EIB Vice-President Andrew McDowell’s speech at the webinar “The EIB Group’s support for agriculture and the bioeconomy: tackling Covid-19, climate change and more”
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Ladies and gentlemen, dear participants
I am very pleased to welcome you to our online event, a new format that we have had to embrace in the context of COVID-19. I am also especially pleased to see the large number of participants registered from our diverse and growing community involved in supporting the agriculture and bioeconomy sector. Thanks to the bioeconomy sector teams at the European Investment Fund (EIF) and European Investment Bank (EIB) for putting this session together.
Before I share with you some highlights of our activity, I would also like to thank Kostas Skrekas, Greece’s deputy minister of rural development and food, for taking time to participate in this webinar. Only five months ago – which seems like a century – we shared a breakfast discussion in Athens on EIB support to Greek agricultural and the bioeconomy sector. We discussed our agricultural loans and our current work for better water management in Greek agriculture. I am very pleased that Deputy Minister Skrekas will share his perspective of our long-term partnership in this sector.
The agriculture and bioeconomy is central to the EIB’s main priorities, which include climate and environmental protection, supporting small and medium-sized business, and social and economic integration. Indeed, over the recent years we have made considerable effort to refine the financial instruments we offer to enhance our impact. During the last five years (2015-2019), EIB funding across the sector reached €33 billion (inside and outside of the European Union). Agricultural activity increased from 6% of total EIB lending in 2013 to stabilise around 9-10% on average over the last years. That level is significantly higher than the sector’s weight of about 4% of GDP in the European Union, but it is in line with the sector’s contribution to overall employment in the European Union, at about 8%. Around 80% of our lending to the sector supports farmers and small businesses along the bioeconomy value chains.
Our lending as well as the advisory services we offer have strengthened thanks to a variety of tailor-made products put in place that specifically address the sector’s needs. Some of these products, implemented through our partner banks, include lending targets for young farmers, an acknowledgement of the need to support a generational changeover in agriculture. Other initiatives include loans to companies developing seeds to support new plant varieties. New varieties help, among other things, to make plants more resistant to stresses caused by climate change, improving productivity while reducing agriculture’s environmental footprint. R&D for new seed varieties is key to achieving the goals of the EU Green Deal.
Other EIB projects promote innovation and the circular economy. We have, for example, helped set up the European Circular Bioeconomy Fund and the Land Degradation Neutrality Fund. The bioeconomy is crucial to finding alternatives to fossil fuels, helping meet Europe’s climate goals. Along the same lines, the Land Degradation Neutrality Fund provides long-term finance and technical assistance for projects that rehabilitate degraded land and promote sustainable land use in Asia, Latin America and Africa. Restoring soil creates the carbon sinks we need to offset our carbon emissions.
The introduction of the European Fund for Strategic Investments (EFSI), known as the Juncker Plan, has been a game changer for us. EFSI has opened doors to new smaller beneficiaries that we previously couldn’t reach. It has allowed us to provide more tailored loans directly to private sector companies and cooperatives, such as Mlekpol, one of Poland’s large dairy cooperatives, to help modernise production facilities, or Agria Group Holding in Bulgaria, to finance the construction of a new storage and distribution facility close to the Varna port.
These investments were possible thanks to a €400 million programme loan facility for agriculture and the bioeconomy backed by EFSI, which we set up in 2018. The funding available under the loan facility was almost entirely allocated within six months. In light of the success, a second programme loan of €700 million, also backed by EFSI, was introduced. From 2021, EFSI will be replaced by InvestEU. Building on the success of EFSI, InvestEU will mobilise public and private investment using an EU budget guarantee. We are looking forward to putting InvestEU to work in the agriculture sector as well.
The coronavirus pandemic has upended not only our daily lives but also how the EIB operates as an EU institution. The pandemic has presented extraordinary challenges in our ability to respond and adapt. We have had to reprioritize our efforts, change well-established financial approaches and develop new initiatives.
For example, the agriculture and bioeconomy programme loan I just mentioned normally focuses on investment. To adapt to the new circumstances, we have temporarily broadened the eligibility criteria to include finance for working capital – addressing the liquidity needs of businesses impacted by the crisis. Our COVID-19 response also includes a Pan-European Guarantee Fund that will enable the EIB Group to scale up its support for mostly small and medium-sized European firms, including those in the agrifood sector, providing up to €200 billion of additional financing.
While the coronavirus has shaken our societies, we should not forget about the existential threat that climate change presents to our world.
The world’s population is set to explode. Feeding that population will require agricultural production to increase up to 70% by 2050. Unchecked, climate change will push down crop yields, destroy ecosystems and lead to desertification in many parts of the world, including in EU members.
Even if we manage to keep global temperature rises to 1.5o Celsius, specific measures will be needed to deal with climate change and to avoid agriculture’s encroachment on our natural resources. We, as the EU climate bank, have an important role in driving the agenda of the European Union’s green recovery and accelerating efforts to combat climate change. At the same time, we need to help guarantee a supply of healthy and sustainable food, and biomaterials. Support for agricultural projects that promote climate resilience and climate mitigation is therefore essential. In that aim, we have been increasing our direct lending for bioeconomy projects with a climate focus. In 2019, half of EIB direct lending to the bioeconomy sector qualified as climate action.
Connecting the themes of today’s event, we are dedicated to providing innovative financial solutions and technical support, in partnership with public and private entities, to help countries deal with external shocks, whether a public health crisis or environmental disaster.
Thank you for your attention and enjoy the rest of the discussions.