The EIB is exceptional among the major public international financial institutions in that it does not commit itself to a binding set of operational environmental and social policies.

Environmental and social standards in international lending have been set up in order to ensure that investments do not harm the environment or local communities. Although they can often be functionally inadequate and poorly implemented, they do at least provide some framework for analysing project impacts and mitigation measures. The EIB, despite its frequent but tellingly abstract commitments to the ‘highest possible standards’, lacks these concrete commitments or benchmarks. Nor does it possess a culture of public disclosure of substantive information relating to projects.

Within the European Union the EIB is guided by the EU’s environmental policies as the bank states in its “Environmental Statement”. How it applies and adheres to those policies is, however, often unclear.

Outside the EU the situation is considerably worse. A clear policy framework is lacking: the EIB endeavours to apply EU environmental policies but is not bound to follow them. Thus, when compared to other lenders, the scope, depth and clarity of the EIB’s environmental and social policies leave a lot to be desired. The EIB follows a flexible, guidance-based approach without clear performance levels or auditable compliance criteria. Combined with the lack of an accountability mechanism for affected people, and a shortage of capacity for monitoring and pro-poor impact assessment, the EIB is not set up to meet the development needs it is obliged to serve under its extra-EU mandates.

In August 2007 the EIB released its Environmental and Social Practices Handbook, which is a guidance document first of all for the bank’s staff. This document identifies why and how the EIB conducts environmental and social assessments of projects. While the disclosure of this mainly internal document is a very welcome step, it clearly shows some eye-catching shortcomings. For example, outside Europe EIB project assessment only “benchmarks” against EU laws and standards. Local conditions like affordability or local environmental conditions influence the application of EU standards. Thus standards are basically followed “where appropriate”.

To add further to the confusion, the EIB operates with different regional mandates. In Africa, Caribbean and Pacific countries, the EIB uses a framework - known as the “Economic and Social Impact Assessment Framework” - to assess the development impacts of projects. This framework has been used since September 2007 for projects in all countries outside the EU to assess the value added that is required for EIB involvement in projects. However, like the internal handbook, this framework is discretionary and too flexible to meet the best practice standards of other international financial institutions.

Despite some improvements in the past year, regrettably the EIB still lacks explicit performance standards based on international or EU law and a clear, consistent and effective framework for managing environmental issues.