EBRD gears up to face future challenges with key 2015 decisions

By Anthony Williams
@ebrdtony

EBRD's key decisions in 2015

EBRD’s three overriding priorities closely aligned with Sustainable Development Goals

The European Bank for Reconstruction and Development continued to invest strongly in 2015 and strengthened its support for its regions with a series of landmark decisions that  prepare the Bank and the countries where it works for the challenges of the future.

In a crucial year for the global development agenda, the  EBRD unveiled a strategy for the EBRD regions for the coming years, guided by three overriding priorities that are closely aligned with new international development goals adopted in September 2015.

The strategy was agreed by shareholders at the EBRD’s May Annual Meeting in Tbilisi and combines a continued high level of investment with increased support for policy reforms aimed at improving the climate for investments.

The EBRD will focus on strengthening transition resilience by supporting policies that improve the investment climate and achieve greater social cohesion and inclusion.

The strategy also aims to promote integration by supporting investments that strengthen economic, financial and infrastructure links and to address global and regional challenges, such as food security and climate change.

Combatting climate change is one of the 17 new goals in the global 2030 Development Agenda and a major priority for the EBRD.

Before leaders met in Paris in December to seal a new global climate accord, EBRD shareholders approved its Green Economy Transition approach which calls for an increase in climate financing to 40 per cent of total annual investments from 2020.

The Bank is planning to double the pace of its climate investment of the next five years, providing finance of €18 billion in that period and mobilising a further €60 billion from other sources.  

The EBRD maintained a very high level of investments in 2015, even though this was the first full year it had not brought new financing to Russia – previously the single largest recipient of annual funding – following shareholder guidance in July 2014. The EBRD invested €8.9 billion for the whole of 2014.

For 2015, Turkey is again set to receive the largest single amount, with more than €1.7 billion. Investment in the southern and eastern Mediterranean (SEMED) region has topped €1 billion so far this year.

The EBRD launched its first investment in Greece, which has become a temporary country of operations until 2020. The Bank agreed to support the recapitalisation of the four leading Greek banks with a total financing amount of €250 million.

2015 was also an important year for investments in Ukraine, which saw a US$ 300 million loan to Naftogaz to finance winter gas purchases. The loan is tied to corporate governance reforms at the group. The Bank also took a 30 per cent stake in Ukraine’s Raiffeisen Bank Aval, demonstrating strong support for the country’s financial sector.

The EBRD has supported the reforms already carried out in Ukraine so far and called upon the authorities in the country to continue down this path.

Part of that reform process has been the establishment of Ukraine’s Business Ombudsman who has already received over 500 complaints since the office started operations earlier this year as part of the drive to improve the investment climate.

Elsewhere, the EBRD’s Investment Climate and Governance Initiative (ICGI)  made siginficant progress in 2015 in the implementation of country programmes in Albania, Moldova and Ukraine and signed a Memorandum of Understanding with the Government of Serbia for an IGCI programme in that country.

The Initiative also placed renewed emphasis on the EBRD’s backing for donor-supported Investment  Councils in Albania, Armenia, Georgia, the Kyrgyz Republic, Moldova and Tajikistan to enhance their effectiveness and strengthen their impact on investment climate reform.

With a global focus on climate change, the EBRD also rolled out a series of pioneering projects to support the development of sustainable energy projects in its regions.

A $250 million renewable energy framework was announced for the SEMED region, with the facility’s first project in Morocco providing electricity from the private Khalladi wind farm direct to industrial consumers.

The EBRD is also providing funding for the first commercial-scale solar park and first privately-owned renewable energy generator in Kazakhstan.

Bolstering climate resilience was a key focus in Tajikistan, one the EBRD’s countries that is most vulnerable to the effects of climate change and where the Bank provided a local currency facility to help small firms deal with the impact of global warming.

Towards the close of the year, the EBRD announced its largest-ever syndicated loan, a US$ 1.221 billion credit to Oyu Tolgoi LLC to develop a copper and gold deposit in the South Gobi region of Mongolia.

Also in December, the Bank opened up its doors to new shareholders. The Board of Governors approved plans for China to become a member, which should make it easier for Chinese companies to cooperate with the Bank on projects in the EBRD’s regions.

The Governors also agreed on Lebanon becoming a shareholder with a view to becoming a recipient of EBRD financing at a later stage. This step would extend the number of countries receiving financing in SEMED, which up to now includes Egypt, Jordan, Morocco and Tunisia.

In the SEMED region, the EBRD put an extra focus on addressing the impact of the refugee crisis, with a loan in Jordan to construct a new wastewater pipeline to help alleviate the strains from the recent sharp increase in usage.

2015 also saw the announcement of the EBRD’s first fully fledged Gender Strategy that promotes equal opportunities for women and men across all of the Bank’s activities in both public and private sectors.