EIB Expertise in Financial Instruments for InvestEU Member State Compartment

1. Financial Instruments Shared management and InvestEU Member State Compartment Brussels, 10 October 2019

2. EIB expertise in Financial InstrumentsJean-François LeprinceHead of Unit, EIB Operations

3. The EIB Group: priorities and financing € 55.6bn Innovation € 13.5bn Providesfinance and expertise for sound and sustainable investment projects Leadingdeveloper of risk financing for innovativeSMEs Environment € 15.2bn Infrastructure € 12.3bn SMEs € 23.3bn € 10.1bn * 2018 provisional figures and subject to audit

4. Overview of EU financial instruments FIs are a delivery tool to provide financial support from the EU budget. Decentralised Financial instruments (DFI) 5

5. EIB Group and “DFI”: what we do Technical assistance and financial advisory Providing capacity-building activities and financial advisory services to MAs in order to support implementation and acceleration of investment projects, bilateral advisory and FI Compass Assistance & advisory Management of financial instruments / Mandate Acting as Investment Manager to manage ESIFs made available in the form of financial instruments (Fund of Funds) and to pilot innovative instruments for EU policy needs Investment manager Co-financing Co-financing of financial instrument operations using EIB own resources at the level of the promoting entity, project or financial intermediary. It enables to increase the resources available to final beneficiaries. Co-financing

6. DFI product offer - EIB Group perspective Flagship products: JESSICA and DFI Product types: Contingent loan, FLP guarantee Sectors: Urban regeneration, Infrastructures, Public sector, Energy efficiency, RDI Flagship products: JEREMIE, SME-I and other products Product types: Capped/Uncapped granular portfolio guarantees, VC/Equity funds, Funded risk sharing Sectors: SME & Midcaps

7. EIB and DFI: urban, energy, RDI and social Since 2010 EIB has invested/managed more than EUR 2.7bn through DFI, supporting nearly 3,000 projects with a leverage effect of 2.7 over the years over the funds contributed by the various managing authorities. Nearly EUR 100m paid back. • Development of professional skills Energy efficient buildings • €2.7bn Total amount managed or invested by EIB • Local transport • RDI • ~3,000 Project financedin the field of Urban Development, EE & RDI • € 1.5bnJESSICA funds in 07-13 • €1.2bn DFI in 14-20 • 10mandates • 18mandates • 2.7xMultiplier effect • €2.2bn Total DFI/JHF under management • Sustainable urban • infrastructure • Provision of public services

8. An example of a project supported by a DFI for Energy Efficiency in Poland: Thermo-modernisation of residential buildings • DFI: Fund of Funds Pomorskie • Sector: Energy efficiency in housing • DFI contribution: long-term loan of EUR 100k, with total project costs of EUR 130k • Promoter:housing cooperative in Słupsk . • Projects of this type are designed to reduce heat losses and greenhouse gas emissions, eliminate individual sources of heat, modernise local heat sources, introduce energy upgrades in heating and ventilation systems as well as to allow for installation of energy monitoring and management systems. • Expected impact: energy saving beyond 25% • It is estimated that approx. 100 multi-apartment buildings will be modernisedand 1300 households will increase their energy efficiency in Pomorskieregion

9. Spain: Restoration of the old railway station – Seville • DFI: JESSICA Holding Fund Andalucia. • Sector: Urban Development. • DFI contribution: Total Investment of EUR 9,6m out of which the DFI contributes EUR 6,6 in equity and quasi-equity instruments. • Beneficiary: Sportbox San Bernardo (Special Purpose Vehicle). • Promoter: Urban Planning Department of Seville City Council. • Purpose: Restoration of an old railway station owned by Seville City Council, including the rehabilitation of an old public food market, the construction and management of a sport center and an underground car park, as well as the rehabilitation of the station access. • Presented as an example of good practice in regional policy and use of European Funds1. • Expected impact: • Recovery of an abandoned public interest infrastructure (building is included in the Special Plan “Sector 20” in Seville) giving it a social and services use (sports center and food market). • Rehabilitation of a traditional Food Market (which was installed in a provisional basis from 1999). • Rehabilitation and revitalization of the surrounding area (refurbishment of the square station access)

10. InvestEU – MS Compartment

11. InvestEU - MS CompartmentCombination or solo use Outreach and applicability of the MS-C: creation of streamlined architecture for Managing Authorities intending to use ESIF funding for standardized products, by establishing a single set of rules (InvestEU) and easing combination with EU-C resources, where desired • Minimize the duplication and fragmentation of financial instruments across the EU; • Effective delivery on the cohesion objectives, through ring-fencing of the ESIF contribution; • Streamlined administrative requirements (e.g. reporting, audit, etc); • Contingent Liability versus Up-front national co-financing; • MS should be in the driving seat for the MS Compartment by: • identifying which priority area to pursue via their MS compartment • contributing to the most effective measure delivering on MS objectives • identifying suitable implementation partners MS-C will support cohesion policy goals in a efficient and innovative way by increasing the resources and impact in benefit for the Managing Authorities territories

12. InvestEU - MS CompartmentPreliminary implementation concepts • Solo use of the MS compartment • Creation of Debt portfolios to address specific market failures or investment needs: • e.g.: support to projects in social housing or elderly care • Combination MS-Compartment and EU-Compartment • Top-up of existing products at EU-level to increase volume at national or regional level: • e.g. top-up of thematic products targeting early deployment of high-risk clean mobility projects • or • Creation of dedicated funds combining EU-C and MS-C in layered tranche • e.g. Funds for energy efficiency investments Possible structures will depend on rules and implementation for provisioning, guarantee pricing, mutualisation of losses…

13. EIF expertise in Financial InstrumentsMarco GiulianiEIF Mandate Management

14. EIF at a glance EC 28,1% EIB 59,9% 30 EU financial institutions 12% Entrusted to Resources and mandators Intermediaries and counterparts micro-enterprises, SMEsand small mid-caps Micro-enterprises, PMEset les small mid-caps • Fund managers • Commercial banks • Development andpromotional banks • Guarantee institutions • Leasing companies • Corporates • Business angels • Microfinance institutions • European Investment Bank • EIF own resources • European Commission • Member States/regions • Managing authorities • Corporates/private • Public institutions • Other third parties

15. EIF – ESIF Financial Instruments JEREMIE (2007-2013) JEREMIE initiative managed by EIF: Key Figures EUR 445m of reflows so far ~ 21,000 SMEs supported ~ 360,000 jobs sustained 98% overall absorption EUR 1.1bn – 13 Holding funds under SF EUR 2.6bn disbursed to SMEs 65 agreements with FIs 240 private investors 2.9x created leverage on SF

16. EIF – ESIF Financial Instruments (2014-2020): 41 mandates for EUR 3,5bn resources Experience gained in 2007-2013 was upscaled from many perspectives, e.g.: • Size: contributions from Member States grew from EUR 1.1bn to EUR 3.9bn • Geographic coverage • Policy objectives covered: EIF deploys instruments also under EAFRD, and ESF • Combinationof resources is more widespread,  better leverage for ESIF • Typology of products deployed (e.g. uncapped guarantees, accelerators for early stage equity) • Deeper impact achieved, e.g. in terms of ecosystem build-up (particularly in equity, e.g. Greece)

17. Examples and lessons learnt:Achieving critical mass by combiningand streamlining • Leverage • Risk Tranches • Guarantee • EIF EIF Risk FI Risk Leverage 5x – 10x • Guarantee National funding also utilised • Leverage Financial Intermediaries • Financial intermediary Risk Conducive for regions (e.g. Spain, Italy) • SME Initiative: a platform for bleing ESIF or national funding with EU resources and EIB resources  more leverage, more impact

18. Examples and lessons learnt:Achieving critical mass by combiningand streamlining • [Picture] • Agri initiative Italy: a platform gathering ESIF-EAFRD resources from several regions for same instrument, same eligibility, same selected intermediaries even smaller regions may contribute to a country-level scheme and benefit of economies of scale • INAF: a platform combining national funds from French central government, setting regional targets, and EU resources (EFSI)  Regional entities, central government and EU joining forces towards common goal

19. Post-2020 MFF: building on existing examples • The architecture of the MS Compartment builds on the lessons learnt from the current MFF, and aims at creating a framework making current success products easier to implement. • For example, SME initiative-like instruments: IP, NPBIs, EIBG and other private/public co-investors Financial Intermediary 1 Final Recipients financing SENIOR Guarantee fee FI Risk FI Risk FI Risk • Multiregional platforms encouraged by removing inefficiencies of silo portfolios per region Guarantee cover Aggregate guaranteed portfolio risk EU-C Financial Intermediary n MEZZANINE Final Recipients financing Guarantee fee FI Risk FI Risk FI Risk MS-C Guaranteefee allocation Guarantee cover JUNIOR Either could be junior/mezzanine

20. Key recommendations for Financial Instruments in Post-2020 legislation Make the most of the possibility to transfer ESIF to InvestEU (“MS Compartment”) as this: • Gives States and regions the possibility to trigger more investments for their citizens with the same amount of ESIF due to the leverage effect of the guarantee • Supports cohesion policy goals in an efficient and innovativeway • Is regulated by a set of rules specifically thought for financial instruments, avoiding inefficiencies and making absorption easier Plan allocations for MS Compartment well in advance (Partnership Agreement) Carefully identify policy objectives which are common among regions, and consider that joint instruments would be more impactful for the benefit of all ….. while at the same time not forgetting that “traditional” and tailor-made financial instruments are still possible under CPR.

21. Advisory support for Financial InstrumentsFrank LeeHead of Division, EIB Advisory Services

22. fi-compass advisory platform www.fi-compass.eu

23. fi-compass case studies, guidance and surveys! The new fi-compass case study features the financial instrument developed to support the Energy Savings in Existing Housing Programme in Greece. The case study describes how the holding fund was established to achieve the objectives of four regional Operational Programmes (OPs) and two sectoral OPs. The Programme, co-funded by ERDF, provided partially subsidised loans combined with non-repayable grants to support household energy saving investments. At the end of the period of investment, 51,152 households had been assisted in reducing their energy consumption. This factsheet provides information on the opportunities available in the 2014-2020 programming period where financial instruments are a sustainable complement to traditional grant based financing. Primarily intended for European Social Fund (ESF) managing authorities and other stakeholders, this document raises awareness and builds a deeper understanding of the role of ESF programmes in supporting microfinance instruments This case study features a financial instrument from France's Occitanie/Pyrénées-Méditerranée Region that uses the European Agricultural Fund for Rural Development (EAFRD). It is implemented through a fund of funds structure (named FOSTER TPE-PME) which aims at improving funding conditions for final recipients through financial instruments, including First Loss Portfolio Guarantees (FLPG) supporting the agricultural, food and forestry sectors. Funding of EUR 27 million is expected to support more than 1 000 final recipients. The financial instrument provides guarantees covering loans, so financial intermediaries can offer better access to finance for rural development investments. This promotes the development, processing and marketing of agricultural products as well as the creation and development of non-agricultural activities in rural areas and forestry technologies

24. Bespoke advisory support for FIs Supporting Managing Authorities and NPBIs throughout the entire FI life cycle, but primarily with: Investment strategies Governance arrangements Financial intermediary selection processes Regulatory advice, incl state aid Carried out ex-ante assessments and feasibility studies (circa 30 undertaken to date covering almost all FI sectors) paid by MAs, using ESIF TA budgets Under the European Investment Advisory Hub, proactive promotion and feasibility of investment platforms, often involving EFSI/ESIF combinations – potential under Invest EU

25. Example Assignments Bulgaria NPI: Support to set up a FoF, devising investment strategy and selection of intermediaries . ESIF/EFSI combination envisaged via an investment platform for urban development Ex-ante for agriculture and food processing in Greece, France and Croatia - have led to ESIF and EFSI FIs with EIF and/or NPBIs Energy efficiency ex-ante assessments and feasibility studies in Spain, Malta and regions of France. Using EPC guidance developed with Eurostat, developing guidance, templates and IPs in Slovakia, Czech Rep and other countries. Feasibility study for a V4 regional investment and advisory platform to attract private financing in infrastructure