The European Bank for Reconstruction and Development (EBRD) may not offer mortgages or savings accounts to the public, but its multibillion-dollar investments are quietly shaping 40 economies across a significant region of the world. With a particular focus on financing the green transition, the EBRD’s Chief Economist, Beata Javorcik, regards the Bank as “the ultimate impact investor.”
However, this multilateral development bank often treads a fine line, promoting market-driven economies and democratic values in regions that are not always fully democratic, while also generating profits for its shareholders.
A Key Regional Player
Speaking with To Vima International Edition at the recent Athens Democracy Forum, Javorcik explained that “over 70 countries are our shareholders, including the European Union and the European Investment Bank (EIB).” The EBRD is recognized as one of the top five regional development banks, boasting an estimated $71 billion in assets. Although headquartered in London, the EBRD is frequently mistaken for the EIB, despite their significantly different missions.
“The EIB is a bank of the European Union, primarily engaging in sovereign projects,” Javorcik clarified. “We at the EBRD, however, are focused on private-sector investments—that’s our mission.”
Founded in 1991, the EBRD was initially tasked with reshaping the economies of post-Cold War Central and Eastern Europe by investing in the private sector. Now, over 30 years later, the EBRD has invested more than €200 billion in over 7,000 projects across three continents—from the southern Mediterranean to Central Europe, and from Eastern Europe to Central Asia.
“Three quarters of our investments are directed towards the private sector. We consider ourselves a green bank, with 50% of our investments aimed at promoting the green transition,” Javorcik elaborated.
Criteria for Investment
The EBRD has three main criteria when determining where and how to invest:
Soundness of Investment: The EBRD examines the viability of investments to ensure loans will be repaid.
Additionality: The Bank assesses whether the project would have occurred without their involvement, aiming to engage in initiatives that would not proceed without EBRD support.
Transition Impact: The EBRD seeks to ensure that the benefits of their projects extend beyond direct clients, aiming for broader economic advantages.
The Challenge of Transitioning Economies
Javorcik highlights that the EBRD aspires for the economies they invest in to be competitive, resilient, integrated, well-governed, inclusive, and green. However, as the bank ventures further from Europe geographically, the decision-making process is fraught with additional risks and considerations.
Before the onset of the war, the EBRD was the largest institutional investor in Ukraine, having invested over €4.6 billion in the country. Even after the Russian invasion, the EBRD continues to invest, with an additional €1 billion committed this year. Nevertheless, the conflict led to a reported €1.1 billion loss in 2022, and the EBRD suspended all new projects in Russia, having already ceased investments there after the 2014 annexation of Crimea.
The Bank’s actions in Belarus further underscore the delicate balancing act it must perform. Following the blatant rigging of the country’s presidential elections, the EBRD halted its support for Belarusian public-sector projects and subsequently ended all private-sector projects as well, demonstrating how political situations directly impact its investment portfolio.
Transitioning economies presents significant challenges, and decision-making in this context is rarely clear-cut. As Javorcik notes, “It is up to our boards, our board of directors and board of governors, and our shareholding countries to make the decisions.”
In 2023, despite substantial investments in Ukraine aimed at sustaining essential services, the EBRD reported a net profit of €2.1 billion.
Greece’s Opportunities for Growth
Greece is no stranger to EBRD support, with the bank involved in 114 completed and ongoing projects in the country, totaling 7.83 billion euros. The active portfolio stands at 2.23 billion euros. Working closely with the Greek Ministry of Finance, the EBRD extends loans to bolster private-sector initiatives alongside the EU’s Recovery and Resilience Facility (RRF). These loans can reach up to half a billion euros, contingent on the company contributing 20% of the funds.
Beneficiaries of EBRD support include companies like Avis, which required funding to electrify its fleet in Greece, and Hatzopoulos, focused on sustainable packaging solutions.
Looking ahead, Javorcik emphasizes that Greece presents a moment of opportunity, having invested half a billion euros last year. “Greece is still feeling the legacy of the debt crisis,” she notes, pointing out that this challenge has been exacerbated by global inflation. However, “Greece is experiencing faster growth than the rest of the Eurozone, has a positive economic trajectory, and tourism appears to be heading for another record year.”
To capitalize on this potential, Greece must pursue additional reforms and, like other European nations, enhance its competitiveness. When discussing necessary improvements, Javorcik remarked, “There’s a lot that needs to be done,” including “enhancing the workings of the judiciary, improving tax compliance, making taxes predictable, reducing red tape, strengthening institutions, curbing corruption, and upgrading infrastructure.”
She advised that the focus should be on enhancing the overall business climate rather than targeting specific sectors.
If Javorcik were to pinpoint sectors with strategic growth potential for Greece, she would prioritize the expansion of luxury and specialized tourism, shipping, and renewable energy production. Additionally, given the country’s relatively low labor costs, there is potential for Greece to emerge as a significant player in the export of services, especially with improvements in broadband infrastructure.
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