Q&A: EIB Global paves the way for private investment

“Europeans must work as a team and combine resources, knowledge, creativity, and innovation capacity to jointly address global challenges,” said Markus Berndt, acting managing director of the European Investment Bank’s new development arm EIB Global.

That’s the thinking behind this new branch of the bank, which aims to increase the European Union’s development impact outside Europe with no extra costs to its shareholders. One way of doing that is by “paving the way for additional financial flows from the private sector,” Berndt said.

“The ultimate contribution that we can make as a financial institution is to take the private sector’s concerns away from investing in certain markets and assets by leading the way.”

“Investing in the Sustainable Development Goals brings a high return because it's something that humanity needs to do and will do, and can ultimately be financed by the private sector. It's for us to try to move the system in that direction,” he said.

Berndt said that targeted private sector investment across Africa will be essential in tackling the impact of COVID-19 and unlocking sustainable growth: “Just this week, EIB Global confirmed new financing, of €62 million [$70.4 million] to accelerate these efforts — six new partnerships for high-tech innovation, rural microfinance, and business financing from Cameroon to Malawi.”

Speaking to Devex, Berndt shared more about how EIB Global will work more efficiently and the role of development finance in tackling COVID-19 and climate change.

This conversation has been edited for length and clarity.

When thinking about tackling both the impacts of COVID-19 and climate change, what role do you see development finance playing?

COVID-19 and climate are, first of all, global challenges that require public intervention. We need to act. They’re not things that will sort themselves out. They both also require a lot of investment, and, in many cases, you can invest in projects that can be made bankable. That's where public development finance banks like ours can play a role.

There are some things in the health sector that require public sector-led programs. There are some things where you can rely on the private sector for investments — for example, in energy. But then there's a spectrum in between where a public development bank can play a large role, first of all to structure the projects, to turn them into projects that can be banked, and then also to provide financing that is willing to take more risks than the private sector might take initially. It might be able to provide financing terms that help a project get off the ground, which wouldn't happen with private financing alone.

What's also important when it comes to development finance is that it's embedded in the policy dialogue because, in many cases — especially when it comes to climate but also health — you need to have a whole system that works, for example in order to incentivize energy efficiency measures. It's this combination of having a dialogue with your partners on how you facilitate such an institutional environment and then how you can combine it with supporting investments where development finance can play its role.

The European Commission launched its Green Deal in 2019 and EIB responded with the Climate Bank Roadmap 2021-2025. How is that helping EIB put climate at the center of its mission?

The EU today contributes only to a relatively small portion of greenhouse gasses but, of course, historically we have been … a massive contributor. Therefore, we have a clear, moral obligation to be a leader in this area. We have created, globally, a mess and we have to help clean it up.

The EU has a lot of cutting edge technologies spread out in all kinds of sectors of the EU and, as the EU bank, we bring a lot of financial and banking capabilities to this area. With its launch of the Climate Awareness Bonds in 2007, the EIB was the first bank to issue what today are known as green bonds. We were also the first multilateral bank to be fully aligned to the Paris Agreement.

When we say we are the EU climate bank that applies not just to climate action inside Europe, but it is defining our actions outside the EU as well because this is a global problem and requires global answers. The challenge we have now is to build on the momentum from COP 26 and mobilize the private sector for more climate action investments.

This work falls under the umbrella of EIB Global, the new development branch of the bank. What can you tell us about this initiative and how it plans to tackle COVID-19 and climate change?

The EIB has already, for more than 60 years now, been a contributor to global development finance. Nevertheless, there have been several shortcomings with regards to how we worked outside the EU. Certainly, significant resources were made available but we sometimes lacked focus and direct policy steer in our financing of development projects. We are now addressing this by establishing EIB Global.

With EIB Global, we have established a governance structure that allows for much more direct interaction with development stakeholders in Europe to make sure that they understand what we can offer and let EU policymakers give direction on where they want to see their own bank be active and what the priorities are.

The EIB's operations outside the EU have always benefited from the synergies with operations  inside the EU and we don't want to change this. I think the experience that we are gathering inside the EU, when it comes to climate action, is very much helping us to provide high value added also outside the EU. Same for the experience that we have gained through our life science and health teams. Same with digitalization. That's something we want to keep.

On the other hand, outside the EU, it's even more important to have a local presence than it is when we operate for example in France or in Sweden.

You talked about green technology, but where do you see connectivity playing a role?

A lot of EIB activity has been on infrastructure, on facilitating connections between member states and between the EU and its neighbors. These networks are growing and therefore connectivity and investments in quality infrastructure is an important element of what we do. Infrastructure leads to better access to services like water, health, education, and is a backbone to enabling private sector growth and prosperity through energy, transport, and digital.

For instance, in Mozambique, we’re supporting the rollout of off-grid solar energy systems for  renewable energy to households and microentrepreneurs with a very high developmental impact of giving first time access to energy for rural communities.

With the Global Gateway initiative, the European Commission is taking this EU offer to a new level saying to its partners, “look, there’s a gigantic need in terms of energy transition, which requires investments to increase green energy supply, energy efficiency, and connectivity between the different sources of energy because only then can you create an efficient market and make the whole system work.” And the same with digital, same with health. 

The EIB will be a key partner in this initiative, as part of “Team Europe” with cutting-edge expertise in the priority areas; a track record of working with both the private and public sectors; the financial strength of being the EU bank; and strong relationships with regional banks and our fellow MDBs [multilateral development banks] like the African Development Bank. The EU including through the EIB Global is a reliable partner for investing in our joint global future.

This coverage exploring innovative finance solutions and how they enable a more sustainable future is presented by the European Investment Bank.