On Tuesday evening, the European Investment Bank (EIB), which is based in Luxembourg, presented its annual results for 2020 during a virtual press meeting with EIB President Werner Hoyer.
Spring 2020 saw the EIB Group rapidly redirect its activities to combat the COVID-19 pandemic and its economic consequences on all fronts. It increased financing volumes to €76.8 billion, exceeding its own targets. A third of these funds, €25.5 billion, went into the immediate crisis response that started with a first package in March. Most of it went to small and medium-sized enterprises (SMEs) to avoid insolvencies and job losses, especially in countries that did not have the budgetary means for massive national rescue packages.
Reflecting the additional need for assistance caused by the pandemic, EIB Group support for SMEs grew by €5 billion to €30.6 billion. In total, more than 425 000 companies profited from financing, sustaining more than 4.2 million jobs. The EU bank achieved this without neglecting its other investment priorities: environmental investment reached €16.8 billion, infrastructure projects were supported with €15 billion and €14.4 billion went to innovation projects.
President Werner Hoyer explained: “Europe can only emerge stronger from this crisis by investing in the green and digital economy of the future and not in structures of the past – making sure it leaves no region in Europe behind and working with our partners outside of the European Union”.
Investment in the health sector
As part of the COVID-19 response, the EIB Group massively increased its financing for the health sector. It not only supported hospitals, but also played a substantial role in the development and mass production of vaccines. Early in the year, the EU bank approved a €100 million loan to BioNTech, the German company that developed the first COVID-19 vaccine in association with Pfizer. The Group financed several other vaccines, as well as companies that develop COVID-19 therapies and testing technology.
The EIB President continued: “The fight against the pandemic and its economic consequences will keep us busy in 2021. On top of the €25 billion already provided, our Board has already approved close to another €25 billion of financing for ailing companies and the health sector”. Part of this financing will come from the European Guarantee Fund (EGF), which started operations in autumn 2020. The EU Member States have provided guarantees of nearly €25 billion to enable the EIB Group to provide additional funding for mostly SMEs affected by the crisis.
EU climate bank progress
At the same time, the EIB kept its promise to increase green investment and transform into the EU’s climate bank. The share of EIB investments that went to climate action and environmental sustainability projects rose from 34% to 40% last year, in spite of the COVID-19 crisis, bringing the EU bank close to its 50% target. The Group aims to mobilise €1 trillion in investment for the climate and the environment by the end of the decade. In November 2020, the EIB Board approved the Climate Bank Roadmap, which defines the way in which it will achieve these ambitious targets. The Roadmap provides for the phasing-out of financing for high-emission projects such as airport expansions and sets stringent criteria for the financing of others, such as motorways, after the bank already announced an end to unabated gas projects.
President Hoyer emphasised: “The fight against climate change cannot wait until the pandemic is over. [...] The EIB Group has made great progress with its Climate Bank Roadmap. I call on the other financing institutions to take similar stands against environmentally unsustainable projects".
Growing investment gap in Europe
As detailed in the new EIB Investment Report, to be published on Thursday, a growing investment gap threatens Europe’s ambitions for a green recovery. According to the report, 45% of EU companies expect to reduce their investment in the aftermath of the crisis, while only 6% expect to increase it. The report warned that companies are aware of an urgent need to invest, especially in digitalisation and climate action, but the COVID-19 crisis deprives them of the means to do so.
The EIB President noted: “We should be worried by the huge dent the coronavirus has made in the intent to invest. The European Union is in danger of losing ground in the global competition if it does not mobilise more money for innovation. But we should also be encouraged by the success of the financial pillar of the Juncker Plan, the European Fund for Strategic Investments, which achieved its increased target to mobilise €500 billion of investment last summer, ahead of schedule".
A record year for the EIF
The European Investment Fund (EIF), the EIB subsidiary that supports high-tech start-ups and SMEs across Europe, had another record year, signing operations with a total volume of €12.9 billion – an increase of 26% on 2019. The EIF generated financing for more than 330,000 SMEs and small mid-caps.
Operations signed in the last year alone will provide close to 66,000 households with refurbished or new social and affordable housing and 1.4 million households with high-speed broadband services. 280 million people will receive a COVID-19 vaccination through EIB funding, nearly 30 million will benefit from safer drinking water and more than 15 million from improved sanitation. Over 145,000 hectares of new forest will be planted and electricity generation capacity will grow by more than 10 GW, of which 83% will come from renewable sources. These are a few examples of the concrete impact EIB Group investment has for people in Europe and around the world.
Global investment to build resilience and combat climate change
The COVID-19 pandemic and the climate crisis are a twin challenge for the whole world, which is why the EIB Group increased its efforts to support the EU neighbourhood, Africa and other regions. 13% of last year’s financing (€10.2 billion) went into countries outside the EU, helping the EU achieve its policy goals, improving people’s lives, modernising health systems and building economic resilience. The EU bank achieved record lending in Africa, signing a volume of more than €4.7 billion, a 50% increase over the year before. It also reached the target for SheInvest, the bank's initiative to mobilise €1 billion in investment to boost gender equality and economically empower women across Africa.
Attracting money from sustainable investors
To finance such activities, the EIB Group has added biodiversity to the range of activities it finances with its Sustainability Awareness Bonds, the most recent addition to its bond family. The EIB, which finances its activities on the global capital market and benefits from an AAA rating, has already pioneered the Green Bond market: it issued its first green bond in 2007 and today leads the market with a volume of more than €35 billion issued. Overall, the EIB borrowed €70 billion in the last year from international investors, almost 20 billion more than the year before.
President Hoyer concluded: “The EIB is not just the world’s largest multilateral lender: as it finances itself on the financial markets, it is also the world’s largest multilateral borrower. The Bank’s creative approach to borrowing sets standards in making investors aware of their power to shape and support the right policies. Climate and sustainability awareness bonds were considered a gamble when we introduced them. Now they set standards that everyone wants to meet, strengthening the green economy worldwide”.
Following his presentation, in response to a question from Chronicle.lu on the specific role played by the EIB in Luxembourg during the pandemic, President Werner Hoyer cited the example of an ING loan (intended to finance more SMEs) in December 2020, as well as 28 coronavirus-related operations in stock with the EIF in Luxembourg. At the end of 2020, it had supported fifteen private equity funds, totalling €258 million (€1,025.1 million mobilised), and thirteen partner finance and guarantee providers, totalling €181 million (€363.4 million mobilised). President Hoyer added that although the EU bank is present everywhere in the union, it has been "extremely happy with cooperation with the Luxembourgish authorities [...] in a country that probably needed us less than others".
More generally, he specified that EIB lending in Luxembourg is substantial, covering sectors as diverse as transport, education, telecommunications, the environment and space. In addition to financing, the EIB pursues advisory activities in the Grand Duchy, for example advising the Ministry of Finance on High Performance Computing (HPC).
Looking beyond Luxembourg, President Hoyer reiterated that the bank had focussed its efforts both on vaccination and medication in relation to coronavirus.
In response to a question on Brexit, he stated: "Brexit is a terrible mistake [...] but it is a mistake made by others". He lamented the loss of a strong shareholder in the bank, but especially regretted the impact of the United Kingdom's departure from the single market on British consumers and citizens. Nevertheless, the EIB President stressed the importance of maintaining good relations in the future.