The role of investment funds in financing eco-innovation David Walker EIB Group Brussels, 29th November 2010

EIB Group  EIB + EIF = EIB Group  EIB = EU's long-term lending institution  Established 1958, owned by EU Member States  Main area of EIB/EIF cooperation = SME support

EIF’s Shareholders* EIB: Main shareholder (61%)‏ European Investment Bank’s shareholders: 27 EU Member States European Community represented by the European Commission (29%)‏ 30 public and private financial institutions from 17 countries (9%)‏ * 1% of EIF’s shares are still to be issued including:

Overview  A new “sustainable investment” asset class is emerging  Number and range of funds increasing every year  EIB Group role to cornerstone new funds  Still emerging, still gaps

DateAuthor What types of fund are active? Venture Capital funds at core of eco-innovation investment  ICT, life science and clean-tech funds: all relevant  EIF role as the major investor in European VC  Dedicated resources to eco-innovation: CIP GIF1  Examples: ETF, Capricorn Cleantech, Wheb II, 360°

What types of fund are active?  Tech transfer funds/structures support pre-seed, seed Strategic development area for EIF Clear link to eco-innovation CIP GIF 1 and other resources deployed Examples: UMIP MTI TTA; Chalmers Innovation

Technology Transfer - Converting Research into Products for the Market MarketUniversity / Research Organisation Spin-out Licensing Collaboration (contract research,…)‏ IP / Idea “technology IP” “prototype IP” R&D Technology TransferMarketable Product

 Lower mid-market drives expansion and development EIF active since 2003 Dedicated resource to eco-innovation: CIP GIF 2 Examples: Demeter II, Pinova Fund I  Mezzanine funds provide later-stage finance EIF manages dedicated mandate in this area Integrated finance fund model pioneered by EIF/EIB No eco-innovation dedicated mezzanine funds What types of fund are active?

 Infrastructure funds supporting e.g. renewable energy EIB active in this area since 2005 Dedicated resource for outside Europe: GEEREF Examples: Enercap Power Fund I, Platina, Impax New Energy II Related fund types to eco-innovation

 Environmental funds Wide spectrum e.g. sustainable forestry, land decontamination... EIB active as cornerstone Example: Dasos Timberland Fund

 Debt funds Suitable for targeting certain sectors e.g. energy efficiency, smaller renewables EIB active as sponsor/lead Example: Green for Growth. Layered structure with EC to attract private sector Related fund types to eco-innovation

Green for Growth fund, south-east Europe Fund Structure – Issuance of different share tranches (A, B, C and later Notes)‏ – Offering investors different risk-return profiles

Funds Goals and successful key elements  Why are funds targeting eco-innovation? Not just profit motive “Impact Investing”  What will determine success? Match of fund size with investment strategy Team: equipped with sectoral expertise, ability to add value Success will be measured on both IRR and ERR At manager level, key metric is next fund. KPI for EIF/EIB

 Guarantees EIF dedicated resource via CIP Example: Crédit Coopératif  Infrastructure Loans EIB lending to certain sectors creates opportunities for eco-SMEs Examples: European onshore and offshore wind, solar  Loans to SMEs EIB adopting new approaches Example: risk sharing with the European Commission: RSFF programme Other EIF/EIB instruments supporting eco-innovative SMEs

15 Risk Capital 1 CIP Resources (SME)‏ 2 RSFF (SME / MidCap)‏ 3 Entrepreneur, friends, family Business Angels Tech Transfer/ Seed Formal VC funds Bank Loans and Guarantees Seed / Start-Up PhaseEmerging Growth PhaseDevelopment Phase  Facility: High Growth Innovative SME Scheme (GIF), Ecotech  Purpose: IP financing, technology transfer, seed financing, investment readiness  Target Group: VC Funds, Business Angels  EIF Product: Fund-of- Funds  Competitiveness and Innovation Framework Programme Guarantee schemes  Growth financing for SMEs  Formal VC funds  SME guarantees (loans, microcredit, equity/mezzanine, securitisation)‏  RSFF  RDI financing  SMEs/MidCaps, Banks, PE Investors (sub- investment grade)‏  Loans (incl. Mezzanine), Funded Risk Sharing Facilities with Banks (Investors)‏ Investment Loans 4  Investment Loans  RDI financing  MidCaps/Large Corporates/Public Sector Entities (investment grade)‏  Loans, Guarantees Later Stage Counterparts EIF/EIB instruments: overview

 European VC industry is still sub-scale  VC geographical reach incomplete  Tech transfer still emerging across EU  Co-investment funds with business angels?  Gap between VC/PE and infrastructure funds?  New sectors still to be fully addressed? Recycling/waste to energy funds Biodiversity funds Where are the gaps in the investment fund industry?

Thank you for your attention!!!