Development Finance Institution (DFI) is the umbrella term for a specialised bank or subsidiary which provides finance for projects in the global South that would otherwise struggle to raise capital. They are usually majority-owned by national governments and get their capital from development funds or benefit from government guarantees. In 2016 the investment portfolio of the 15 European DFIs was €38.1bn.
Their central aim is to foster growth, reduce poverty and improve people’s lives by “promoting economically, environmentally and socially sustainable development through financing and investing in profitable private sector enterprises”. But all too often they do the opposite.
European DFIs have bankrolled projects that have driven deforestation, land grabs, and caused other social and environmental ills. European governments must ensure that the vast sums of public money invested by European DFIs in private sector enterprises in the developing world are subject to genuine accountability and transparency.
Fern tracks damage being done by European DFIs and works with NGOs in Member States to bring concerns to national governments.
To learn more about the EU's involvement in land grabs and its questionable forestry projects, read our study: European Development Finance Institutions and land grabs: The need for further independent scrutiny. Additionally, this guest blog discusses the controversial cases outlined in the report and raises questions about the shortcomings of DFI's: Guest Blog: Are European taxpayers funding land grabs and forest destruction? For information regarding the policies of major European donors to projects which support forests and forest peoples, read this part of our report series on EU action to reduce deforestation: Taking stock: Tracking trends in European Aid for forests and communities.
Call to action
National Parliaments must scrutinise DFIs' portfolios and bring them in line with zero deforestation commitments.