EBRD: New president – new direction for the bank?

With the European Bank for Reconstruction and Development (EBRD) in the process of selecting a new president [1] as the term of current office holder Thomas Mirow approaches its end, CEE Bankwatch Network, an NGO that has been monitoring the EBRD for over a decade, makes a call on the bank’s shareholders and new president to reassess some of its past – faulty – approaches:

1. Despite its name, the EBRD to date has not created means to measure the development impacts of its operations even though sustainable development is core to its mandate and the bank is supposed to contribute to poverty alleviation in its countries of operation classed as developing countries; Bankwatch calls on the EBRD to:
• set measurable human development and environmental goals in country and sectoral strategies, not only market-oriented ones
• ensure that its transition indicators measure social (including employment), development and environmental outcomes, not just privatisation and liberalisation of the economies
• report annually to the EU how it is contributing to the EU's goals for external action, particularly on poverty eradication
2. Via its loans, the EBRD promotes unsustainable economic models, for instance, economies over reliant on natural resource exports in Central Asia or growth driven by unsustainable consumer credits and foreign currency borrowing in central and eastern Europe; Bankwatch calls on the EBRD to:
• review its portfolio to avoid promoting dependence on the export of commodities in transition countries and instead foster the development of higher value-added economic activities
• ensure that its loans to small and medium enterprises done via financial intermediaries actually reach the intended beneficiaries; avoid financing of financial intermediaries (including private equity funds) that make use of tax havens; generally improve disclosure on its financial intermediary (FI) operations
• tighten up its due diligence and public disclosure requirements on the value for money and budget burdens incurred through public-private partnership projects (a model that the bank heavily promotes)
3. While claiming to promote the transition to low-carbon economy in its countries of operation and making some commendable efforts in this direction, the EBRD continues to lend to fossil fuel projects; Bankwatch calls on the EBRD to:
• develop a climate policy that will set clear and ambitious CO2 reduction goals to guide the bank's investments across all sectors
• phase out loans for fossil fuels – especially coal - and aviation and increase energy efficiency and sustainable new renewables investments
• adopt a robust set of sustainability criteria for renewable energy to ensure that promotion of renewables does not conflict with the EU's other policy commitments such as halting biodiversity loss by 2020
• introduce sustainability indicators as part of the bank's transition indicators system
4. The EBRD currently cooperates with undemocratic regimes in countries such as Kazakhstan, Azerbaijan and Russia while also expanding its operations into North Africa and the Middle East, a region on which it has virtually no expertise; Bankwatch calls on the bank to:
• refrain from lending to Egypt, Morocco or Jordan until these countries have legitimate, democratically elected governments that respect human rights
• conduct in-depth consultations with a wide variety of local stakeholders in North African and Middle Eastern countries planned for expansion about whether and/or how they want the EBRD
• regularly revise its policies in relation to existing countries of operation such as Kazakhstan, Azerbaijan and Russia where democratic and pluralist principles are clearly not implemented

See the letter Bankwatch sent today to the bank’s Board of Governors here (pdf)

Notes

[1] For the first time since the EBRD was established 21 years ago, the new president of the bank will be selected following a “contest” between several candidates that have expressed an interest in the position: current president Thomas Mirow, Suma Chakrabarti (nominated by the UK government), Philippe de Fontaine Vive Curtaz (currently a vice-president of the European Investment Bank), Jan Bielecki (nominated by Poland), and Bozidar Djelic (Serbia). The new president is expected to be chosen at the bank's annual meeting, which will take place May 18-19 in London.

For more information, contact:

Fidanka Bacheva-McGrath
Bankwatch EBRD coordinator
fidankab at bankwatch.org

Pippa Gallop
Bankwatch research coordinator
pippa.gallop at bankwatch.org