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Climate and inequality top of the agenda for new NIB chief

One of the stars of Estonia’s post-Soviet generation, André Küüsvek spent 25 years crisscrossing emerging Europe for the EBRD, covering the furthest reaches of emerging Europe before returning to his home region to head up the Nordic Investment Bank this year. He talks to Euromoney about escaping lockdown in Kazakhstan, expanding the NIB’s environmental remit and the risks posed by rising inequality.

NIB - president of NIB André Küüsvek 23.2.2021
André Küüsvek, Nordic Investment Bank.
Photo: Marjo Koivumäki Studio Apris oy

After the fall of the Berlin Wall, the need to create a market economy from scratch created unprecedented opportunities for ambitious young graduates across central and eastern Europe (CEE).

With international knowhow in short supply and western firms wary of doing business with anyone imbued with the ideas and mindset of the Soviet era, savvy young men and women found themselves running banks and businesses in their early 20s.

André Küüsvek was part of this cohort. Born in Estonia in 1967, he did postgraduate studies in Dresden before returning to Tallinn in 1991 to study market economy and entrepreneurship at the three-year-old Estonian Business School.

The following year, at the age of 25, he became head of foreign payments for the newly created Tartu Kommertspank, one of the first commercial banks in the former Soviet Union.

“I’m from the lucky age group that in childhood saw how things should not be done, then the moment I became an adult I had the opportunity to study abroad and the freedom to do things my own way,” Küüsvek tells Euromoney.

I’m from the lucky age group that in childhood saw how things should not be done
André Küüsvek, Nordic Investment Bank

After two more years in Tallinn, in a bid to gain international experience, he moved to Frankfurt as correspondent banker for CEE at Dresdner Bank. Having become accustomed to early responsibility and fast promotion, however, he found the pace of corporate Germany stifling.

“Here I saw the other extreme, where your career is essentially prescribed for you,” says Küüsvek. “An older colleague puts her hand on your shoulder and says: ‘Andre, you’re a really bright guy. In five years’ time, you’ll be able to move up and then again in another 10 years.’ And you think God, I can’t wait 15 years to move!”

He stuck it for less than a year before moving back to Tallinn, this time as a banker in the Baltic division of the European Bank for Reconstruction and Development (EBRD).

EBRD tenure

Initially, he worried that he was late to the party, having missed out on the breakneck expansion of the bank’s first five years under the leadership of its extravagant and visionary founder Jacques Attali.

“After the first week I said: ‘Damn, I’m late, all the good things have already happened’,” he recalls. “But I decided to stay for a few years to see what would happen.”

Those few years turned into 25 and a career that took him to the furthest reaches of the EBRD’s sprawling region. A four-year stint as country head for Kazakhstan in the run-up to the global financial crisis was followed by five years in Kyiv leading the bank’s Ukrainian operation.

In 2012 he went to London as head of local currency and capital markets development, then returned to Kazakhstan in early 2020 to head up the EBRD’s central Asia operation.

By the time Küüsvek arrived in Nur-Sultan, the country’s inhospitable new capital, Covid was already spreading rapidly. He was lucky to avoid getting stranded there for months, securing a seat on one of the last flights out of Kazakhstan. The decree to close the borders was signed while he was in the air heading back to London and his family.

“I actually had a sense, three days before the borders closed, that if I wanted to leave, I had to leave now, so I brought my return flight forward by two days,” he says. “Maybe it’s an instinct inherited from my grandparents who had to live through all the upheavals of the Iron Curtain period.”

Küüsvek subsequently took advantage of the EBRD’s offer to allow staff to work from anywhere in the world for the duration of the pandemic to move his family back to Estonia, where he has always spent summer holidays and has a house.

Step change

Then in March this year, in the shortest relocation of his peripatetic career, he made the two-hour ferry journey to Helsinki to take up the position of president of the Nordic Investment Bank (NIB) – the first time a Baltic citizen has held the post.

While Finland is less exotic than some of his previous postings, he says he is very happy there. “For me, Helsinki is a home away from home,” he explains. “The climate is the same, the culture is very similar to what I remember from growing up in Tallinn and being able to understand Finnish is a big benefit.”

At the same time, the move to NIB is a step change for Küüsvek. Although the bank is older than his former employer – it turned 45 this year, while the EBRD was celebrating its 30th anniversary – it is smaller and has a narrower focus.

After several rounds of enlargement, the EBRD’s region now comprises 39 countries across central and eastern Europe, the Middle East and north Africa.

By contrast, the NIB’s coverage is limited to just eight states. Set up by the five Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – to promote economic growth and cooperation in investment projects within the region, it was expanded to include the three Baltic states in 2005.

Nevertheless, the NIB has considerable financial clout. While its balance sheet of €37.8 billion (as at year end 2020) is barely half the size of the EBRD’s, the Nordic bank last year disbursed €4.9 billion of loans versus €7.6 billion for its larger counterpart.

In other respects, there is considerable overlap between the two institutions.

Geographically, both cover the Baltics, although the EBRD’s involvement in the region has tailed off over the past decade. Both are run on commercial banking principles and have a mandate to support the private sector, as well as a strong focus on climate change and environmental issues.

The EBRD has been ramping up its green operations since 2005 and in July ratified plans to fully align all its activities with the Paris Agreement by 2023.

The NIB arguably has an even stronger track record on climate; perhaps, suggests Küüsvek, because it is a topic that particularly resonates in the bank’s region. “We always seem to care a bit more about the environment,” he says. “The sea and the forest mean a lot in this part of the world.”

This has been reflected across the NIB’s activities. An environmental bond programme set up in 2011 has raised more than €5 billion for green projects across the region, as well as €335 million from the sale of ‘blue bonds’ for cleanup projects in the Baltic Sea, one of the world’s most polluted bodies of water.

Taking a lead

On the lending side, the bank has been checking the environmental credentials of all projects for more than a decade. Last year this was expanded to include a full assessment of the environmental, social and governance performance of all NIB clients, including their climate strategies and alignment with the Paris Agreement.

The NIB has also taken a lead on sustainability reporting. It has been working with the Global Reporting Initiative, the leading European sustainability standards setter, since 2007 and last year began reporting according to the recommendations of the Taskforce on Climate-Related Financial Disclosures.

It has also produced a first report following the guidelines set by the United Nation’s Principles for Responsible Banking, to which it remains the only international financial institution (IFI) signatory.

It’s easy to get involved in projects that are green from the start… It’s much more difficult to move into the steel industry or the cement industry
André Küüsvek

Küüsvek has continued the work of his predecessors. In June he signed the NIB up as an institutional partner of the Coalition of Finance Ministers for Climate Action and he is overseeing work on a new sustainability policy and climate strategy for the bank. Due to be finalized later this year, the latter will outline ways to tackle some of the knottier climate-related issues in the NIB’s region.

Some of these are specific to the Baltics. Electricity generation in Estonia, for example, is 10 times as carbon intensive as in Iceland, Norway and Sweden due to its continued reliance on locally produced, heavily polluting oil shale. Latvia and Lithuania are closer to their Nordic neighbours in this respect, thanks to a focus on natural gas, but have yet to make meaningful progress on renewable energy.

Similarly, while the Nordic countries have some of the greenest and most energy-efficient real estate in Europe, a shortage of cash and a surplus of sub-standard Soviet housing stock mean the Baltics are still towards the back of the pack.

The fact that none of the proceeds of NIB green bonds have gone to Latvia or Estonia, while Lithuania has absorbed just 1% of the total, also testifies to the challenges of finding investible environmental projects in the region.

Environmental remit

Yet even in the Nordics there is plenty to do on the climate front. While the region is very advanced in terms of renewable energy and green technologies, it is also still home to high-emitting companies in sectors from construction to chemicals.

Like other IFIs, the NIB has traditionally focused its environmental work on projects that can be classified as ‘pure green’ – solar parks, electric transport, battery factories and the like.

Küüsvek wants to expand its environmental remit to cover investment in hard-to-abate industries. “The absolute impact you can achieve at that end is much bigger than from financing another wind park, which everyone wants to do,” he says.

He acknowledges that it will be challenging. “It’s easy to get involved in projects that are green from the start,” he says. “It’s much more difficult to move into the steel industry or the cement industry – but you can’t ignore those sectors anymore.”

One option the NIB is exploring to help the push towards net zero in these industries is the introduction of sustainability-linked loans, similar to those used by private-sector banks, which would tie funding costs to the achievement of environmental key performance indicators.

As such goals are usually set at a corporate level, this would imply a shift away from the NIB’s traditional project-based approach – and, indeed, that is also on the bank’s agenda. “We want to see how we can invest in a way that makes the corporate sector as a whole greener,” says Küüsvek.

However, he is realistic about the limits of what IFIs can do. “There is so much investment needed into these areas that NIB with its balance sheet of €38 billion and loan book of just over €22 billion can only show the way,” he says. “What we want is for others to follow.

“Whatever we do on the environmental side, we would like to attract commercial banks and other investors and underwriters to co-finance with us and to do similar projects on their own.”

Fine balance

The other challenge for IFIs, and indeed for everyone working towards energy transition, is ensuring that the process does not disadvantage poorer populations and exacerbate existing fault lines in society.

Küüsvek is acutely aware of this. Indeed, he sees rising inequality as the main medium-term challenge facing the NIB’s region and particularly the Baltics, where many are disappointed with the pace of economic development in the post-communist era.

“There is a widening gap between those that have and those that have less,” he says. “Even if the latter have more than they did 10 or 20 years ago, they still feel they are falling behind in terms of the rise in living standards.”

This is not something he would have worried about at the start of his career. One of the defining characteristics of his generation of post-communist bankers and entrepreneurs was unbounded enthusiasm for Thatcherism and the market economy, and a concomitant horror of anything that smacked of socialism – an attitude that still prevails today among many of his peers.

Küüsvek’s view, however, has become more nuanced. “If you would have interviewed me when I was 25, I would have told you a much tougher story – every man for himself and all that matters is the speed and direction,” he says. “Now I think you also need to look at the breadth of society as a whole.”

He is still a fervent proponent of promoting entrepreneurship and encouraging innovation, but he also believes in the need to take care of “those that fall behind or cannot quite keep up with the pace” – if nothing else, to neutralize the populist pressures building up in the Baltics, as in the rest of Europe.

“We all know that democratic systems are better than non-democratic, but if too many people are left behind, it will come through in the next election cycle and then you get governments that are not committed to market economy principles or the green transition,” he says. “So it’s a very fine balance.”

Connecting the Baltics


As well as supporting broader economic development in the Baltics, André Küüsvek is particularly keen on improving connectivity for his home region.

Three years before taking up his role at the NIB, he agreed to head the newly created supervisory board of Rail Baltica, a greenfield project designed to update the region’s creaking transport infrastructure and integrate it into the European rail network.

The new railway line will run from Tallinn to Warsaw via Riga and Kaunus, with a link to the Lithuanian capital Vilnius. Work on the project has already started and is due to be finalized by 2026. The cost, estimated at €5.8 billion, is being borne by the three Baltic states and the European Union.

“Rail Baltica will be great for the speed of travel for goods and also for the safety of drivers who are risking their lives on the roads,” says Küüsvek. “In this part of the world the winters can be harsh and dark.”

As currently envisaged, the line will end in Tallinn. However, that could change if plans to build a tunnel under the Gulf of Finland to connect the Estonian capital with Helsinki come to fruition.

In April, Estonian entrepreneur Peter Vesterbacka – the creator of the Angry Birds franchise – announced that his FinEst Bay Area Development company had secured €15 billion of funding for an ambitious scheme involving two 103 kilometre tunnels, an offshore island with housing for 50,000 people and a plethora of smaller islands devoted to leisure and entertainment.

The fact that the funding had been promised by a Chinese investment company, however, raised hackles in a region that has become increasingly suspicious of president Xi Jinping’s Belt and Road Initiative.

The Finnish and Estonian governments responded by signing a memorandum of understanding supporting the creation of a railway tunnel between their respective capitals but encouraging the use of EU funds as an alternative to Chinese cash.

Clearly, a fast rail link between his home city and his new base in Helsinki would be a boon for Küüsvek. Does he think it will go ahead?

“Greater connectivity would benefit everybody in the region so it’s good that somebody is thinking about it,” he says. “It’s a vision and I never discourage visionaries. If you ask me, is the tunnel going to be built? I would say: ‘Yes, it will – but probably not in my lifetime.’”

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