European development banks launch €2bn programme to support Ukrainian refugees

EBRD rules out issuing social bonds to fund Ukraine crisis package

Five European development banks have launched a €2 billion programme to provide financial support for Ukrainian refugees in partnership with the European Investment Bank and European Association of Public National Promotional Banks and Financial Institutions.

German development bank KfW joins Poland’s Bank Gospodarstwa Krajowego, France’s Groupe Caisse des Dépôts, Italy’s Cassa Depositi e Prestiti and Spain’s Instituto de Crédito Oficial in the initiative, which aims to funnel at least €2 billion this year into projects to provide housing for refugees and support their integration into local communities, as well as financing education, healthcare and infrastructure needs.

The Pan-European Support Initiative for Ukraine will provide loans, grants, equity investment or guarantees to eligible projects, as well as look to develop new financing structures for infrastructure, municipalities and private enterprise.

The new financing comes as some development banks turn to labelled debt to raise funds for refugees. The Council of Europe Development Bank issued a €1 billion social inclusion bond at the start of April, which it said would be disbursed to member states to support the longer term needs of refugees and their host communities. Ninety percent of the issue was allocated to SRI investors, with Credit Agricole and French insurer AG2R La Mondiale among the investors.

The International Capital Markets Association issued a note underlining that the social and sustainability bond principles can be used for funding “fragile and conflict states”, including directly financing emergency relief as well as supporting refugee populations.

However, Isabelle Laurent, head of funding at the European Bank for Reconstruction and Development, said the bank had no plans to issue specifically labelled debt to fund its response to Ukrainian refugees. She noted that the projects underlying EBRD’s social bonds are focused on ambitious long-term impacts, whereas the bank’s crises response packages seek to focus more on offering emergency liquidity support. Investors expect social bond reporting to demonstrate that the funding is creating sustainable impact that goes beyond “business as usual”.

Laurent added that, in response to investor requests, the EBRD would likely follow its model during covid by explicitly referencing its support for Ukraine in its documentation for bonds issued by the bank. The EBRD did not issue specific “covid bonds” during the pandemic.

The EBRD has already committed €2 billion to fund its response to the invasion of Ukraine, with funds going to support Ukrainian businesses as well as neighbouring countries that are taking in refugees.