European municipalities, ranging from small towns to large metropolitan areas, are increasingly seeking innovative financing solutions to address infrastructure needs, environmental sustainability, and social welfare programs.
They are trying to leverage diverse investment mechanisms such as public-private partnerships, green bonds, and European Union funds to do so. The European Investment Bank (EIB) fosters financial programmes and funds available to cities. Over the past five years, municipalities have received over €90 billion from the EIB.
Eurocities talked with Bianca Faragau, Institutional Policy Officer at the Permanent Representation of the European Investment Bank (EIB), with responsibility for urban development policy, cohesion policy and just transition policy, about the role that the EIB can play in supporting European municipalities, especially in achieving climate goals.
The EIB invests in many fields. For example, water and sanitation, agriculture and fishing ways, health, transportation, education, and urban development and planning. Cities contribute to most of these areas. What financing opportunities are available to cities?
Indeed, cities have been key partners of the EIB since its foundation in 1958. There are different ways for cities to receive EIB support. One is investment loans, for example for a major investment project like a metro line. But I want to highlight other ways, like Urban Framework Loans. Framework Loans support cities’ investment programmes for 3 to 5 years where cities can have smaller or medium-sized projects in different investment sectors supported.
For example, in an investment programme of a city, they can have education projects, housing, energy efficiency, transport, water and many other sectors bundled up in a framework loan that gives flexibility to cities to add more projects as they become mature. And then there is, of course, the very important part of attracting private financing to support the needs of cities. So we support cities with public-private partnerships as well as with financial instruments to leverage some public funds to attract private financing for the same goals.
One of the six priority areas of the EIB is sustainable cities and regions. You mentioned that the bank supports projects to make urban life more sustainable. For example, social and affordable housing, but also urban development or environmentally friendly transportation. But where is the mismatch between cities’ needs and the support currently available to them?
There are two main needs. First, the administrative capacity – the skills to develop these complex projects for the twin transition. Of course, cities are facing a gap there, a mismatch. They need more administrative capacity. And second – the funding to support these projects and the access to financing.
So how do we support these two needs? We have put in place many advisory services relevant to cities, for example, to support climate adaptation, which is very important in cities, as well as the circular economy transition, and energy efficiency. So there are many types of advisory support. Also under the Investor Advisory Hub, cities can get support. So we are here to help boost the administrative capacity or to prepare the projects. Once the projects are there and they’re mature enough to get funding from the EU or financing from the banks, then we help cities to step into the funding and financing available.
Now, arguably, we have a €500 billion gap to achieve the climate goals every year, so we need 500 billion. We will not be able to achieve these goals only with public funding, whether it comes from the EU, national or local level. We will need to get private-sector financing on board. This can be done through investment platforms and fund-of-funds. We support a major financial instrument that supports 300 municipalities [in Portugal], starting with €100 million bundled together from seven operational programmes of structural funds.
The EIB Climate Roadmap states that cities are home to half the world’s population, consume two thirds of the world’s energy and 70% of its natural resources, and account for over 70% of global CO2 emissions. Indeed, every country, every region and every city must make significant changes over the next decade. So how does the EIB value cities’ commitment to these climate goals? And how crucial are municipalities for contributing to a greener and fairer Europe?
Yes, thanks for bringing up the climate topic because climate action is a key priority for the EIB and has been recently reaffirmed as one of our strategic priorities for the future by President Nadia Calvino. We achieved €49 billion in one year for green financing and that accounts for more than 55% of what the EIB financed in the whole of Europe and also globally. We are already over the 50% target and we are also on track to deliver €1 trillion of investment for climate action by 2030.
36% – more than a third of all the green finance last year – went to cities to support sustainable urban transport, and energy efficiency in various areas of cities. So, cities are a key partner to implement the Green Deal agenda to achieve the objectives and the EIB is there to support cities. We will work together also in the future.
Thank you very much.
Thank you for the opportunity to discuss a bit about the EIB.
