What is InvestEU?
InvestEU will provide the EU with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable recovery. It will provide crucial support to companies, especially in view of the still ongoing crisis. It will also help mobilising private investments for the EU's policy priorities, such as the European Green Deal and the digital transition.
The InvestEU Programme will bring together under one roof the multitude of EU financial instruments currently available to support investment in the EU, making funding for investment projects in Europe simpler, more efficient and more flexible.
The InvestEU Fund will support four policy areas which represent important policy priorities for the Union and bring high EU added value: sustainable infrastructure; research, innovation and digitisation; small and medium-sized businesses; and social investment and skills.
The InvestEU guarantee amounts to €26.2 billion, with provisioning from the Multiannual Financial Framework (MFF) and Next Generation EU resources. The overall investment to be mobilised on this basis is estimated at more than €372 billion.
The major novelty of the initial InvestEU proposal remains: the guarantee will be open to the EIB Group and also to National Promotional Banks and Institutions (NPBIs) and other International Financial Institutions (such as the European Bank for Reconstruction and Development (EBRD).The InvestEU Fund will provide for a dedicated scheme to generate additional investment to the benefit of just transition territories - those to be most affected by the socio-economic consequences of green transition - in complementarity with the Just Transition Fund and the public sector loan facility.
Two further components will complement the InvestEU Fund:
The InvestEU Advisory Hub will provide technical support and assistance to help with the preparation, development, structuring and implementation of projects, including capacity building.
The InvestEU Portal will bring together investors and project promoters by providing an easily-accessible and user-friendly database.
How will InvestEU support the recovery?
InvestEU is the EU's investment programme that will play a major role in kick-starting the European economy. It will provide and attract long-term funding by mobilising private investment in line with the Union policies. This programme builds on the successful implementation of the European Fund for Strategic Investments (EFSI) that was a novel instrument designed to relaunch investments after the past financial crisis.
InvestEU will play a particularly important role in the post-crisis recovery, as EU businesses might still struggle to access and attract necessary funding and Member States might not be in a position to ensure needed support, including for projects which require a European approach.
InvestEU will also be able to support companies affected by the crisis. There will be a possibility to provide capital support to SMEs that were not in difficulty in State aid terms already at the end of 2019, but since then face significant risks due to the crisis caused by the Covid-19 pandemic.
In addition, Member States will be able to use InvestEU as a tool to implement their recovery and resilience plans under the Recovery and Resilience Facility (RRF), if they so wish. Concretely, funds from RRF allocations may be channelled through Member State compartments under the InvestEU to help with the implementation of the Member States' Recovery and Resilience Plans, while respecting the Plan's milestones and targets. Like this, Member States will benefit from the EU guarantee and its high credit rating, giving national and regional investments more firepower.
How will the InvestEU Fund work?
The InvestEU Fund will mobilise public and private investment through an EU budget guarantee of €26.2 billion that will back the investment projects of the European Investment Bank (EIB) Group and other financial partners, and increase their risk-bearing capacity. The EU budgetary guarantee is indicatively distributed across four policy windows as follows:
-Sustainable Infrastructure window: €9.9 billion
-Research, Innovation and Digitisation window: €6.6 billion
-SME window: €6.9 billion
-Social Investment and Skills window: €2.8 billion
The elements of strategic investment initially foreseen under the fifth window - the strategic European investment window - will be mainstreamed across the initial four windows.
The guarantee will be provisioned at 40%, meaning that €10.5 billion of the EU budget is set aside in case calls are made on the guarantee. In addition to the amount budgeted for provisioning the EU guarantee, the budgetary envelope dedicated to advisory support, the project portal and other accompanying measures would amount to €430 million.
The InvestEU allocation also foresees the EU's contribution to the EIF capital increase approved on 12 February 2021 with a pro-rata participation, maintaining the EU's relative share in the EIF capital. The paid-in contribution to be made by the Commission on behalf of the Union for the capital increase is up to €375 million.
The InvestEU Fund will be implemented through financial partners who will invest in projects using the EU guarantee. The main partner will be the EIB Group, which has successfully implemented and managed EFSI since its launch in 2015. In addition to the EIB Group, International Financial Institutions active in Europe - such as the European Bank for Reconstruction and Developments (EBRD) - and National Promotional Banks will have direct access to the EU guarantee. The EU guarantee is split 75%-25% between the EIB Group and all other implementing partners. Opening up the possibility to benefit from the EU guarantee to other institutions is driven by the fact that there are other experienced potential financial partners in the EU, which have specific financial or sectorial expertise, deep knowledge of their local market or greater capacity to share risk with the EU in some areas. This approach will enlarge and diversify the pipeline of projects and increase the potential pool of final beneficiaries.
What happened to the new strategic European investment window?
The new strategic European investment window foreseen in the May 2020 Commission proposal was not retained in the course of the negotiations between co-legislators.
However, co-legislators agreed to their importance and therefore strategic investments will be mainstreamed in the initial four windows. They will focus on building stronger European value chains in line with the strategic agenda of the Union and the New Industrial Strategy for Europe, as well as supporting activities in critical infrastructure and technologies.
Some examples are:
-providing critical healthcare and support the manufacturing capacities for pharmaceuticals, medical devices, diagnostics and advanced therapy medicinal products;
-building stronger value chains within the EU, for instance regarding the manufacturing capacity of equipment for renewable energy technologies including batteries;
-supporting critical infrastructure, whether physical or virtual, in the fields of energy, transport, environment, health, secure digital communication, media, space and defence;
-recycling and manufacturing facilities for mass production of Information Communication and Technology components and devices.
What will be the InvestEU eligibility criteria?
In order to benefit from InvestEU financing, potential projects must:
-address market failures or investment gaps and be economically-viable;
-need EU backing in order to get off the ground;
-achieve a multiplier effect and where possible crowd-in private investment;
-help meet EU policy objectives.
The policy areas eligible for financing and investment operations are presented in annex II to the InvestEU Regulation The eligibility criteria are further defined in in the Investment Guidelines which lay down the requirements that financial products and financing and investment operations shall satisfy.
How will InvestEU provide capital support to SMEs?
The InvestEU programme allows capital support to help otherwise viable SMEs, that were not in difficulty in State aid terms already at the end of 2019 and that are now faced with liquidity issues due to the coronavirus crisis. It will help such companies at this critical time get back to a sustainable and profitable business track. Capital support is open under all policy windows and will therefore contribute to the EU priorities of the green and digital transitions. Such financing may be provided directly by the EIB, the EIF, the EBRD or National Promotional Banks or through financial intermediaries or dedicated vehicles.
More specifically, capital support operations under InvestEU will be implemented as all other financing and investment operations. An implementing partner will have to propose under one or more of the policy windows a financial product that aims at delivering capital support for SMEs and build a portfolio of operations. The financing provided will be partially covered by the EU guarantee. SMEs are eligible if they operate in one of the areas identified in Annex II and do not carry out activities excluded by the list in Annex V point B.
The financing will typically take place through financial intermediaries that take equity participations, convertible loans and other equity-type financing. These intermediaries would typically be independent commercially-run fund managers that select companies with adequate return prospects, driven by a commercial logic when selecting companies in which to invest or provide other forms of financing. The InvestEU intervention will done on commercial terms and crowd in private investors.
Does InvestEU foresee national envelopes?
No, there are no national envelopes as this is a market based and demand driven instrument. The InvestEU Programme was designed to ensure it benefits all Member States, irrespective of their size or development of their financial market.
However, InvestEU foresees Member State compartments, to which Member States may contribute voluntarily in two ways. Member States can contribute through structural funds or contribute funds under the Recovery and Resilience Facility to finance policy priorities in line with their national recovery and resilience plans. Like this, Member States will benefit from the EU guarantee and its high credit rating, giving national and regional investments more firepower.
Who will manage InvestEU?
As in the case of EFSI, a Steering Board will give strategic direction on programme implementation. It will be composed of the Commission (4 members), EIB Group (3 members) and other implementing partners (2 members) as well as a non-voting expert appointed by the European Parliament. The Steering Board will strive to take its decisions by consensus.
The Steering Board will be assisted by an Advisory Board composed of representatives of the Commission, the implementing partners (one member each) and Member States (one member each). Also the Committee of the Regions and the Economic and Social Committee will have one member each. The Commission will be able to consult this board when preparing and designing new financial products or to follow market developments and share information. This Advisory Board will be able to issue recommendations to the Steering Board on the implementation and functioning of the InvestEU programme.
An Investment Committee composed of independent experts will be responsible for approving the individual requests for use of the InvestEU guarantee based on compliance with the eligibility criteria set by the Regulation as well as the Investment Guidelines. The Investment Committee will be supported by a secretariat, which is staffed by and located in the Commission. The Committee's decisions will be made independently, with no political interference.
How will InvestEU contribute to the green transition?
The InvestEU Programme focuses on the Union's medium- and long-term policy priorities such as the European Green Deal, the Strategy on shaping Europe's digital future and the Strong Social Europe for Just Transitions.
The InvestEU Regulation provides that the InvestEU fund as a whole will target at least 30% of investment contributing to climate objectives. Under the sustainable infrastructure policy window, at least 60% of the investment shall contribute to meeting the Union objectives on climate and environment. The ‘do no significant harm' principle of the EU taxonomy regulation will apply horizontally and be operationalised by the guidance on sustainability proofing to be issued by the Commission. The InvestEU Regulation also has a reference to the Commission biodiversity ambition and to its biodiversity goals.
How will the ‘do no significant harm principle' be operationalised under InvestEU?
The regulation foresees that the Commission develops sustainability guidance to operationalise the ‘do no significant harm' principle. This guidance will ensure that financing and investment operations receiving InvestEU support are in line with and contribute to the EU broader sustainability commitments. In particular, the sustainability proofing will aim at identifying and addressing potential significant impacts the operations may have on the climate, environmental and social dimensions.
Against this backdrop, the sustainability proofing requirements will progressively integrate the ‘do no significant harm' criteria of the EU Taxonomy, bearing in mind that the technical screening criteria are not yet in force and that potential Implementing Partners (especially other than the EIB Group) still need to develop capacity to deal with these requirements. The guidance will be developed in cooperation with Implementing Partners, financial intermediaries and project promoters.
What does the just transition scheme under InvestEU entail?
As stated in European Green Deal Investment Plan communication, InvestEU will provide for a dedicated scheme (Pillar 2 of the Just Transition Mechanism) to generate additional investment to the benefit of just transition territories (the Just Transition Scheme, JTS) in complementarity with the Just Transition Fund (Pillar 1 of the Just Transition Mechanism) and the public sector loan facility (Pillar 3 of the Just Transition Mechanism). This pillar caters mainly for private sector investments and is demand driven, while being linked to the objectives of the territorial just transition plans.
Projects supported under the JTS can be located in the just transition territories, but also outside these regions if they are key to the transition within the just transition territories as defined in the respective territorial just transition plans. The JTS is a flexible instrument allowing for both direct and intermediated financing. Such support will be implemented through InvestEU financial products proposed by the InvestEU implementing partners (e.g. the European Investment Bank Group, EBRD or national promotional banks or institutions). The InvestEU investment guidelines laying down the requirements for investment operations supported through the InvestEU will include a dedicated section on the JTS and its implementation modalities.
Can third countries participate in InvestEU?
The InvestEU Fund is open to contributions from third countries (non-EU countries) that are members of the European Free Trade Association, acceding countries, candidates and potential candidates, countries covered by the European Neighbourhood Policy and other countries, in accordance with the conditions laid down between the Union and those countries. This will allow continued cooperation with the relevant countries, in particular in the fields of research and innovation as well as SMEs. According to the Regulation, third countries would have to provide their full contribution to financial products in cash.
What are the aims of the InvestEU Advisory Hub?
The InvestEU Advisory Hub is envisioned as the central entry point for project promoters and intermediaries seeking advisory support and technical assistance related to centrally managed EU investment funds. Managed by the European Commission and financed by the EU budget, the hub will connect project promoters and intermediaries with advisory partners, who will work directly together to help projects reach the financing stage. The InvestEU Advisory Hub will complement the InvestEU Fund by supporting the identification, preparation and development of investment projects across the European Union. It succeeds the European Investment Advisory Hub (EIAH), established by the Commission with the EIB and builds on the experience acquired through EIAH.
What is the goal of the InvestEU Portal?
The InvestEU Portal will build on its predecessor, the European Investment Project Portal (EIPP), having further enhanced features. The InvestEU Portal will provide an easily accessible and user-friendly project database granting visibility to EU-based projects for which project promoters seek financing and which provides investors with information about investment opportunities available in the EU.
When can companies expect to be able to apply for financing supported under InvestEU?
The Commission will launch the call for expression of interest for selecting implementing partners other than the EIB Group as soon as the Regulation enters into force, which is expected for beginning of April 2021. In the meantime, discussion on the EIB and EIF guarantee agreements are already progressing with a view to conclude negotiations mid-2021 so that companies and project promoters can already start applying for financing at that time. Guarantee agreements with other implementing partners will follow in the course of 2021.
As a transitional measure, the EIB Group and other implementing partners may also benefit from warehousing possibility that allows them to support companies as from the 1 January 2021 and prior to the signature of guarantee agreements, subject to ex-post approval by the Investment Committee. This will ensure continuity with EFSI and existing financial instruments and anticipated deployment by all implementing partners.
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