As part of the European External Investment Plan, the new European Fund for Sustainable Development (EFSD) wants to encourage €44 billion in private investments in fragile states by offering a combination of grants, loans and financial guarantees worth €3.3 billion to boost jobs, growth and stability, thus addressing the root causes of migration.

In recent talks on the operating rules of the EFSD, MEPs persuaded EU ministers on the following key points:

Focus on poverty, jobs, climate and small enterprises. EFSD will focus on fighting poverty by creating decent jobs and offering particular support to young people, women and small businesses. Financial support must comply with internationally agreed development standards.

Climate action. A minimum of 28% of investments will back climate action to help the implementation of the Paris Agreement.

Responsible businesses. Beneficiaries must respect human rights, ILO standards and international rules on responsible investment. Locals affected by projects need to have access to a complaints procedure.

Beneficiaries must respect human rights, ILO standards and international rules on responsible investment. Locals affected by projects need to have access to a complaints procedure. Tax transparency. Strict rules will ensure that businesses in jurisdictions which are not cooperating on tax and money-laundering issues will not benefit from resources.

Democratic control. Parliament will have an observer status on the EFSD Strategic Board and the EU Commission must inform Parliament before any important investment decisions are taken.

The new scheme was backed by 503 votes to 78 with 51 abstentions.

Quotes

“This new innovative instrument is a clear signal that the EU is indeed serious about sustainable growth and addressing the root causes of migration. By improving the business climate and attracting private investments where they are needed most, we can help to create better living conditions in our partner countries”, said co-rapporteur Eduard Kukan (EPP, SK).

“The EFSD will strengthen our fight against poverty and foster the sustainable development and resilience of our partner countries, especially the least developed. Thanks to the Parliament’s insistence, the new tool will also help implement the Paris Agreement and includes fundamental safeguard clauses on human and labour rights”, said Doru-Claudian Frunzulica (S&D, RO).

“By enhancing the development aspects of this regulation and including core EU values on human, labour and environmental rights, the Parliament made sure that we are one big step closer to improving the lives of people in Africa and in our neighbourhood“, said co-rapporteur Eider Rubial Gardiazabal (S&D, ES).

Next steps

The EFSD Regulation will enter into force once the Council formally approves it and after it is published in the Official Journal of the European Union.

Quick facts

EFSD resources are made available thanks to the mid-term review of the 2014-2020 EU long-term budget plans and to the European Development Fund (EDF) reserve. The new fund will be composed of two regional platforms: one for Africa and the other for the EU Neighbourhood (south and east). It will function as a “one stop shop”, offering access to existing EU blending facilities (when EU grants are combined with loans or equity from public and private financiers), coupled with a new, additional guarantee for public and private investors. The EFSD Guarantee is expected to have a cash provision of €750 million including €350 million from the EU budget and €400 million from the EDF. The EFSD will also combine resources from two existing blending facilities – €2.6 billion from the Neighbourhood Investment Facility and Africa Investment Facility.