EIC Memo on future EU Financing Architecture for Development

EIC considers that the preferred option to implement the ‘Team Europe’ approach on the financial level would be to establish a European Climate and Sustainable Development Bank (ECSDB) based on the EIB or an EIB + subsidiary.

With its proposal, EIC responds to a public debate which started in October 2019, with the launch of a Report by the so-called the High-Level Group of Wise Persons which presented fresh options to consolidate and streamline the European Financial Architecture for Development (EFAD). That report suggested that ‘maintaining the status quo is not an acceptable option for the future’ and instead called for the consolidation of European development finance and climate activities outside the EU into a single well-capitalised entity, referred to as European Climate and Sustainable Development Bank (ECSDB), alongside the European Commission in its role of policy driver. On 05 December 20019, the European Council requested a feasibility study to explore the report in greater depth. Contrary to the originally proposed options, the feasibility study explores not only the options to associate the ECSDB with either the EBRD or the EIB, it also investigates an additional ‘Business-As-Usual’ option, labelled ‘status-quo plus’ or ‘open architecture’, with few extra bits of coordination.

EIC observes an urgent need for the European Union to draw level with Asian and U.S. Development Finance Institutions, Exim Banks and policy banks, aid agencies, etc. in terms of both volume and management capacity for infrastructure and climate finance in third markets, and specifically in Africa. For the EU to improve its respective competitiveness it will be necessary to pool European development finance and technical expertise for Africa’s infrastructure sector and to establish a complementary EU financing institution with a broad mandate to provide competitive finance. EIC observes that, presently, European finance is fragmented across many institutions both on EU and Member States’ levels operating under various mandates. This may be an advantage for small-scale investments in the social sectors, but it is a hindrance for structuring tailor-made EU financial offers for large-scale infrastructure projects globally. A more streamlined and versatile financing institution on EU level, capable of combining European development and export finance and thus of matching the performance of Asian and U.S. institutions, could work alongside European DFIs and ECAs and aggregate existing financial capacity and technical expertise.