Our essay series City, transformed has told the in-depth story of urban development in seven European cities. Now this final installment details the role of the European Investment Bank in the progress of our cities.
The European Investment Bank has been fundamental in promoting the expansion of European urban investment. Its key contribution has been to make long-term finance available for sound investment. As the EU bank, the European Investment Bank has responded to the investment imperatives of EU integration and shaped the financial systems that support it. “The EIB in the City” tells the story of how the Bank did the job.
Investment innovation key to EU bank urban development
The European Investment Bank raises substantial funds on capital markets, which it then lends on favourable terms to projects that further EU policy objectives. Of the European Investment Bank’s €50-70 billion of annual lending, more than 10% is allocated specifically to urban projects. Indirect investment in the urban sector exceeds 40% of its overall portfolio.
But the Bank has also been key to enhancing investment in other ways.
It has led the way in developing new funding tools, such as the framework loan, which quickly became the most important financial instrument in integrated urban development following its introduction in the 1990s. The framework loan is essentially a line of credit afforded to municipalities that supports the funding of eligible projects in each city’s capital programme.
The framework loan’s transformative power in terms of European urban development lies in its ability to:
- cover a portfolio of projects across multiple sectors
- authorise a city or region to manage the allocation and disbursement of funds
- blend national, regional and loan funding as a means of overcoming barriers related to project size.
The Bank has also been fundamental in developing new financial instruments and advisory techniques. Together with the European Commission, the Bank launched the new "Urban Investment Support" (URBIS) initiative in early 2018 to help cities plan and implement their investment strategies.
URBIS is effectively a dedicated city advisory service. It allows cities to benefit from an easy-to-access entry point and the full technical and financial advisory capacity of the European Investment Bank.