Even though the European Investment Bank’s mission is bigger than just making money, profit can be a good measure of our investment success. EIB Vice-President Gelsomina Vigliotti explains why profit matters.
To be entrusted with resources, both by public entities and markets, an institution needs a relevant mission and must be able to deliver on it. This is purpose.
How does profit fit in this picture? Does profit play a role in the activity of an institution such as the European Investment Bank Group, which, by statute, is not primarily seeking to make a profit?
I believe the answer is yes, profit is still essential.
First, how is an institution sustainable if it does not make a profit? The money entrusted to us by the European Union Member States, which are our shareholders, by our partners, by the markets, would be wasted if we were not able to make a profit. We would soon lose the trust of our stakeholders.
Profit is what allowed us to build our capital over the years, making us an instrument for the growth of the European Union, without being a burden on the taxpayers.
And profit is what makes us attractive to investors, who see our bonds as safe instruments to protect their wealth.
Facilitating development – and prosperity
The European Investment Bank was founded to facilitate development in the various regions of the European Union and to fund projects that achieve the aims of the Union.
This clear mission has been our compass since 1958, allowing us to evolve and adapt to the times while remaining faithful to our objectives.
Throughout the decades, the EIB Group expanded its business beyond the European Union, funded a subsidiary dedicated to financing small and medium enterprises, the European Investment Fund, and decided to dedicate 50% of its activity to the fight against climate change. More missions. More purpose.
Nowadays, our action is framed by various objectives in the areas of climate and environment, cohesion, digitalisation, human capital, sustainable cities, sustainable energy, and natural resources. These targets allow us to develop effective actions and business.
I am convinced that these missions are our main strength. They allow us to evolve over time, while remaining the financing partner of choice for governments, institutions, and companies.
These missions also allow us to raise resources from the markets and other stakeholders, who know that we are a reliable partner, able to deliver on financial targets, as well as on impact and policy objectives.
Why is profit a factor?
If we profit, it means that we financed businesses that were in turn able to benefit from our investments and to grow.
Profit is the signal that our investments are productive and successful and are able to generate returns for our societies. Even though we do not seek to maximise our profits, we still believe that profit is a good benchmark to measure the success and impact of an investment.
There is one more reason, specific to the EIB Group, why we seek profit in our investments. We always act as co-financers in our investment, and we never finance 100% of a project’s costs. This is because we want to act as investment catalysers. But our additionality would be worth nothing if we invested in projects that are not profitable, because the market would still not believe in them.
Fiduciary duty, purpose, and profit are the three pillars on which a successful financial institution is founded. Each of these elements is worth nothing if the other two are missing.
