EU opens up €24bn of existing finance to circular economy businesses in support of EU climate goals
10 December 2015
The European Commission and the European Investment Bank (EIB) announced changes to EU financial tools today to help circular economy projects and businesses secure funding and support the realisation of EU climate goals, as UN climate negotiations draw to a close in Paris. The changes build on the EU’s Circular Economy Strategy launched last week and result from EIB recommendations published today at the Financing the Circular Economy conference hosted under Luxembourg’s Presidency of the EU.
An amendment to the InnovFin Delegation Agreement signed at the conference will enable higher-risk, yet innovative sustainable business models and plans to access credit through InnovFin – an EU finance support programme under Horizon 2020, which was previously only available to innovative industrial and technology enterprises. InnovFin Advisory, a financial advice service in the EIB, will also support mid-sized businesses in making their circular economy projects investment ready in order to benefit from the Mid Cap InnovFin financial products.
Karmenu Vella, European Commissioner for Environment, Maritime Affairs and Fisheries, stated: "This Commission has made the transition to a more circular economy a priority of our work. And for small and medium businesses across Europe, we are committed to making that transition as easy as possible. Now one week after we launched our proposal, we have a real financial commitment. Today's signing of an extension of funding coverage with the EIB will help our risk-takers make that leap to a more sustainable model of production".
Carlos Moedas, European Commissioner for Research, Innovation and Science, said: "The circular economy has great potential to create a competitive advantage for Europe on a sustainable basis. I'm delighted to see that InnovFin, supported by Horizon 2020, has been improved to allow, from now on, support to circular economy projects."
Werner Hoyer, President of the EIB says: “We must enable the transition towards a circular economy to unlock sustainable growth without consuming more resources, or consuming them in a smarter way - our collective future and prosperity depend on that. We at the EIB, the EU Bank, will continue to deploy technical expertise, advisory and financial firepower in support of those investment decisions which make our economies more circular, more sustainable.”
The EIB analysed the role of finance in the transition to a Circular Economy as part of an InnovFin advisory mandate for the European Commission and the Government of Luxembourg. The associated report “Assessment of access-to-finance conditions for projects supporting circular economy“ presents practical actions to finance the re-use, repair, refurbishing and recycling of existing materials and products.
Apart from the broadening of InnovFin's eligibility criteria to attract circular economy projects, the report proposes setting up a platform for institutional and private investors ready to support projects and encourage new funding applications. Broader, non-finance related recommendations directly concern relations between manufacturers and their industry peers, as well as consumers. The report makes further recommendations on how consumers can receive more information on the expected lifetime of products or availability of spare parts, and how to assist enterprises in the creation of sound secondary markets and sharing platforms for manufactured goods or by-products.
InnovFin – EU Finance for Innovators
Under Horizon 2020, the EU research programme for 2014-20, the European Commission and the European Investment Bank Group (EIB and EIF) launched a new generation of financial instruments and advisory services in 2014 to help innovative firms access finance more easily. Until 2020, "InnovFin – EU Finance for Innovators" offers a range of tailored products which will make available over EUR 24bn of financing support for research and innovation (R&I) by small, medium-sized and large companies and the promoters of research infrastructures. This finance is expected to support up to EUR 48bn of final R&I investments.
Backed by funds set aside under Horizon 2020 and by the EIB Group, InnovFin financial products support R&I activities, which by their nature are riskier and harder to assess than traditional investments, and therefore often face difficulties in accessing finance. All are demand-driven instruments, with no prior allocations between sectors, countries or regions. Firms and other entities located in EU Member States and Horizon 2020 Associated Countries will be eligible as final beneficiaries.
InnovFin MidCap Growth Finance offers senior and subordinated loans or guarantees (including mezzanine and quasi equity financing), in order to improve access to finance mainly for innovative larger midcaps (up to 3000 employees), but also SMEs and small midcaps. Loans from €7.5 million to €25 million will be delivered directly by the European Investment Bank to eligible beneficiaries in EU Member States and Associated Countries.
InnovFin MidCap Guarantee provides guarantees and counter-guarantees on debt financing of up to €50 million, in order to improve access to finance for innovative midcaps (up to 3000 employees) which are not eligible under the InnovFin SME Guarantee. This will be rolled out through financial intermediaries such as banks, other financial institutions. Under InnovFin MidCap Guarantee, financial intermediaries will be guaranteed against a portion of their potential losses by the EIB.
InnovFin Advisory aims to improve the 'bankability' and investment-readiness of large projects that need substantial, long-term investments. It will also provide advice to improve the conditions for access to risk finance for R&I. It builds on a successful pilot operated under the Risk-Sharing Finance Facility in FP7. The main clients foreseen are promoters of large R&I projects that meet Horizon 2020's Societal Challenges.
The EIB and Borealis have successfully closed a benchmark financing agreement that supports the Borealis research, development and innovation (RDI) programme in the circular economy sphere. The EIB will provide a €250 million loan supporting Borealis’ multi-year investment programme in the area of plastics circularity, in line with its objectives to support innovation, climate action and sustainability.
The robotics company Magazino has closed a Series B financing round of €21 million. Jungheinrich AG and the EIB are leading the round, with existing investors also participating. The capital raised will be used to expand international sales activities and above all to accelerate the expansion of the "ACROS.AI" software stack – a software platform for intelligent robots developed by Magazino that is also used on third-party hardware.
The EIB has signed a PLN 71.2million (EUR 16 million) guarantee agreement with BNP Paribas Bank Polska to provide a first loss portfolio guarantee to support the financing of energy efficiency projects from Polish homeowners, micro-farmers, and housing associations.