EBRD should change mandate to prioritise people and the environment, says Bankwatch

May 20, 2011

Astana, Kazakhstan – After twenty years of promoting market economies in central and eastern Europe, the European Bank for Reconstruction and Development needs to move swiftly and genuinely towards prioritising social justice and transition to energy efficient, renewable energy based economies if it wants to bring real benefits to the region, says a new policy paper from CEE Bankwatch Network issued on the occasion of the EBRD annual meeting in Astana May 20 (1).

“One of the central elements of the EBRD’s mandate has been market promotion, interpreted by the bank to mean privatisation and liberalisation as ends in themselves,” explains Pippa Gallop, Bankwatch research co-ordinator. “The bank has acted on the assumption that promoting market economies is sufficient to eventually bring prosperity and well-being to entire societies. But this axiom has taken a severe battering over the years, particularly during the recent financial crisis. The whole direction of transition in the post-socialist context is now under question, but what is certain is that the EBRD cannot postpone any longer making social and environmental concerns as important as its economic agenda.”

The analysis shows that many projects promoted by the EBRD, while scoring highly on promoting the private sector, create problems for local people or the environment. Examples include the Baku-Tblisi-Ceyhan pipeline and coal investments in Mongolia. In other cases analysed by Bankwatch, EBRD investments in private equity firms, supermarkets or real estate, while not directly worsening the local situation on people or environment, are questionable as effective uses of public development finance. Bankwatch calls on the EBRD to provide clear measurements of the real, on-the-ground impacts from its investments, rather than merely justifying projects with its market promotion mantra.

In spite of commendable progress made by the EBRD in energy efficiency investments in recent years, such laudable efforts are likely to be undermined by other EBRD energy investments, argues Bankwatch. The bank’s lending for renewables pales in comparison with its lending for fossil fuel-based projects, and in fact EBRD lending for fossil fuel-based projects increased significantly between 2006 and 2009.

“The post-socialist region is one of the most carbon intensive in the world, so it is crucial that the bank prioritises investments that help reduce carbon intensity and increase the share of renewable energy in our economies,” argues Fidanka Bacheva-McGrath, Bankwatch EBRD coordinator. “Rather than planning to rely on carbon markets in our region as a solution for this problem, while continuing to put money in large oil and gas infrastructure, the EBRD should phase out fossil fuel lending and radically increase its investments in energy efficiency and renewables.”

“After two decades of activity in the post-socialist region and after expressing a strong interest for expanding its mandate to North African countries, there is no better time for the EBRD to reevaluate its mission,” added Pippa Gallop. “If the bank wants to continue its mandate in central and eastern Europe, it should only do so if it promotes, through all its actions, a transition to environmentally sustainable, socially just, renewable energy-based societies rather than just market economies.”