Evaluation of EIB support for the water sector outside the European Union from 2010 to 2021

The world isn’t on track to achieve Sustainable Development Goal 6. While the human right to water and sanitation has been recognised, it has yet to become a reality for a substantial share of the global population.

According to the latest UN data (2021) one in three people don’t have access to safe drinking water, with 40% of the world’s population still being affected by water scarcity. Moreover, 80% of wastewater is discharged untreated into rivers or the sea worldwide, and 70% of deaths related to natural disasters are water related.

The Evaluation of EIB support for the water sector outside the European Union (2010–2021) assessed  projects financed by the European Investment Bank to determine what worked and what didn’t in terms of development outcomes and the contribution to climate action and environmental sustainability. The evaluation includes recommendations aimed at the revision of the Bank’s water sector orientation and the strategy for EIB Global.

The EIB, one of the largest multilateral lenders to the water sector, finances on average more than €2 billion per year both inside and outside the EU. During the period of the evaluation, 131 projects were signed in the water sector outside the EU with a total volume of €7.2 billion.

Some key takeaways from the Evaluation of EIB support for the water sector outside the European Union from 2010–2021:

• Projects funded by the EIB were of high technical quality, aligned to the needs of the sector and led to the expected results, but projects suffered significant delays especially in the start up phase.
• Projects strongly contributed to climate action and environmental sustainability.
• Development outcomes of projects were evident, but they were not optimised or reported on.
• Completed projects were being physically well maintained, but tariff and governance arrangements of the sector meant there are threats to their longer-term sustainability.
• The EIB’s business model, and its relatively limited local presence, combined with its complex procedures affected the Bank’s impact, especially when faced by a challenging sector environment and weak promoter capacity.

The number of water sector projects that contributed to climate action (both adaptation and mitigation) grew between 2010 and 2021.

• By following the EIB’s environmental standards, projects funded by the Bank raised awareness of best practice.
• Wastewater treatment was a feature of many water projects that contributed strongly to environmental sustainability.
• Most projects didn’t have a circular economy approach although this is changing as the topic is rising up the agenda.

Water sector projects supported by the EIB considered the development potential, but development outcomes were not structured into the projects, nor were they introduced as focus of project monitoring.

• EIB water projects primarily focused on infrastructure construction.
• The EIB relied on other institutions working in the sector to fill the development gap and tackle sector reforms, institutional strengthening or hygiene campaigns – all of which were necessary for the water infrastructure to deliver the desired development outcomes.
• Yet, the links to these other initiatives were often not close enough.

Incomplete sector reforms and low promoter capacity were the two main challenges for the EIB’s water projects. It was also clear that the Bank’s project based approach was better suited to respond to infrastructure needs, rather than policy support and local institutional strengthening – critical areas for longer term project sustainability.

• Water projects financed by the EIB tended to be relatively large, complex projects. At the same time, in the majority of cases the promoters in the water sector outside the EU were low capacity municipalities who only carried out major infrastructure projects every 20 – 30 years.
• Grants, especially for technical assistance, created an opportunity to respond to the challenge of low promoter capacity, but the processes to access grants/ technical assistance were time intensive and often too complicated and disconnected from the project.
• While the EIB identified the key sector and project-related challenges and risks, it didn’t have the necessary resources to fully follow up and tackle the issues; and its limited number of local offices and staff based in-country constrained the EIB at all levels of the project’s life cycle.

The evaluation makes eight recommendations, which have all been agreed or partially agreed.  

1. Optimise the development, environment and climate results of water projects by diversifying beyond infrastructure to include innovations such as water resource management, nature-based solutions, circular economy, digitalization and utility performance in projects.
2. Develop pre-prepared guidance packages to support projects in the water sector in areas such as: how to engage in peer-to-peer utility partnerships, how to adopt green economy measures such as energy efficiency, circular economy; improving customer orientation and corporate governance of utilities.
3. Actively complement and engage with the EU and other partners in supporting credible water related reforms and development outcomes – for example through supporting common policy agendas, a re-energised Mutual Reliance Initiative and focus on countries where the EU and Member States are also active in water and related sectors.
4. Expand products highly relevant for the water sector in less developed countries – for example by intensifying framework loans that are able to build national sector capacity, piloting water sector-based loans for responding to wider sector opportunities, introducing solutions and innovations that have an effect beyond a single project.
5. Consider enhancing EIB local presence to address capacity gaps in water sector projects at origination, design and implementation stages. This would for example allow the Bank to ensure a strong project follow up and help unlock disbursements and enable stronger partnerships at local level.
6. Consider increasing technical assistance resources for water projects that can be easily mobilised. This would allow the EIB to increase support to project preparation and implementation; and where justified, promote development outcomes and reforms.
7. Consider developing a simpler, standardised package of procedures that responds to the needs of low-capacity promoters at municipal and local government level in the water sector.
8. Consider additional measures to accelerate completion and disbursement of EIB projects in the water sector, balancing the current focus on signatures with a focus also on completion, and reinforcing incentives for both EIB staff and promoters.