A new initiative has launched in Europe with the aim of dealing with the root causes of economic migration.
The issue represents one of the largest challenges to Europe today and one that has featured high in political discourse. The new initiative is led by the European Investment Bank — the EU's nonprofit lending institution — which is rolling out a program called the Economic Resilience Initiative.
The idea is to help mobilize additional financing from the private sector, alongside the public sector, to deal with the root causes of migration. To date, Croatia, Italy, Lithuania, Luxembourg, Poland, Slovakia, Slovenia and the U.K. have pledged contributions for the initiative which aims to boost economic resilience in the countries of origin.
Speaking to CNBC at last week's IMF (International Monetary Fund) Spring Meetings in Washington, D.C., Luxembourg's Finance Minister Pierre Gramegna highlighted the need to counter the flow of economic migration by investing in countries of origin, adding that "people leave due to climate change, economic situation, starvation."
He emphasized that alongside government aid, "new tools are needed. The goal is to encourage the private sector to get involved in these projects as well, as official development aid alone will not do."
The initiative is seeking funding from private donors to blend in with EIB financing and is encouraging participation by structuring the bonds so that the first risk is taken by the institution, either via a guarantee mechanism for riskier private sector projects, or by issuing impact financing instruments.
The principle is structured around investing in assets that offer social or environmental benefits as well as financial returns.
As of yet, the geographical scope of the initiative includes the western Balkans as well as "southern neighborhoods" including Algeria, Egypt, Jordan, Lebanon, Libya, Morocco, Palestine, and Syria. The EIB is looking to increase its financing in the two regions by 6 billion euros ($7.3 billion) over a five year period (added to the 7.5 billion euros already envisaged) and to encourage up to 15 billion euros of additional investments.
Existing projects include providing investments in critical infrastructure, as well as promo
ting improved delivery of public services and social protection to create a long-term solution.
This goes beyond the approach that was introduced in 2015 via an EU-Africa trust that largely dealt with migration by providing funds to help deport unwanted migrants and prevent people from leaving in the first place.
In 2015, 2.2 million people were found to be illegally present in the EU, according to figures from the European Parliament.
Impact investing has grown in magnitude over the last couple of years growing at 17 percent last year, according to the Global Impact Investing Network .
Last week, the World Bank's International Development Association (IDA) also launched its inaugural "poverty bond" that is designed to help the poor by providing loans and grants to 75 of the world's poorest countries. The bond issue size was $1.5 billion but was more than three times oversubscribed.
"Unless there is policy action that address inequality of income as well as inequality of opportunities, then it will be difficult to restore trust (in multilateral institutions)," the CEO of World Bank, Kristalina Georgieva, told CNBC last week. She added that she expects to see the scope of impact investing grow over time.