The consortium in composed of the following companies:
- PwC EU Services.
- COWI Consulting Group.
- Fundación General de la Universidad Politécnica de Madrid (FG UPM).
- Taylor Wessing.
In the 2014-2020 programming period, FIs will play an increasingly important role in helping Member States and MAs to achieve ESI Fund objectives. Public FIs are most appropriate where they can be implemented to support investments in projects that are expected to deliver economic returns (i.e. that are revenue-generating) but that are unable to attract the required funding on the market because potential private investors believe that the risks involved are unacceptably high or financial returns too low compared to market returns; or that the costs of obtaining financing on the open market is too high (particularly in the case of SMEs). This situation may be as a result of market failures (e.g. public goods such as innovation, unpriced externalities for energy efficiency renovations) or sub-optimal investment conditions.
MAs are able to address these market failures/suboptimal investment conditions through the careful implementation of FIs that use products such as loans, guarantees, equity and mezzanine financing which provide much-needed liquidity and/or assume the risk required to draw-in additional private finance or public funding for investments. FIs therefore have a strong potential to complement traditional grant financing by catalysing and leveraging additional investment resources to achieve the expected results and impacts of the Programme. These additional resources may come in the form of national co-financing within the EU Programme contribution or beyond the co-financing requirement outside of the Programme. Of key interest to MAs is to determine how they can unlock these private additional resources by forging partnerships with financial institutions and project promoters who are interested in the scope of the FI and believe that the investment strategy offers a sound business proposition.
A further advantage of FIs is their revolving effect which allows for the recycling of funds over multiple investment cycles where they can continue to support ESI Fund Programme investment objectives. This form of revolving instrument may prove more sustainable than traditional grant financing and be particularly important when addressing market failures or suboptimal investment conditions related to access to finance or social inclusion where new final recipients may become eligible for assistance later in the programming period. This will contribute to reinforcing the EU’s long-term investment capacity.
The revolving nature of FIs and their ability to leverage further public and private investment is particularly important in the current period of tight fiscal constraints across the EU-28 and ongoing difficulty to mobilise banking financing due to the solvency issue of the financial sector. Nevertheless FIs will only be an effective option when genuine returns on investment exist and financial risk can be managed, otherwise grants may remain the best form of public support to achieve ESI Fund investment objectives. Establishing these conditions requires a rigorous analysis of both the quantitative and qualitative value added of the FI compared to grants or other policy options, as laid out in the Common Provisions Regulation (CPR). In other cases, a combination of FIs and grants may be the most effective and efficient means of achieving investment priorities. For example, upfront audits for energy efficiency projects are essential to determine where investments can best be made, however they are often expensive and do not in themselves provide a revenue stream. In this case a combination of grant (for the audit) and FI (loan for energy efficiency renovations) may be a viable option for MAs to pursue.