Presentation by Alex Wilks on behalf of Counter Balance 24/2/10

The EIB is: 1. incoherent with European development, environment and human rights policies; 2. incomplete, with insufficient attention to poverty, and overlooks opportunities for positive contributions; 3. incompetent, as it has the wrong staff with the wrong incentives.

 The EIB has confusing and contradictory mandates.  The Bank does not comply with European Union pledges and policies on aid effectiveness, human rights and environment.  Staff procedures and incentives in tension with social and environmental goals.

Development objectiveEU self-interest objective The sustainable economic and social development of the developing countries, and more particularly the most disadvantaged among them. Support EU presence through Foreign Direct Investment. The campaign against poverty in the developing countries. Cost recovery and rapid financial return. The improvement or protection of the environment, and combating climate change. Energy security for the European Union and raw material supply for the EU.

 Limited social, human rights and environmental guidance to staff.  Insufficient due diligence on corporate clients’ track records and capabilities on tax affairs, environmental or social protection.  Corporate clients do not have to agree to specific covenants on benefits for communities on the ground.

 The Bank has 1500 staff to deal with a rapidly expanding loan volume and multiple mandates in all the world’s regions.  Member States board members lack development/social/environment expertise.  Capacity constraints mean global loans increase faster than overall lending.  Some goals are not achievable with hard currency loans.

 If the EIB cannot be transformed in the ways proposed, then the European Union should redirect its money and guarantee.  Reforms needed: 1. Clarify mission and objectives; 2. Introduce structural and procedural changes; 3. Enhance external accountability measures.

Reform areaSelected proposals Clarify mission and objectives - Establish priority sectors and no go sectors. - Do not expand technical assistance. Introduce structural and procedural changes -Finance within countries’ national development strategies. -Enhanced development, human rights and environment due diligence. - appropriate staffing and incentives. -No support for financial intermediaries operating in offshore financial centres. -Financial intermediaries require substantial local ownership and capability to implement a pro-development approach. Enhance external accountability measures. -Transparent and verifiable project-based development indicators, to be covenanted in project agreements. -Improve transparency policy.

 A delusion to think that this will help the EU persuade developing countries to commit to a global climate deal.  The EIB is not well adapted to this role because the €2 billion is:  Not “new and additional” money.  Not under the UNFCCC COP.  Loans not grants.

 Enhanced coordination platform between European institutions worthwhile if funding is aligned to recipients’ priorities;  Building up a major European development finance institution a very dubious proposition  No developing country representation at all;  Danger of lowest common denominator standards and approaches.