This article was first published in the Luxembourg Private Equity Association’s magazine Insight/Out # 27 featuring a multifaceted cover dossier on the European Investment Fund (EIF) and this contribution by Adelaide Cracco, Head of Unit for Climate and Environmental Impact.
As one of the investment pillars of the European Union and largest providers of risk capital in Europe, the EIF has a key role in tackling climate change and supporting the green transition of the European economy.
The EIF has been an early pioneer and one of the most active LPs in climate and environmental impact finance with its first cleantech fund investment dating back to the 2000s. At the time the market was still in its infancy, largely immature and ill-prepared for private equity financing.
Thanks however to governmental policies and a growing awareness across industry and society of the impending emergency, sustainability is finally garnering the attention it deserves.
Sustainability as an opportunity – also for investors
The green financing gap is acute and vast, encompassing multiple climate, environmental and societal challenges as well essential industries. Every sector of the economy needs to transform and risk capital will be critical to bring about the change that is required.
This is attracting a new and growing community of investors that perceive both the magnitude of the market need as well as its opportunity.
Importantly, and consistent with the developing nature of the market, the EIF is seeking to build a well-functioning and specialised climate and environmental fund industry with sufficient breadth and depth to address funding shortfalls in core strategic policy areas.
The EIF is thus acting as an anchor investor to new specialised thematic funds that can provide strong value add to the market in addition to capital and working closely with its stakeholders to devise targeted investment programmes for key and critical industries, the RePowerEU and BlueInvest mandates being notable examples.
The EIF is also striving to ensure that SMEs and infrastructure projects have access to funding throughout all stages of their development by covering the financing continuum from business proof of concept through to company growth and expansion.
Climate action and environmental sustainability necessitates both the development of game changing innovation and technologies needed for the future, as well as the scaling of existing products and solutions that can be deployed as of today.
Similarly, it is supporting the expansion of climate and renewable energy infra- structure, fundamental to achieve net zero targets, taking on the financial and developmental risk of greenfield projects versus existing later stage brownfield projects.
Leveraging the EIF’s impact expertise – in funding and policy
As part of its mission to mobilise capital, the EIF has also just launched a Greentech fund of funds initiative which capitalises on its experience as one of the most active and longstanding LPs in the European clean tech industry in order to provide to provide private institutional investors with qualified and secerned access to the most relevant VC and PE fund initiatives coming out of Europe.
Impact is finally and fundamentally at the core of the EIF’s climate and environmental policy objectives. The EIF has been a frontrunner in impact measurement and performance incentives and is also systematically implementing the EIB Group’s climate action and environmental sustainability eligibility criteria to enable the classification of underlying fund investments according to their contribution towards the six pillars of the EU taxonomy.
Investing more in what matters
Going forward, the EIF’s climate and environmental objectives should be considered within the broader context of the EIB Group’s positioning as the EU Climate Bank and its roadmap to direct 50% of its financing activities towards climate action and environmental sustainability by 2025.
The EIF will thus further intensify its climate and environmental activities in the years to come, extending its reach across strategic underserved verticals and geographies which can help bring the EU closer to a carbon neutral, sustainable and resilient future.