spent.
True, the EIB—which now promotes itself as ‘one of the largest providers of climate finance’—stopped direct support for fossil-fuel projects, such as drilling for oil, at the end of 2021. But it still pours money into fossil-fuel companies. PGE, CEZ and Repsol have received almost €1.5 billion from the bank since the beginning of last year.
The EIB has also not hesitated to finance banks which are in turn pumping billions into fossil fuels. The latest Banking on Climate Chaos annual report revealed how six banks—BNP Paribas, Unicredit, Société Générale, Santander, Crédit Agricole and BPCE—collectively invested over $60 billion in the fossil-fuel sector in 2022 alone. These banks in turn received almost €2 billion from the EIB in the same period.
Beyond planetary boundaries
Worse still, the EIB’s direction of travel is further beyond planetary boundaries rather than respectful of them. The bank last year decided to loosen the climate criteria fossil-fuel corporations have to meet to receive financing for projects deemed ‘green’. These include renewable energy and electric-vehicle charging infrastructure.
Companies pursuing EIB funding were previously barred from increasing unconventional oil and gas production. Now, any energy corporation which upped its extraction of oil from tar sands, drilling in the Arctic or fracking of oil or gas would still be eligible, providing it can wave even a flimsy decarbonisation plan.
The EIB is handing cheap finance for a few green projects to the very companies and banks responsible for trashing the planet—so they can use their own money to reward shareholders and trash the planet even more. Its enthusiasm for financing fossil-fuel companies and private banks shows how, though a public institution, it prioritises big business over the public good.
Energy companies made record profits in 2022, with Repsol and Iberdrola (also receiving more than €1 billion from the EIB) each making over €4 billion alone. They could have afforded to invest in renewables and other green projects without public financial support. The profits made by the financial sector were even more staggering, with the six banks above making over €37 billion in combined profits last year. These companies were cashing in on high energy prices and interest rates, as European citizens struggled to pay their bills and watched prices soar.
The EIB also protects profits by guaranteeing the returns of businesses investments in specific sectors. In theory this is to counter the ‘liquidity preference’ of asset holders. But in practice it hands the power to shape society via investments to private enterprises only interested in the most profitable targets—not in what might engender the greatest social benefit. It weakens the democratic control citizens should enjoy, by shifting decision-making over what gets financed from democratically accountable institutions to a handful of private investors.
Democratic deficit
The EIB would be less likely to behave so recklessly if its own investments were subject to democratic scrutiny. Yet it suffers from a serious democratic deficit.
The European Parliament is the only institution which can hold the EIB to any degree of account. MEPs vote on reports biannually—last year they called on the EIB to stop investing in polluting highways and infrastructure projects outside Europe causing serious human-rights violations.
The EIB has however remained impervious to these calls: the parliament’s reports are not binding. It is deeply concerning that it should choose to ignore MEPs and that no other vehicle exists for elected officials or civil society to shape the EIB’s actions.
Many social movements are waking up to the damage the EIB is wreaking in Europe and around the world, with Counter Balance and other civil-society organisations meeting the bank directly today. Rather than financing projects, corporations and banks which are destroying the climate and cranking up inequality, it is time to turn the EIB into a force for social and environmental justice.
Public accountability, transparency and public participation should be built into how the EIB operates. The bank should stop indulging private investors and put healthcare, education and truly green energy and public transport at its heart. These services should be public or community controlled, with any associated investments not linked to privatisation.
Luxembourg may not be seen as the centre of the EU’s economic power. But society is waking up to the entrenchment of fossil fuels and private interests within it—and how the EIB is enabling them. Civil society needs to mobilise to reclaim the largest multilateral development bank in the world, putting the ‘public’ back in public investment.
Frank Vanaerschot is director of Counter Balance, a non-profit organisation which works to make European public finance support the creation of socially and environmentally sustainable and equitable societies, within Europe and beyond.
Paul Creeney is the media and communications officer at Counter Balance.