EU Blending Framework SWITCH to Green Coordination Meeting 27th September 2016, Brussels Jose Manuel FERNANDEZ Directorate General for Development and Cooperation

The lead financial institution Examples What is blending Forms of blending Some figures The lead financial institution Examples The grants can address market inefficiencies and can make projects with a high economic and social return possible. The grant element can set incentives, address factors that hold back investment such as risk and send out positive signals to market actors For each project, find the right financing project mix needed

Blending The use of a limited amount of grants to mobilise financing from partner FI's and private sector to enhance the development impact of investment projects LEVERAGE The grants can address market inefficiencies and can make projects with a high economic and social return possible. The grant element can set incentives, address factors that hold back investment such as risk and send out positive signals to market actors For each project, find the right financing project mix needed

So far, blending takes one of 5 forms Investment Grant Interest Rate Subsidy Technical Assistance Grant Risk Capital Guarantees

Technical Assistance Business Development Support Pre-investment Project Analysis Feasibility ESIA Design Pre-investment project screening Investment phase services Project management Supervision Auditing, Verification EMP Technical Assistance

July 2015 Africa Investment Facility (AfIF)

Annual grant approvals (in € million) 2007-2014 Blending operations Annual grant approvals (in € million) Approx. € 2 billion, supporting more than 230 projects (EUR 43 billion)

2007-2014 Blending operations Grant approvals by type (in %)

2007-2014 Blending operations Grant approvals by sector (in %)

Lead Financial Institution EIBEBRDAFDKFWIDBCEBAECIDCDPAFDBCDBCOFIDESSOFID CAFBIODEGOeEBIFCADBBCIEFMO … Projects are submitted by lead FI

FIRA (Mexico) Technical Assistance & Investment Grant Project aims to improve climate change adaptation in the agribusiness sector. The investment grant will contribute to the improvement of the financing offer to promote sustainable practices in agriculture (EUR 4 million). The TA will assist FIRA to translate existing strategy to mid-term action programmes (EUR 1 million). The total project cost is estimated at EUR 100 million, of which EUR 5 million from the Latin American Investment Facility (LAIF). AFD, Inter-American Development Bank. FIRA (Mexico)

FIRA (Mexico) Technical Assistance & Investment Grant The investment grant will reduce the cost of financing for projects leading to: Reduced energy consumption and C02 emissions Increased use of renewable energy Reduced water use by introduction of new practices Better use of pesticides Better management of toxic waste Etc FIRA (Mexico)

Financial Instruments Risk capital can help address the lack of equity capital in some countries, particularly for new sectors such as renewable energy (e.g. GEEREF fund) Guarantees are particularly useful in more liquid markets where the perceived risk of certain activities is high among local investors or banks (e.g. SME Guarantee Facility) Financial Instruments

SME Finance Facility (NIF) Financial Instruments Guarantees & Technical Assistance EU grant resources are used to finance a combination of Technical Assistance to local partner financial intermediaries (PFI) and/or credit enhancement support for PFIs (under the form of guarantee) to leverage new on-lending by PFIs to SMEs. Accompanied by EBRD/KfW credit lines to PFIs. Up to €10 million for guaranteeing up to 50% of individual loans and up to 10% of the loan portfolio risk. Total project volume: up to €100 million Grant contribution: €10m (Guarantee) incl. up to €1m (TA) Involved EFIs: EBRD, KfW SME Finance Facility (NIF)

Guarantees (for SME lending) PFI PFI PFI PFI PFI PFI PFI 50% guarantee provided to PFIs for their lending to SMEs (and 10% of SME portfolio) TA for PFIs and SMEs SME Borrowers

Eco.business fund for SME in Latin America Financial Instruments Equity & Technical Assistance The eco.business Fund is an investment fund promoting sustainable business practices contributing to biodiversity conservation and the sustainable use of natural resources. Eco.business’ purpose is to promote the development of green enterprises in developing and transition countries, with an initial focus on highly biodiverse countries such as Peru, Columbia, Ecuador and Central America. LAIF: € 13 m equity capital and € 3 m TA grant Eco.business fund for SME in Latin America

Eco.business fund for SME in Latin America Financial Instruments (Equity) & Technical Assistance The Fund will offer: Medium to long term senior loans in USD and in local currency. Subordinated debt. In particular cases, other instruments like guarantees, term deposits, equity and quasi equity. The TA Facility will offer: Capacity building for PFIs to better reach the target group. Technical assistance for the target group: Advice mainly to SME on changing to more biodiverse and resource efficient production processes; Support with the loan request and support to get access to eco.business financing. Eco.business fund for SME in Latin America

& Technical Assistance Financial Instruments (Equity) & Technical Assistance Eco.business fund for SME in Latin Anmerica

More information http://ec.europa.eu/europeaid/policies/innovative-financial-instruments-blending_en

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