EIB greenlights historic overhaul of dual-use policy, ramps up defence investment

The EU’s multi-billion lending arm announced on Wednesday (8 May) changes to its long-standing policy not to invest in military products, by waiving restrictions on dual-use investments.

The board of directors of the European Investment Bank (EIB) approved an “updated definition of dual-use goods and infrastructure eligible for EIB Group financing,” scrapping its minimum threshold for expected revenues from civilian applications or share of civilian users within any defence-related investment, they said in their statement.

Until now, its dual-use lending criteria restricted the bank’s investment into defence-related projects to those civilian applications that exceed their military use.

EU finance ministers, who serve as EIB’s directors, agreed to “facilitate financing” for small and medium-sized enterprises (SMEs) involved in security and defence, “by opening up dedicated intermediated financing.”

They also added “projects and infrastructure used by the military or police that also serve civilian needs,” to the the bank’s list of eligible target investments. 

The move would expand its ability to invest in products and technologies used only by the armed forces, including cybersecurity, radars, satellite technology, infrastructure, and equipment – to the extent they do not imply lethal risk.

“The changes are expected to speed up investment and improve access to EIB Group financing for the European security and defence sector,” stated the EIB. It already had financing of €6 billion under the Strategic European Security Initiative (SESI), and the European Investment Fund’s (EIF) Defence Equity Facility.

The decision follows multiple calls from EU leaders over the past two years, since Russia’s full-scale invasion of Ukraine, for the bank to explore ways to ramp up its lending to the bloc’s defence and security sectors.

While European defence industry and defence ministries had long called on the EIB to ramp up its contribution to the EU’s heightened defence efforts, it was only in February that the request was moved to the finance ministers’ table and the EIB’s chief Nadia Calviño opened a two-month consultation with the European Commission.

According to several sources familiar with the negotiations, one key pre-condition for any move by the EIB beyond its traditional lending remit would hinge on its ability to retain its top credit as well as Environmental, Social and Governance (ESG) ratings.

Especially its main Triple A credit score allows the lender to get very favourable borrowing terms on the market. This is a key priority for the bank’s shareholders—the bloc’s 27 member states—that neither the bank nor national governments would be willing to jeopardise, as Euractiv reported earlier.

Last week, US credit rating giant Moody’s was the first rating agency to confirm that the EIB’s overall credit rating – rather than just its ESG score – would be scrutinised in case of substantial changes to its dual-use policy. So far, only the bank’s ESG rating was questioned after Euractiv’s first report.

[Edited by Alexandra Brzozowski/Rajnish Singh]

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