SABADELL LOAN FOR AGRICULTURAL SMES & MIDCAPS

This operation is presented under the Lending Envelope "PAN-EUROPEAN AGRICULTURAL PROGRAMME (2024-0444)". The operation is intermediated by Sabadell, a specialised lender in the agricultural sector in Spain.

The aim is to finance agricultural small and medium-sized enterprises (SMEs), mid-caps and public sector entities. This sub-operation will have a specific dedication to Climate Action and Environment Sustainability (CA&ES) of at least 30% of the total amount. Sub-projects are expected to cover a broad range of activities and may include investments by SMEs & Midcaps in, but not limited to: - sustainable and regenerative agriculture; - digital and precision agriculture tools; - working capital for climate resilience and adaptation crops varieties; - water management system; - renewable energy ; - animal welfare and sustainable livestock practices; - sustainable aquaculture; - innovation and resource efficient measures in agri, food or fibre industries; - education and training in sustainable practices; - infrastructure improvements.

The proposed transaction consists of an intermediated loan with Banco Sabadell SA ("Sabadell"), a financially solid promoter and repeat counterparty of the EIB. The operation will enable Sabadell to finance small and medium-sized investment projects in the agriculture sector carried out by SMEs and Midcaps enterprises operating in Spain and also public entities (PSE) specifically Irrigation Associations ("Comunidades de Regantes, CCRR").

The operation thus falls under the EIB's vertical Public Policy Goal (PPG) of "SME and Midcap financing" on an 80% of the portfolio and within PPG "sustainable energy and natural resources" for the 20% committed to PSEs. With regards horizontal PPG "Economic and Social Cohesion" it is foreseen, according to the commercial presence of Sabadell, a contribution of 55% to less-developed and transition regions. SABADELL commits to dedicate at least 30% of the loan amount to green eligibilities as per EIB MBILs side letter, from which the 20% to PSEs (CCRR). The Climate Action and Environmental sustainability for the operation is foreseen at 30%. This figure includes a 20% contribution to Climate Adaptation related to the drought vulnerability of Spain and the link that modernization of irrigation infrastructure plays for reduction of water losses in this context.

The operation will address market weaknesses and failures related to the availability of financing for SMEs operating in the agriculture/bioeconomy sectors in Spain. For such SMEs, this project will ease the financial constraints that arise from information asymmetries caused by the lack of track record, insufficient farm net asset value to collateralize, as well as high screening costs for small investments. In addition, these projects address financial market inefficiencies caused by the fact that the economic life of an investment project exceeds the tenor of loans that are typically available on domestic capital markets. Finally, the project will address negative externalities in the form of less carbon emissions, better water management and enhanced resilience to climate change (Adaptation).

The proposed operation falls within the scope of the EIB's Environmental and Social Standards - "Standard 11 Intermediated Finance". The Borrower / Financial Intermediary has adequate capacity, systems and processes in place for identifying, assessing, managing and monitoring environmental, climate and social (ECS) risks related to the potential sub-projects benefitting from EIB support. The Final beneficiaries will be required to comply with applicable national and EU legislation in respect of environmental and social matters, as appropriate.

Final beneficiaries will be requested to comply with applicable national and EU legislation, as appropriate.