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EU Ombudsman reprimands EIB for lack of transparency on funding’s environmental impacts

The self-declared “world first climate bank” claimed it dedicated Euros 27,6 BLN to climate action and sustainability projects in 2021. But it consistently failed to disclose information which could help verify that the projects it supports are consistent with these claims or with environmental laws.

In three decisions published today, the EU Ombudsman called on the bank to adopt a “more ambitious approach to its disclosure practice” to act in line with EU transparency laws.

Non-governmental organisations ClientEarth, CEE Bankwatch Network and Counter Balance have applauded this decision, which follows a complaint lodged two years ago. 

ClientEarth Senior Law and Policy Advisor Sebastian Bechtel said:

“The Ombudsman confirmed today that the EIB financing decisions were not exempted from public scrutiny – this is good news for democracy and the planet.

“We want to know the details of the environmental impacts of the projects the EIB plans to fund, how it is assessing them and what it is doing about them. This is crucial information to be able to verify whether the EIB is actually really being the climate bank it claims it is and to hold it accountable, if necessary.”

NGOs argue that the EIB – a public institution recently condemned for illegally avoiding environmental scrutiny – prevents the public from fully expressing its views on environmental issues before the EIB takes its decision to finance projects.

Secrecy is deeply rooted in the EIB’s culture, according to a report highlighting that the bank is less transparent than other public financial institutions such as the World Bank. This is also confirmed by the 2020 Aid Transparency Index, in which the EIB only scored 58.9 out of 100 points, while the World Bank received 97.1 points.

 Xavier Sol, Director at Counter Balance, said:

“Today’s decision blows another hole in the EIB’s claims to be a world leader on transparency.”

“EIB shareholders and other EU institutions like the Parliament and Commission must now make sure the bank genuinely addresses the Ombudsman’s suggestions.”

“The EIB has been allowed to cloak itself in secrecy for too long. It’s time the bank stopped hiding information and let the public check that public money is being invested in projects that are in the public interest.”

One area of particular concern are projects financed through “financial intermediaries”, such as national banks. For these projects, the EIB usually does not publish the name, place and nature of the projects, even if they significantly impact on the environment. The Ombudsman suggests changing this.

Anna Roggenbuck, EIB Policy Officer at CEE Bankwatch Network, said: 

“For years we have been calling on the EIB and its governing bodies to enhance  transparency of operations through financial intermediaries. With the same concern, the European Parliament called on the bank to include contractual clauses requiring mandatory disclosures on lending activity.”

“Now the European Ombudsman concluded that the bank must publish relevant information on projects financed by intermediaries and that there is no justification for confidentiality here.” 

The EU Ombudsman released preliminary findings in 2021 providing suggestions to the EIB that the bank partly ignored. The Ombudsman regretted this and reissued many of the suggestions, which she considered to be in the public interest.

With this decision released today, the watchdog closed the inquiry, giving the EIB until the end of October to explain how it has implemented its suggestions.

Activists call on EU to stop promoting fossil gas dependence in the Western Balkans

36 civil society organisations have today sent a joint letter (1) to the European Commission President Ursula von der Leyen, calling on the EU to stop promoting the use of fossil gas in the Western Balkans.

The region is currently much less gas-dependent than the EU, which is struggling to free itself from fossil gas imports after Russia’s invasion of Ukraine. 

Serbia and parts of North Macedonia and Bosnia and Herzegovina use Russian gas, mainly for heating. Albania, Kosovo and Montenegro do not have gas networks at all (2).

Despite the fact that the Western Balkans have committed to phase out fossil fuel use by 2050 (3), the Commission has in recent years actively encouraged increasing fossil gas consumption in the region, mainly via the Southern Gas Corridor from Azerbaijan (4), despite the Shah Deniz gas field project being 20 per cent owned by Russia’s Lukoil (5).

Today’s letter calls on the Commission to ramp up sustainable energy investments that are being neglected in the region, instead of continuing to promote fossil gas.

Denis Žiško from the Aarhus Center in Bosnia and Herzegovina, said, ‘Promoting increased fossil gas use in the Western Balkans at this stage of the global climate emergency is irresponsible and counterproductive. Our low gas dependency is a plus, not a minus, as we move towards electrification of heating and transport. New infrastructure built now will end up either as stranded assets or as a fossil gas lock-in that will hinder renewables development in the region’. 

Nevena Smilevska of Eko-Svest in North Macedonia, said, ‘Irrespective of whether it is from Russia, Azerbaijan or elsewhere, increasing our import dependency is the last thing we need – a fact underlined by this winter’s gas price hikes and Russia’s invasion of Ukraine. As the EU finally realises that its own energy security cannot be based on fossil gas imports, so too must the Commission urgently stop promoting this dead end in the Western Balkans’. 

Nataša Kovačević of CEE Bankwatch Network, said, ‘Tackling electricity distribution losses, increasing the use of heat pumps and rooftop solar, innovative heat storage technologies and deep renovation of residential buildings need much more high-level attention from the European Commission to make up for the years lost promoting fossil gas’.

Contacts

Pippa Gallop, Southeast Europe Energy Advisor, CEE Bankwatch Network

pippa.gallop@bankwatch.org

+385 99 755 9787

Natasa Kovacevic, Campaigner for Decarbonisation of District Heating in Western Balkans 

natasa.kovacevic@bankwatch.org 

+382 67 030 033

Notes for editors

  1. The letter can be found here. 
  2. Serbia uses fossil gas for district heating, but use for power and individual households is relatively low. North Macedonia has increased its fossil gas consumption for power and heat in recent years. In Bosnia and Herzegovina, only four towns and cities are connected to the gas network, while Kosovo, Montenegro and Albania hardly use gas at all and do not have functional distribution networks. The Trans-Adriatic Pipeline crosses Albania but so far provides no gas to the country. 
  3. Sofia Declaration on the Green Agenda for the Western Balkans, 10 November 2020. The Declaration includes a pledge to adopt the EU Climate Law, which makes climate neutrality by 2050 a legal obligation. 
  4. E.g. The European Commission’s 2020 Economic and Investment Plan for the Western Balkans overtly promotes gas. It claims – without providing any evidence – that new gas pipelines could later be used for renewable gas.

In February 2022 alone: 

5. Lukoil, Lukoil completes the deal on acquiring interest in Shah-Deniz project, 18 February 2022.

Statement of solidarity with Ukraine

The strength of our network is our people.

Right now, a number of colleagues in Ukraine are at risk, including our member groups Ecoaction, the National Ecological Centre of Ukraine and the frontline communities that we support.

Our concern first and foremost is for their safety and security in the dangerous times ahead.

We are doing everything in our power to ensure the well-being of them and their families.

Nearly three decades of experience in the region demonstrate the resilience of our team and collaborators.

In that time, we have seen that no good has come from the violence of war.

We remain in solidarity and offer strength to the Bankwatch family and people of Ukraine in these precarious moments.

We welcome the European Bank for Reconstruction and Development’s action to suspend financing for Russia and Belarus, and we demand that all international financial institutions immediately suspend Russia’s membership, divest from all Russian and Belorussian companies and suspend all operations in Russia and Belarus.

Progress with EU recovery fund hampered by fossil fuels investments and threats to nature

The report looks at ten plans submitted by Czechia, Estonia, Hungary [1], Italy, Latvia, Portugal, Romania, Slovakia, Slovenia and Spain to the European Commission and approved by the Council to access funds from the facility.  

The report is available here. 

The facility is designed to help Member States recover from the pandemic and to fund a green recovery, requiring that at least 37 per cent of a country’s investments address the climate emergency. It also requires all reforms and investments included in national recovery plans not to harm environmental goals [2]. 

However, several countries have prioritised measures such as investments in fossil gas boilers over renewable energy sources. For example, Italy, Czechia and Slovakia all plan to fund fossil gas boilers as part of broader measures for building renovation and heating, running the risk of extensive lock-in in gas infrastructure that contradicts EU climate objectives. In Romania, the recovery plan includes building a fossil gas distribution system in the Oltenia coal region, which was accepted simply because the pipeline will be used in part to transport hydrogen. 

Fossil fuels have cropped up in several plans in the form of financial support for hydrogen, which is worrying given that it is not always guaranteed that only renewables-based hydrogen will be used. While the development of renewables-based hydrogen is necessary for sectors that are difficult to electrify, a number of recovery plans dedicate important resources to hydrogen without maximising first the potential of renewable energy and energy efficiency investments.   

Other Member States have included investments that could severely harm Europe’s natural environment and hamper the bloc’s drive towards the aims of the Biodiversity Strategy 2030. In Latvia, for example, 29 irrigation projects are planned that would irrevocably alter local ecosystems, and Slovenia has proposed a hydropower plant suspected to be the Mokrice one on the Sava river, a Natura 2000 protected area. The Estonia’s recovery plan includes support for the main terminal in Tallinn of the Rail Baltic project, which itself is planned to be built through forests and wetlands of high conservation value, including Natura 2000 areas. 

At the same time, the report does find that in some key areas, Member States have committed to important reforms and investments for climate mitigation. For instance, changes to national legislation in Italy, Romania and Spain aim to expand renewable energy sources, and Portugal, Slovenia and Latvia include reforms for improving their public transportation systems.  

Isabelle Brachet, EU Fiscal Reform Policy Coordinator for CAN Europe, said, “We urge Member States and the European Commission to ensure a genuine green recovery throughout the implementation of the recovery plans and other EU funds. At the very minimum this requires increasing the share of climate positive investments while fully respecting the ‘do no significant harm’ principle. Indeed, it is critical to realise that the recovery plans’ investments earmarked for the green transition often pale in comparison to the green investment needs of Member States.”

Christophe Jost, Senior EU Policy Officer for CEE Bankwatch Network, said, “When people are involved in planning, the results speak for themselves: more acceptance and ownership of the plans and a greater chance that harmful and wasteful spending is avoided. The Commission and Member States must ensure proper public monitoring of the recovery spending as the funds start to flow.” 

Contacts 

Christophe Jost, Senior EU Policy Officer 
CEE Bankwatch Network
christophe.jost@bankwatch.org 

Nina Tramullas, (Interim) Head of Communications 
CAN Europe
nina.tramullas@caneurope.org 

Notes 

[1] The Hungarian recovery plan is pending approval by the Commission over rule of law concerns. 

[2] For more information on the ‘do no significant harm’ principle, see this briefing from the Green 10 group of environmental organisations. 

EU bank’s new environmental and social policy not fit for lofty development ambitions

On 2 February 2022, the EIB’s Board of Directors approved a new Environmental and Social Sustainability Framework, which lays out the bank’s social, environmental and climate standards and requirements for its clients.  

The revision comes as the bank just launched “EIB Global”, a branch of the EIB which will cover all its operations outside of Europe in a tentative bid to raise its profile in the world of development finance. 

Despite some improvements, the new standards fail to address many of the concerns raised by civil society organisations during the revision process. In a letter to the EIB Board [1] sent last week, 22 civil society groups urged the Directors representing EU Member States and the European Commission to include explicit procedures in the policy to prevent human rights violations in its projects, to end the Bank’s hands-off approach to projects financed via secretive financial intermediaries and to avoid double standards for biodiversity rules depending on whether a project is in the EU or not.   

Human rights violations still possible with EU money 

The new policy includes no significant improvement in human rights promotion and protection. Without a clear system of human rights due diligence and explicit requirements for the bank’s clients to conduct human rights impact assessments, the EIB is in danger of continuing to inadvertently fund human rights abuse.  

In Kenya, a road connecting Mombasa and Mariakani, which is co-financed by the EIB, resulted in more than 500 complaints related to rights violations against the individuals and communities living along the road [2]. Many people have been left without proper and timely compensation or the possibility to work, families were forcibly evicted overnight, and others faced intimidation.  

In Nepal, the construction of an electricity transmission grid funded by the EIB threatens to intrude on ancestral lands of indigenous communities, damaging their forests, community resources, livelihoods, health, and spiritual practices [3].  In April 2021, the EIB Complaint Mechanism concluded that the bank overlooked the project’s impact on Indigenous Peoples, despite the concerns raised by impacted communities. 

One third of the EIB’s lending disappears into a black hole 

A third of the EIB’s investments in 2020 – a total of EUR 22.6 billion – was carried out through financial intermediaries. Due to the secrecy of commercial banks, the public has little idea of what happens to this money, whether it is effectively used and whether it causes environmental and social damage.  

The EIB has introduced a long-awaited new standard on financial intermediaries. Yet the standard still perpetuates the bank’s hands-off approach to risky projects funded via unaccountable banks or funds. Even environmentally and socially risky projects will not be subject to public disclosure. The rules require financial intermediaries to comply with social and environmental standards, but the EIB fails to commit to systematically checking and ensuring compliance, leaving intermediaries to police themselves [4]. 

Biodiversity outside Europe threatened by double standards 

The new policy offers better protection for biodiversity in many ways, but applies double standards regarding protected areas and internationally recognised areas of biodiversity such as Emerald, Ramsar and UNESCO sites. In the EU and accession countries, an appropriate assessment in line with the EU Habitat Directive is required in order to decide whether a project can be implemented without damaging the area, while in the rest of the world no equivalent is prescribed. 

Anna Roggenbuck, policy officer with CEE Bankwatch Network, said, “The EIB’s self-proclaimed leadership in EU development finance has disappeared in a haze of understatements with the new policy. With no clear EIB role in safeguarding human rights and requirements for promoters to conduct human rights impact assessments, a complete lack of responsibility for its financial intermediary investments and double standards in assessing projects impacting biodiversity inside and outside of the EU, the EIB is not ready to become ‘EIB Global’.”  

Xavier Sol, Counter Balance Director, said: “The bank’s commitments on protecting and promoting human rights will be toothless if it refuses to back them up with concrete actions. By refusing to develop specific tools to check that the projects it finances do not harm local communities, the EIB has given the green light for human rights violations to be funded with EU public money for years to come.” 

For additional information please contact: 

Anna Roggenbuck
Policy Officer, CEE Bankwatch Network
+48 509970424
annar@bankwatch.org 

Xavier Sol
Director at Counter Balance
+32 473 223 893
xavier.sol@counter-balance.org 

Notes for editors: 

[1] https://bankwatch.org/wp-content/uploads/2022/01/Joint-CSOs-letter-to-the-EIB-Board-on-ESSF.pdf  

[2] Briefing on the Regional Mombasa Port Access Road project “Highway of Destruction” https://bankwatch.org/publication/highway-of-destruction-raises-questions-about-effective-and-safe-access-to-remedy-and-poor-human-rights-safeguards-at-the-eib 

[3] Accountability Counsel’s article “Nepal Indigenous communities vindicated in rare European human rights victory” https://accountabilitycounsel.org/2021/04/nepal-indigenous-communities-vindicated-in-rare-european-human-rights-victory/   

[4] In southeast Europe alone, the EIB has provided at least 27 intermediated loans for destructive small hydropower plants since 2010, though the names of many of the projects remain unknown. Just last week, a complaint was submitted to the EIB’s complaint mechanism on two hydropower plants on the Crni Rzav river in Serbia, which have damaged over 9 km of river in a protected area. Ten months after being informed of the issues, the EIB has still not responded to the evidence submitted by civil society organisations. For more examples see Bankwatch’s recent report on EIB hydropower financing in central and eastern Europe: https://bankwatch.org/publication/public-money-vs-pristine-rivers    

Major blow to Bosnia hydropower project as Germany’s KfW drops financing plans

A EUR 30 million loan agreement between KfW and public utility Elektroprivreda Bosne i Hercegovine (EPBIH) was signed in 2014 (1) for the 15.75 MW Janjići plant. The plant would entail a 16 m high dam and would flood a picturesque section of the river with a series of rapids upstream from Zenica.

The stretch is highly valued by local people and fishermen and is home to protected species such as otters and numerous fish species, including the endangered Danube Salmon or Huchen. The hydropower plant would represent the first major barrier that would stop fish migration all the way from the Danube, through the Sava and Bosna rivers up to Sarajevo.

Samir Lemeš from Eko Forum Zenica, said, ‘A year after filing a complaint to the bank, we welcome this decision. We would like to express our gratitude to our friends from other NGOs who helped us in this campaign. The next step is to erase the power plant from the spatial plan, and Eko Forum has already submitted an initiative to the Cantonal Ministry for Spatial Planning.’

Emina Veljović, from the Aarhus Center in BiH, said, ‘The river Bosna is the river after which our country is named. It has indescribable value for all of us. It was completely insane for an attempt to be made to destroy it by building the Janjići hydropower plant despite public opposition and contrary to domestic and international environmental laws. I feel deeply about every illegal attack on the environment in BiH, especially this one, because the river Bosna is part of my identity. I am very grateful that KfW decided to act responsibly.’

Ulrich Eichelmann, CEO of Riverwatch, said, ‘This is a very promising step by Germany´s KfW and wonderful news for the Bosna river and the people who live along it. However, we will remain vigilant to ensure that no other financier backs the project.’

Andrey Ralev, Biodiversity Campaigner at CEE Bankwatch Network, said, ‘The Janjići hydropower plant is clearly not in line with KfW’s standards, as the beautiful rapids and islands of the river Bosna were going to be flooded beneath a 3-km long reservoir. After this decision by KfW, the government must take steps towards the long-term protection of this and many other unique Bosnian rivers.’

 

Contacts

Andrey Ralev, Biodiversity Campaigner at CEE Bankwatch Network, andrey.ralev@bankwatch.org, +359884268552

Emina Veljović, Executive Director and Environmental Legal Expert at the Aarhus Center in BiH, koordinator@aarhus.ba, +38762103544

Samir Lemeš, activist at Eko Forum Zenica, samir@ekoforumzenica.ba, +38761805565

Ulrich Eichelmann, CEO Riverwatch, ulrich.eichelmann@riverwatch.eu, + 436766621512

 

Notes for editors

  1. Source: https://www.epbih.ba/upload/documents/GI_engleski_2014%201.pdf.

The project information on KfW’s website is available at: https://www.kfw-entwicklungsbank.de/ipfz/Projektdatenbank/Programm-zur-Entwicklung-der-Wasserkraft-I-27390.htm

This publication was produced in collaboration with EuroNatur and RiverWatch in the frame of the Save the Blue Heart of Europe campaign, with financial support from MAVA Foundation.