The EU’s lending arm, the European Investment Bank (EIB), announced on Wednesday (8 May) that it was changing its long-standing policy of not investing in military products by lifting restrictions on dual-use investments.
In a statement, the EIB’s board of directors said it had approved “the updated definition of dual-use goods and infrastructure eligible for financing by the EIB Group”, removing the minimum threshold of expected revenues from civilian applications or the share of civilian users in a defence-related investment.
Previously, the dual-use lending criteria limited the Bank’s investment in defence-related projects to civilian applications that denied their military use.
EU finance ministers, who act as the EIB’s directors, agreed to “facilitate financing” by paving the way for “private intermediary financing” for small and medium-sized enterprises (SMEs) active in security and defence.
They also added projects and infrastructure used by the military or police that also serve civilian needs to the bank’s list of “appropriate targeted investments”.
The move will expand the bank’s ability to invest in products and technologies used only by the armed forces, including cybersecurity, radar, satellite technology, infrastructure and equipment, as long as they “do not pose a lethal risk”.
“The changes are expected to accelerate investment and improve access to EIB Group financing for the European security and defence sector,” the EIB said in a statement.
The EIB had already committed EUR 6 billion under the Strategic European Security Initiative (SESI) and the European Investment Fund’s (EIF) Defence Capital Facility.
While the European defence industry and defence ministries have long been asking the EIB to increase its contribution to the EU’s growing defence effort, this request was only put on the table of finance ministers in February, and EIB President Nadia Calviño launched a two-month consultation process with the European Commission.
According to several sources with knowledge of the negotiations, one of the key conditions for the EIB to move beyond its traditional lending mandate is its ability to maintain its environmental, social and governance (ESG) ratings as well as its top credit rating.
In particular, the triple-A core credit rating allows the lender to obtain very favourable borrowing conditions on the market. As Euractiv has previously reported, this is a key priority for the bank’s shareholders (i.e. the bloc’s 27 member states), which neither the bank nor national governments want to jeopardise.
Last week, US credit rating giant Moody’s became the first rating agency to confirm that not only the EIB’s ESG score but also its overall credit rating would be put under review if significant changes were made to the dual-use policy.
