In recent years, not least in the post-crisis economic environment, the European Investment Bank (EIB) has become an increasingly important source of funding for urban projects. The EIB is the European Union’s (EU) long-term lending institution, established in 1958 under the Treaty of Rome, which supports the EU’s objectives by lending money to both the public and private sectors for projects of European interest. The EIB is therefore a policy-driven but not-for-profit bank that, in general, makes long-term loans for capital investment projects (mainly fixed assets), although it’s portfolio of intervention possibilities is becoming increasingly diversified. As an international financial institution (IFI), the Bank is not only active in the EU but also in more than 140 other countries worldwide with which the EU has cooperation agreements.
As far as the urban sector is concerned, EU activity has evolved over time from early support for a series of relatively modest ad hoc initiatives to far more substantive intervention and associated financial support, with the urban agenda now formally embraced within the policy mainstream. Against this backdrop, and in pursuit of the headline policy goal of developing more sustainable cities and communities, the Union’s urban policy is informed by both the economic imperatives of the Lisbon Agenda and the need for a more integrated approach to urban planning and development as emphasised in the Leipzig Charter. As the lending arm of the EU, the EIB has responded accordingly, formally supporting the EU’s sustainability objectives and developing a range of financial products to meet the resulting funding challenge. In doing so, the Bank has developed what might be termed an implicit action plan for cities, comprising three elements:
- extending its traditional lending operations in the urban sector by increasing its lending volume and customising its lending products to more appropriately meet the needs of cities and municipalities;
- extending the scope of its structured finance facility (SFF), where the Bank takes more risk than normal including possible equity investment, to include urban projects;
- promoting financial engineering and, in particular, supporting the EU in the promotion and implementation of innovative financial instruments such as JESSICA (Joint European Support for Sustainable Investment in City Areas).
A plethora of policy options and potential projects can be identified in pursuit of sustainability objectives and to avoid the obvious threat of fragmentation, Leipzig has highlighted the need for a more integrated approach to urban planning and development. The EIB has therefore explicitly embraced the need for more holistic evaluation of individual initiatives to ensure consistency between apparently disconnected projects and to exploit any obvious and positive synergies in development programmes. Within the urban sector, it is a requirement that almost all projects seeking Bank finance, by way of loans or equity, must form part of an integrated urban development plan for the localities in question. What this actually means in practice is open to interpretation, but there is now a clear requirement that any project seeking EIB support must be “planning led”.
In volume terms, approximately 10% of the Bank’s finance is now overtly “urban”, which amounts to quite a significant contribution given that its overall lending volume in 2011 was in excess on €60 billions.
Top image credit : Photobank gallery