(Source: European Commission)
What is InvestEU?
InvestEU provides the EU with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable recovery. It provides crucial support to companies, especially in view of the still ongoing crisis. It also helps mobilising private investments for the EU’s policy priorities, such as the European Green Deal and the digital transition.
The InvestEU Programme brings together under one roof the multitude of EU financial instruments previously available to support investment in the EU, making funding for investment projects in Europe simpler, more efficient and more flexible.
The InvestEU Fund supports 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 NextGenerationEU resources. The overall investment to be mobilised on this basis is estimated at more than €372 billion.
There are some major novelties in the InvestEU programme: the guarantee is 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). Furthermore, the InvestEU Fund provides 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 complement the InvestEU Fund:
The InvestEU Advisory Hub provides technical support and assistance to help with the preparation, development, structuring and implementation of projects, including capacity building.
The InvestEU Portal brings together investors and project promoters by providing an easily-accessible and user-friendly database.
How does InvestEU support the recovery?
InvestEU is the EU’s investment programme that plays a major role in supporting the European economy. It provides and attracts 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 plays a particularly important role in the recovery, as EU businesses might need help to access and attract necessary funding, including for innovative projects which might involve more risks and require a European approach.
InvestEU is also able to support companies affected by the pandemic crisis. There is a possibility to provide capital support to small and medium-sized businesses (SMEs) that were not in difficulty in State aid terms already at the end of 2019, but since then have faced significant risks due to the crisis caused by the COVID-19 pandemic.
In addition, Member States are able to use InvestEU as a tool to implement their recovery and resilience plans under the Recovery and Resilience Facility (RRF), if they have indicated so in their recovery and resilience plans. 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 can benefit from the EU guarantee and its high credit rating, giving national and regional investments more firepower.
How does the InvestEU Fund work?
The InvestEU Fund mobilises public and private investment through an EU budget guarantee of €26.2 billion that backs the investment projects of the European Investment Bank (EIB) Group and other financial partners, and increases 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
Strategic investments are mainstreamed across the four policy windows. This includes for instance: providing critical healthcare and supporting the manufacturing capacities for pharmaceuticals; building stronger value chains within the EU, for example regarding the manufacturing capacities for renewable energy technologies; and supporting critical infrastructure, for instance in the field of energy.
The guarantee is 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 amounts to €430 million.
The InvestEU Fund is implemented through financial partners who will invest in projects using the EU guarantee. The main partner is 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 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 enlarges and diversifies the pipeline of projects and increases the potential pool of final beneficiaries.
What are 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 the Investment Guidelines which lay down the requirements that financial products and financing and investment operations shall satisfy.
How does InvestEU provide capital support to SMEs?
InvestEU particularly aims to support SMEs and continues the success from EFSI where over 1.4 million SMEs benefitted from investment projects.
The InvestEU programme also 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 and its aftermath. It helps such companies at this critical time getting back to a sustainable and profitable business track.
Capital support is open under all policy windows and therefore contributes to the EU priorities of the green and digital transitions. Such financing is provided directly by the EIB, the EIF, the EBRD or National Promotional Banks or through financial intermediaries or dedicated vehicles.
The financing typically takes place through financial intermediaries that take equity participations, convertible loans and other equity-type financing. These intermediaries are typically 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 is done on commercial terms and crowds 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 can benefit from the EU guarantee and its high credit rating, giving national and regional investments more firepower.
Who manages InvestEU?
A Steering Board gives strategic direction on programme implementation. It is composed of the Commission (four members), the EIB Group (three members) and other implementing partners (two members) as well as a non-voting expert appointed by the European Parliament. The Steering Board strives to take its decisions by consensus.
The Steering Board is assisted by an Advisory Board composed of representatives of the Commission, the implementing partners (one member each) and Member States (one member each). The Committee of the Regions and the Economic and Social Committee also have one member each. The Commission is able to consult this board when preparing and designing new financial products or to follow market developments and share information. This Advisory Board is able to issue recommendations to the Steering Board on the implementation and functioning of the InvestEU programme.
An Investment Committee composed of 12 independent experts is 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 is supported by a secretariat, which is staffed by and located in the Commission. The Committee’s decisions are made independently, with no political interference.
How does 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.
To achieve the objectives of the green transition it is important to reach an ambitious climate target for InvestEU. Therefore, the InvestEU Regulation provides that at least 30% of the InvestEU Fund are supporting financing for investments that contribute to the EU’s climate objectives. Furthermore, under the “Sustainable Infrastructure Window” of the InvestEU Fund, 60% of the investments supported are contributing to climate and environmental objectives. Moreover, the InvestEU programme is supporting sustainable investments in all sectors of the EU economy and contributes to more sustainable practices among private and public investors. The InvestEU Regulation also has a reference to the Commission’s biodiversity ambition and to its biodiversity goals.
To measure the contribution of specific financing and investment operations to the climate and environmental targets of InvestEU, a dedicated climate and environmental tracking methodology has been developed. In addition, a sustainability proofing method has been determined to review the environmental, climate and social impacts of projects, before they are approved. This method will also take into account the ‘do no significant harm’ principle as well as the technical screening criteria of the EU Taxonomy.
How is the ‘do no significant harm principle’ operationalised under InvestEU?
In line with the InvestEU Regulation, the Commission has developed sustainability guidance to operationalise the ‘do no significant harm’ principle. This guidance has been developed in cooperation with Implementing Partners, financial intermediaries and project promoters. It ensures 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 aims at identifying and addressing potential significant impacts the operations may have on the climate, environmental and social dimensions.
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 is 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 include a dedicated section on the JTS and its implementation modalities.
How does InvestEU contribute to the digital transition?
Through its “Research, Innovation and Digitisation window” InvestEU supports the digital transition, including by supporting the development of digital solutions for businesses and boosting the development of trustworthy digital technologies in Europe.
In particular, InvestEU supports investments in digital infrastructures, technologies, and digital skills. This includes investments in better connectivity, super-computing, artificial intelligence, blockchain, cloud, data, the Internet of Things, semiconductors, including microprocessors, data technologies, 5G and quantum technologies, digital transformation of ecosystems and businesses, as well as innovative media content and technologies.
Furthermore, the digital investments under InvestEU, in particular the green and digital technologies, are also contributing to a sustainable, climate-neutral and resource-efficient economy.
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 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 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 connects project promoters and intermediaries with advisory partners, who work directly together to help projects reach the financing stage. The InvestEU Advisory Hub complements 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 provides 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. The InvestEU Portal builds on its predecessor, the European Investment Project Portal (EIPP), having further enhanced features.
When can companies expect to be able to apply for financing supported under InvestEU?
The Commission launched the call for expression of interest for selecting implementing partners other than the EIB Group in 2021. A guarantee agreement with the EIB Group was signed in March 2022 so that companies and project promoters can start applying for financing. Guarantee agreements with other implementing partners will follow in the course of 2022.
As a transitional measure, the EIB Group and other implementing partners may also benefit from warehousing possibility that allows them to support companies 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.