Explanatory Memorandum to COM(2018)439 - InvestEU Programme

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dossier COM(2018)439 - InvestEU Programme.
source COM(2018)439 EN
date 06-06-2018


1. CONTEXT OF THE PROPOSAL

For the Multiannual Financial Framework (MFF) as of 2021, there is a need to provide for an EU investment programme to cater for cross-cutting objectives in terms of simplification, flexibility, synergies and coherence across relevant EU policies. The considerations put forward in the Commission's Reflection Paper on the future of EU finances highlight the need 'to do more with less' and leverage the EU budget at a time of budgetary constraints. To address the problem of the current multitude of EU-level financial instruments, the Reflection Paper suggests as a possible solution their integration in a single fund that would provide support via a wide variety of financial products while having a strengthened focus on policy areas and objectives. It also suggests that EU-level financial instruments and those managed by Member States under cohesion policy should be complementary.

Under the current and previous MFFs, financial instruments expanded under a variety of programmes. During the 2014-2020 MFF, the Commission established 16 centrally managed financial instruments. The budget allocation for the instruments for internal action currently amounts to EUR 5.2 billion. These instruments aim to support investments in different policy areas, like Research and Innovation (R&I), small and medium-sized enterprises (SMEs) financing, infrastructure, cultural sectors, as well as promoting environmental and social sustainability.

Financial instruments are also a delivery mechanism for the European Structural and Investment Funds (ESIF) programmes delivered under shared management by the managing authorities. The total budget programmed to be delivered through financial instruments under shared management for the 2014-2020 MFF amounts to approximately EUR 21 billion.

Moreover, in the aftermath of the financial and sovereign debt crises spanning from 2008 to 2015, boosting jobs, growth and investment is one of the top 10 priorities of the Commission in the form of the Investment Plan for Europe launched in 2014 as a response to the subdued investment levels. At its core is the European Fund for Strategic Investments (EFSI) established in 2015, with the aim of mobilising at least EUR 315 billion of additional investment by mid-2018 through support to the risk-bearing capacity of the European Investment Bank Group by means of an EU guarantee of EUR 16 billion together with financing of EUR 5 billion from the own resources of the European Investment Bank Group. Building on its success, the EFSI was extended and increased at end-2017. It now provides a budgetary guarantee of EUR 26 billion underpinned by provisioning of budgetary resources of EUR 9.1 billion. Moreover, the European Investment Bank Group provides additional risk-bearing capacity of EUR 7.5 billion. The aim is to mobilise at least EUR 500 billion of additional investment by end-2020. The InvestEU Programme will be based on the same successful budgetary model as the EFSI, making sure that scarce budgetary resources mobilise as much private investments as possible.

The conditions for an increase in investment have improved since 2014, thanks to the improvement of the economic conditions and also due to public interventions such as the EFSI. However, important investment gaps remain in different policy areas which are often held back by persistent market failures. In order to meet the ambitious policy objectives of the Union, attracting private capital to finance investment remains essential while adjusting the approach towards more policy relevance. The InvestEU Programme will contribute towards meeting policy objectives of the Union, including in particular under COSME and Horizon Europe, whenever the use of repayable investment support is appropriate. The Commission's proposal for A Modern Budget for Europe establishes that EUR 3.5 billion of the envelope for Horizon Europe is allocated under the InvestEU Fund, to contribute to the Research, Innovation and Digitisation policy window, with a total indicative allocation of the EU guarantee of EUR 11.25 billion.

The creation of the InvestEU Programme provides for a single EU investment support mechanism for internal action for the 2021-2027 MFF. The InvestEU Programme builds on the successful experience of the EFSI and the current financial instruments for internal policies. It will stand on four legs: (i) the InvestEU Fund providing for the EU guarantee; (ii) the InvestEU Advisory Hub providing in particular project development-related technical assistance; (iii) the InvestEU Portal providing an easily accessible data-base for promoting projects in search for financing; and (iv) blending operations.

The InvestEU Fund will be demand-driven in attracting private investment. It will foster in particular innovation, digitisation and sustainable infrastructure investment but will also cater for needs in the social sector and of SMEs. Reaching also smaller and local projects will be important.

The InvestEU Fund consists of an EU budget guarantee that will back the financial products provided by the implementing partners. It targets EU added-value projects and promotes a coherent approach to financing EU policy objectives. It offers an effective and efficient mix of EU financing tools for specific policy areas.

This proposal provides for a date of application as of 1 January 2021 and is presented for a Union of 27 Member States, in line with the notification by the United Kingdom of its intention to withdraw from the European Union and Euratom based on Article 50 of the Treaty on European Union received by the European Council on 29 March 2017.

• Reasons and objectives

As a single investment scheme for internal Union policies, the InvestEU Programme is both a policy instrument and a delivery tool.

As a policy instrument, the InvestEU Programme's overall objective is to support the policy objectives of the Union by mobilising public and private investment within the EU, hereby addressing market failures and investment gaps that hamper the achievement of EU goals regarding sustainability, competitiveness and inclusive growth.

The purpose is to supply financing to economic actors with a risk profile that private financiers are not always able or willing to address in order to promote competitiveness of the EU economy, sustainable growth, social resilience and inclusiveness and the integration of capital markets in the EU in line with EU policy objectives in different sectors. Underpinned by an EU guarantee, the InvestEU Programme will contribute to the modernisation of the EU budget and increase the impact of the EU budget by 'doing more with less'. For economically viable projects with a revenue generating capacity, a more systemic use of a budgetary guarantee can help increasing the impact of public funds.

The InvestEU Programme should have the capacity to shape an EU strategy in tackling the still subdued investment activity in the Union. By diversifying the sources of funding and promoting long term and sustainable finance, the InvestEU Programme will contribute to the integration of European capital markets, within the framework of the Capital Markets Union, and to the strengthening of the Single Market. As an EU-wide resource pooling financial, market, technical and policy expertise, the InvestEU Programme should also be a catalyser for financial innovation at the service of policy objectives.

As a delivery tool, the InvestEU Fund aims to implement the EU budget through a budgetary guarantee more efficiently, achieving economies of scale, increasing the visibility of EU action and simplifying the reporting and accountability framework. The proposed structure has the objective of simplification, increased flexibility and removal of potential overlaps between seemingly similar EU support instruments.

In addition to the EU guarantee at Union level, the proposal foresees the possibility for the Member States to use part of the funds under shared management through a dedicated compartment in the EU guarantee under the InvestEU Fund in pursuit of the same objectives where market failures or sub-optimal investment situations are present at national or regional level.

Moreover, the InvestEU Advisory Hub will provide project development advisory support and accompanying measures throughout the investment cycle to foster the origination and development of projects and access to financing. The InvestEU Advisory Hub will be provided in the InvestEU Programme's policy areas and will also ensure a single point of access for project promoters and intermediaries. The InvestEU Advisory Hub will be complementary to technical assistance activities carried out under the shared management programmes.

Finally, the InvestEU Portal will reinforce the visibility of investment opportunities in the Union and thus help project promoters in search of financing.

• Consistency with existing policy provisions

The proposal is fully aligned with existing policy provisions since the InvestEU Programme provides the EU guarantee in order to efficiently use EU budgetary funds when operations with revenue-generating capacity are financed in line with EU policy objectives. These include the Capital Markets Union, the Digital Single Market Strategy, the Clean Energy for All Europeans package, the EU Action Plan for the Circular Economy, the Low-Emission Mobility Strategy, the Defence and the Space Strategy for Europe. Within its scope of application, the InvestEU Fund supports from a financing perspective these mutually reinforcing strategies.

• Consistency with other Union policies

The InvestEU Programme is complementary to grant financing and other actions under the policy areas it supports, such as Horizon Europe, the Connecting Europe Facility, the Digital Europe Programme, the Single Market, Competitiveness of SMEs and European Statistics Programme, the European Space Programme, the European Social Fund+, the Creative Europe, the Programme for Environment & Climate Action (LIFE) and the European Defence Fund. Synergies with external policy instruments will be ensured, where relevant.

Blending with grant financing will ensure complementarity with other spending programmes.

The InvestEU Programme is also complementary to the European Structural and Investment Funds. In order to facilitate the deployment of certain Funds under shared management (European Regional Development Fund (ERDF), the European Social Fund+ (ESF+), the Cohesion Fund, the European Maritime and Fisheries Fund (EMFF) and the European Agriculture Fund for Rural Development (EAFRD) through financial products, the Member States will have the possibility to rely on the InvestEU Programme. This is a major simplification compared to the current situation since only one set of rules will apply in this case.

The InvestEU Programme's actions should be used to address market failures or sub-optimal investment situations, in a proportionate manner, without duplicating or crowding out private financing and have a clear European added value. This will ensure consistency between the actions of the Programme and EU State aid rules, avoiding undue distortions of competition in the internal market.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

The proposal is based on Article 173 (Industry) and the third paragraph of Article 175 (Economic, Social and Territorial Cohesion) of the Treaty on the Functioning of the European Union (TFEU).

In line with established jurisprudence, the legal basis referred to reflect the main contents of the proposal. The procedures laid down for both Articles regarding the legal basis are the same (ordinary legislative procedure).

• Subsidiarity (for non-exclusive competence)

The InvestEU Programme will cover investments and access to finance supporting EU policy priorities by addressing EU-wide market failures and investment gaps. It also supports the design, development and EU-wide market testing of innovative financial products, and the systems to spread them, for new or complex market failures and investment gaps.

The voluntary Member State compartment would allow addressing country specific market failures and investment gaps while drawing on financial products designed at central level, ensuring a more efficient geographical usage of resources, where this is warranted. It would allow Member States to implement part of their funds under the European Regional Development Fund (ERDF), the European Social Fund+ (ESF+), the Cohesion Fund, the European Maritime and Fisheries Fund (EMFF) and the European Agriculture Fund for Rural Development (EAFRD) through the InvestEU Fund.

The proposed structure with two compartments in each policy window allows an effective application of the subsidiarity principle. In addition, the two compartments within each window will share the same InvestEU Fund rules, which will allow a clearer and simpler framework for the use of different sources of EU funds.

• Proportionality

The EU long-term goals regarding sustainability, competitiveness and inclusive growth require significant investments in different policy areas. This includes, inter alia, new models relating to mobility, renewable energy, energy efficiency, natural capital, innovation, digitisation, skills, social infrastructure, circular economy, climate action, oceans and small businesses' creation and growth.

Renewed efforts are needed to tackle persisting market fragmentation and market failures caused by private investors' risk-averseness, the public sector's limited funding capacity and structural inefficiencies of the investment environment. Member States cannot sufficiently bridge those investment gaps alone.

An intervention at EU level ensures that a critical mass of resources can be leveraged so as to maximise the impact of investment on the ground. The proposal does not replace Member State investment but on the contrary it is complementary to such investments, by focusing in particular on support for projects that provide EU added value. In addition, the EU level provides for economies of scale in the use of innovative financial products by catalysing private investment in the whole EU and making best use of the European institutions and their expertise for that purpose. The EU intervention also provides access to a diversified portfolio of European projects, thereby catalysing private investment, and allows for the development of innovative financing solutions which can be scaled up or replicated, as appropriate, in all Member States.

Intervention at EU level is the only tool capable of effectively addressing investment needs linked to EU-wide policy objectives. In addition, structural reforms and an improved regulatory environment will continue to be necessary to address the remaining investment gaps in the period 2021-2027.

• Choice of the instrument

The purpose of the proposal is to provide a single instrument providing an EU budgetary guarantee to underpin financing and investment operations by the implementing partners in line with the conclusions of the Impact Assessment to build on the success of the EFSI and previous financial instruments while taking into account lessons learnt as regards, inter alia, the avoidance of fragmentation and possible overlaps. Therefore, a Regulation is proposed.

3. RESULTS OF RETROSPECTIVE EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Retrospective evaluations/fitness checks of existing legislation

The proposal builds on lessons learnt from evaluations of predecessor financial instruments and of the EFSI. In particular, an independent evaluation of the EFSI [insert references to external evaluation and SWD] was conducted in 2018 in addition to several other evaluations on the EFSI since its inception:

·Commission evaluation on the use of the EU guarantee and the functioning of the EFSI guarantee fund 1 accompanied by an opinion of the Court of Auditors 2 ,

·EIB evaluation on the functioning of the EFSI 3 (October 2016) and

·independent external evaluation on the application of the EFSI Regulation 4 (November 2016).

Main findings of these evaluations were summarised in the Commission Communication on the Investment Plan for Europe (COM (2016) 764) 5 .

All evaluations found that the EU Guarantee proved relevant and enabled the EIB to undertake riskier activities and introduce higher risk products to support a wider range of beneficiaries. The EFSI also proved a relevant tool to mobilise private capital. In terms of governance, the independent evaluation of 2018 pointed to the importance of the Investment Committee for the credibility of the scheme, the transparency of its decisions and the quality of the scoreboard, which was evaluated as a relevant tool that allows a consistent approach to project presentation and to summarise appraisal conclusions.

Based on signed operations, the EFSI has mobilised EUR 207 billion of investment by end-2017, corresponding to 66 % of the target. This increased to EUR 256 billion for approved operations and corresponds to 81 % of the target. Extrapolating this trend a further 6 months with the completion of the EFSI in mid-2018, mobilised investment from approved operations are expected to reach the EUR 315 billion target by mid-2018 or shortly thereafter.

The evaluations have noted some concentration in Member States with well-developed institutional capacities. However, if the investment mobilised is considered relative to Member States' Gross Domestic Product this concentration is much less pronounced. Nevertheless, in order to improve further the geographical balance, the EFSI 2.0 has strengthened the relevance of the European Investment Advisory Hub.

As of 31 December 2017, the actual multiplier effect of the EFSI is broadly in line with what had been assessed at the outset – an aggregate global multiplier of 13.5 achieved by end-2017 against a target of 15 at the end of the investment period. The EFSI has also been effective in mobilising private investments. Around 64 % of investment mobilised is from the private sector.

In terms of efficiency, the availability of the EU Guarantee proved to be an efficient tool to considerably increase the volume of riskier operations by the European Investment Bank. In particular, the EU Guarantee freezes less budgetary resources compared to financial instruments, as it requires prudent but limited provisioning compared to the level of financial engagement. It assumes a contingent liability and is consequently expected to achieve economies of scale that result in higher investment mobilised per euro spent. The evidence analysed as part of the independent evaluation in 2018 also clearly indicated that the size of the EU Guarantee under the EFSI was appropriate. It also found that the approach used for the modelling of the EFSI target rate was broadly adequate and in line with industry standards, but proposed some further developments.

A budgetary guarantee has also proven more cost-efficient for the EU budget, as it limits the payment of management fees to the implementing partner. In the case of the EFSI, the EU is even remunerated for the EU Guarantee provided under the Infrastructure and Innovation Window.

The 2016 independent evaluation stressed the need to better define and clarify the concept of additionality. Consequently, the EFSI 2.0 Regulation includes several measures which clarify the concept and the criteria and made the process more transparent.

The independent evaluation of 2018, which could only assess operations approved under the EFSI and therefore could not test the new EFSI 2.0 measures, confirmed the need to further clarify the concept of additionality and the definition of sub-optimal investment situations. In particular, it concluded that the EFSI operations are characterised by a higher level of risk as compared to standard (non-EFSI) operations by the European Investment Bank, as required by the EFSI Regulation. However, the various survey and interviews indicated that under the Infrastructure and Innovation Window of the EFSI some crowding out may have occurred. It would be important to avoid this situation under the InvestEU Programme.

The independent evaluation of 2018 also highlighted the non-financial added value of attracting new investors, providing demonstrations and market testing of new products and financing models, and support and adoption of higher operations standards by financial service providers.

The 2016 EIB evaluation and the independent evaluation of 2018 confirmed the initial disruption caused by the EFSI to other EU level financial instruments by offering similar financial products, in particular the debt instrument under the Connecting Europe Facility and part of the InnovFin, which were partly resolved by re-focusing existing instruments towards new market segments.

The proposal for the InvestEU Fund also builds on lessons learnt from evaluations of predecessor financial instruments spanning two decades (Connecting Europe Facility, Horizon 2020, COSME, etc., and instruments launched under earlier financial frameworks such as the Competitiveness and Innovation Programme (CIP). In general, these evaluations confirm that financing gaps continue to exist in Europe in the sectors and policy areas covered by EU financial instruments and that EU-level investment support continues to be relevant and necessary in order to meet EU policy objectives. However, they also stress that the coherence between different EU-level financial instruments and other EU initiatives should be strengthened, that synergies with national and regional initiatives should be better exploited, and that overlaps exist among the current instruments. They point to a need for better coordination and design of investment support instruments to minimise potential overlaps. The expansion of activities has created a need to strengthen mechanisms for the overall coordination of actions, avoiding unnecessary proliferation and achieving greater synergies.

As regards the COSME instruments offering support to SMEs which are crucial to the Union's future competitiveness, the evaluations show that these instruments are underpinned by a strong market failure rationale and being driven by the constraints in access to finance faced by SMEs. Especially start-ups, smaller SMEs and those lacking sufficient collateral are faced with persistent and structural market gaps for debt finance prevalent across the EU. The Court of Auditors found in a Special Report that the SME guarantee facility has had a positive impact on the growth of supported SMEs. In line with the Court's recommendations, some better targeting of beneficiaries and more coordination with national schemes is needed. 6

Specifically regarding the InnovFin financial instruments under Horizon2020, the evaluations show that access to finance remains an essential issue in order to improve Europe's innovation performance. They confirm that InnovFin financial instruments have performed well against the backdrop of growing demand for risk finance in research and innovation, and made it possible for the EIB Group to cover new riskier segments. However, again, the need to strengthen synergies with other EU funding programmes is highlighted, as is the need to address remaining barriers in the context of helping innovative companies to grow from early stage to expansion. It was also pointed out that only a relatively small number of firms receiving grants under Horizon 2020 benefitted from financial instruments under Horizon 2020, which may hinder scaling up of innovative companies.

The InvestEU Fund will build upon these experiences and target research and innovation recipients (including innovative SMEs and mid-caps) in order to provide them with better access to finance at all stages of their development. It will exploit synergies between grant and market based financing by facilitating blending. In addition, the European Court of Auditors' audit on the guarantee facility recommended better targeting of beneficiaries at more innovative companies. By pooling expertise and resources, the InvestEU Fund will increasingly focus support on companies that engage in higher-risk innovation activities.

In the social area and regarding the Employment and Social Innovation (EaSI) Programme, there is empirical evidence that investments in social infrastructure, social enterprises producing goods ('tangibles') as well as social services, ideas and people ('intangibles') are crucially lacking in the Union, yet critical for its Member States to develop into a fair, inclusive and knowledge-based society.

Microfinance and social enterprises in Europe are still recent developments and part of an emerging market that is not yet fully developed. As highlighted by the EaSI mid-term evaluation conducted in 2017, the EaSI financial instruments have supported vulnerable persons and micro-enterprises and facilitated access to finance for social enterprises, thus having achieved significant social impact. The evaluation concluded that deploying the full potential shown by the results achieved so far justifies the continuity for investment support in the social field and need for additional firepower to be provided under the InvestEU Programme.

The impact assessment report regarding the InvestEU Programme includes a detailed summary of these evaluation results.

• Stakeholder consultations

The impact assessment relied on the Open Public Consultation (OPC) on EU funds in the area of investment, research & innovation, SMEs and the single market and in particular on the replies related to EU Support for Investment 7 .

This proposal takes into account the results of this OPC. In particular most respondents expressed a view that the current EU support for investment does not sufficiently address policy challenges like reducing unemployment, supporting social investment, facilitating the digital transition, facilitating access to finance in particular for SMEs, ensuring a clean and healthy environment and supporting industrial development.

The respondents stressed the importance of EU-wide policy challenges, among others, in areas like research, support for education and training, clean and healthy environment, and transition to low carbon and circular economy, and reducing unemployment.

Around 60 % of respondents to the OPC on Strategic infrastructure expressed a view that difficulty to access financial instruments is an obstacle that prevents the current programmes from successfully achieving policy objectives.

A vast majority of participant supported the identified steps that could help simplify and reduce administrative burdens. In particular, this included fewer, clearer and shorter rules, alignment of rules between EU funds as well as a stable but flexible framework between programming periods.

The proposal aims to address these results by strengthening the focus on Union policy priorities in the context of the support under the InvestEU Fund. The single set of rules established by the InvestEU Fund should address the issue of possible overlaps and in particular make it easier for final recipients to request support. The InvestEU Fund also has an in-built flexibility, allowing it to adjust to developing market situations and needs. The reporting requirements have also been harmonised.

• External expertise

An external evaluation was conducted in line with Article 18(6) of Regulation (EU) 2015/1017 of the European Parliament and of the Council of 25 June 2015 on the European Fund for Strategic Investments, the European Investment Advisory Hub and the European Investment Project Portal and amending Regulations (EU) No 1291/2013 and (EU) 1316/2013 – the European Fund for Strategic Investments 8 as explained under the sub-heading Retrospective evaluations/fitness checks of existing legislation. It is published concurrently to this proposal.

• Impact assessment

The impact assessment [insert reference to Impact Assessment] examines in detail the main challenges for the next MFF, in particular the investment gaps and sub-optimal investment situations in different policy areas like research and innovation, sustainable infrastructure, SME financing as well as social investment. It analyses and explains the choices for the proposed InvestEU Fund structure, its governance, objectives, target actions, financial products and final recipients. Where appropriate, the impact assessment describes the considered alternative solutions and explains the reasoning for the proposed choices. This in particular relates to the rationale for the creation of a single investment support instrument, the delivery mechanisms and the implementing partners, and for the proposed governance structure.

The impact assessment underlines that the current experience with EU financial instruments and the EFSI budgetary guarantee demonstrated a need for simplification, streamlining and better coordination of EU’s investment support instruments during the next MFF. Experience with the EFSI also revealed significant benefits and efficiency gains inherent in using, where possible, a budgetary guarantee instead of traditional financial instruments.

1.

The impact assessment identifies the following main characteristics for the InvestEU Fund:


·A single structure, directly communicated to financial intermediaries, project promoters and final recipients in search of financing.

·Increase in leverage and more efficient use of budgetary resources through the use of a single budgetary guarantee underpinning different financial products that address a diversified portfolio of risks. This presents efficiency gains when compared to the option of having different financial instruments or ring-fenced budgetary guarantees addressing a limited range of risks, in that it requires a lower provisioning rate while providing an equivalent level of protection.

·Simplified and focused offer of investment support instruments targeting the main EU policy objectives. Such offer would also enable combining grants and finance from different EU programmes, EIB conventional lending or private finance.

·The ability to deliver sector-specific instruments to support particular market failures (e.g. Green Shipping, energy demonstration projects, natural capital).

·Flexibility measures that will enable the InvestEU Fund to quickly react to market changes and policy priorities that evolve over time.

·An integrated governance and implementation structure which enhances internal coordination and strengthens the position of the Commission towards implementing partners. This would also lead to management cost efficiencies, avoidance of duplications and overlap and would increase the visibility towards investors.

·Simplified reporting, monitoring and control requirements. Due to the single framework, the InvestEU Fund will foresee integrated and simplified monitoring and reporting rules.

·Better complementarity between programmes managed centrally and those under shared management. This includes a possibility for Member States to channel shared management allocations through the InvestEU Fund (in the Member State compartment).

·Association of the InvestEU Advisory Hub to the InvestEU Fund in order to support the development of and implementation of a pipeline of bankable projects.

The range of interventions envisaged under the InvestEU Fund will be implemented through different products targeting different risks that would inherently require high, medium or low provisioning rates, depending on the type of guarantee coverage provided and the operations supported. The Commission will provide guidance and monitor the usage and the risks incurred under different products, so as to ensure that the overall portfolio is compatible with the provisioning rate laid down in the proposal.

On 27 April 2018, the Regulatory Scrutiny Board issued a positive opinion with reservations. [insert hyperlink to opinion of RSB] The Impact Assessment Staff Working Document [insert reference/link] addresses the issues raised. The report now better explains the current overlaps between the EFSI and centrally managed financial instruments. It also clarifies how the potential overlaps will be avoided under the InvestEU Fund. Moreover, the choice of the proposed governance structure as well as the role of the different bodies are presented in more detail. This includes a comparison of the governance arrangements currently in use for the EFSI and the financial instruments with the one proposed under the InvestEU Fund. Additional clarifications on the assumptions for the foreseen level of risk and the provisioning rate have been added, including further explanations concerning the risk assessment function within the governance structure.

• Simplification

Sub-optimal investment situations are currently addressed through a heterogeneous and fragmented portfolio of EU financial instruments and the EFSI. This situation also leads to complexity for financial intermediaries and final recipients, who are confronted with different eligibility and reporting rules.

The aim of the InvestEU Fund is to simplify the EU investment support by establishing a single framework that helps to reduce the complexity. Due to a reduced number of agreements under a single set of rules, the InvestEU Fund will simplify the access to EU support for the final recipients, the governance and the management of investment support instruments.

Moreover, as the InvestEU Fund covers all investment support policy needs, it allows for the streamlining of and harmonisation of reporting requirements and performance indicators.

• Fundamental rights

The proposal does not have an impact on fundamental rights.

4. BUDGETARY IMPLICATIONS

In accordance with the Communication 9 of the Commission on the Multi-Annual Financial Framework for the period 2021-2017, the budgetary framework (commitments in current prices) foreseen for the InvestEU Programme is EUR 14 725 000 000, including EUR 525 000 000 for project development assistance and other accompanying measures. The overall provisioning will amount to EUR 15 200 000 000, of which EUR 1 000 000 000 being covered by revenues, repayments and recoveries generated by existing financial instruments and the EFSI. In line with [Article 211(4)(d)] of the [Financial Regulation] revenues and recoveries from the InvestEU Fund shall also provide additional contributions to provisioning.

A legislative financial statement is included into this proposal.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

The InvestEU Fund (the EU guarantee) will be implemented through indirect management. The Commission shall conclude the necessary guarantee agreements with the implementing partners. The InvestEU Advisory Hub will be implemented through indirect or direct management depending on the nature of the assistance. The InvestEU Portal will mainly be implemented through direct management.

The impact of the InvestEU Programme will be assessed through evaluations. Evaluations will be carried out in line with paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016 10 , where the three institutions confirmed that evaluations of existing legislation and policy should provide the basis for impact assessments of options for further action. The evaluations will assess the InvestEU Programme's effects on the ground based on the InvestEU Programme indicators/targets and a detailed analysis of the degree to which the InvestEU Programme can be deemed relevant, effective, efficient, provides enough EU added value and is coherent with other EU policies. They will include lessons learnt to identify any lacks/problems or any potential to further improve the actions or their results and to help maximise their exploitation/impact. Monitoring of performance will be measured against indicators laid down in the proposal. In addition to these core indicators, more detailed indicators will be included in the investment guidelines or in the guarantee agreements on the basis of the specific financial products to be deployed. Moreover, specific indicators will be developed for the InvestEU Advisory Hub and the InvestEU Portal.

Harmonised reporting will be requested from the implementing partners in line with the [Financial Regulation].

• Detailed explanation of the specific provisions of the proposal

Chapter I – General provisions

The general provisions provide for the general and specific objectives of the InvestEU Programme which are subsequently reflected in the policy windows.

The financing and investment operations to be supported by the EU guarantee under the InvestEU Fund shall contribute to (i) the competitiveness of the Union, including innovation and digitisation; (ii) the sustainability of the Union economy and its growth; (iii) social resilience and inclusion; (iv) the integration of Union capital markets and the strengthening of the Single Market, including solutions addressing the fragmentation of the Union capital markets, diversifying sources of financing for Union enterprises and promoting sustainable finance.

The size of the EU guarantee is proposed to be EUR 38 000 000 000 and the provisioning rate 40 %, i.e. EUR 15 200 000 000 is needed for the provisioning (both amounts in current prices). The indicative allocation of the EU guarantee between the policy windows is laid down in Annex I. The size of the provisioning is based on the type of financial products envisaged and the riskiness of the portfolios, taking into account the experience under the EFSI and former financial instruments.

A financial envelope of EUR 525 000 000 (in current prices) is proposed for the InvestEU Advisory Hub, the InvestEU Portal and accompanying measures.

It is also foreseen that third countries could be associated to financial products under the policy windows of the InvestEU Fund by providing their full participation in cash. This possibility is foreseen in particular to allow, where justified, for the continuation of existing arrangements, inter alia, in the area of research, or to foresee possibilities for support in relation to the accession processes. Member States wishing to use part of their funds under shared management through the InvestEU Fund may also contribute. These amounts come in addition to the EU guarantee of EUR 38 000 000 000 (in current prices).

Chapter II – InvestEU Fund

This Chapter identifies the four policy windows of the InvestEU Fund: (i) sustainable infrastructure; (ii) research, innovation and digitisation; (iii) SMEs; (iv) social investment and skills. It also defines the two compartments of the EU guarantee: (i) EU compartment; and (ii) Member State compartment, which will be composed of one sub-compartment per Member State which decides to contribute part of its funds under shared management into the InvestEU Fund.

The specific rules related to the Member State compartment foresee a contribution agreement between the Commission and the Member State concerned and define the main elements of the contribution, such as, for example, the size, provisioning rate and contingent liability. The Common Provisions Regulation and other relevant legal instruments will contain the necessary enabling provisions. Once the transfer to the InvestEU Fund takes place, the implementation of the Member State compartment will follow the rules of the InvestEU Fund. The Commission shall select the implementing partner based on a proposal by the Member State and sign the guarantee agreement with the Member State concerned.

The Commission proposal for the 2021-2027 MFF set a more ambitious goal for climate mainstreaming across all EU programmes, with an overall target of 25 % of EU expenditure contributing to climate objectives. The contribution of the InvestEU Programme to the achievement of this overall target will be tracked through an EU climate tracking system. The Commission will present the information annually in the context of the annual draft budget.

To support the full use of the potential of the Invest EU Programme to contribute to climate objectives, the Commission will seek to identify relevant actions throughout the InvestEU Programme preparation, implementation, review and evaluation processes.

Chapter III – EU guarantee

The provisions relating to the EU guarantee and its deployment are set out in this Chapter. They include the irrevocable and on-demand character of the EU guarantee, the investment period which covers the MFF-period, requirements for the eligible financing and investment operations and eligible types of financing. The sectors eligible for financing and investment operations are laid down more in detail in Annex II.

Moreover, this Chapter lays down the requirements for implementing partners – who, inter alia, have to pass the pillar-assessment in line with the [Financial Regulation] –, and for the guarantee agreements between the Commission and the implementing partners.

In selecting the implementing partners, the Commission will consider their capacity to fulfil the objectives of the InvestEU Fund and to contribute their own resources, to crowd-in private investors, to provide adequate geographic and sectorial coverage and contribute to new solutions to address market failures and sub-optimal investment situations. Given its role under the Treaties, its capacity to operate in all Member States and the existing experience under the current financial instruments and the EFSI, the European Investment Bank Group should remain a privileged implementing partner under the EU compartment. National promotional banks or institutions will also be considered. Moreover, it will be possible to have other international financial institutions as implementing partners, in particular when they present a comparative advantage in terms of specific expertise and experience in certain Member States. It should also be possible for other entities fulfilling the criteria laid down in the Financial Regulation to act as implementing partners. Implementing partners will need to cover at least three Member States but may form a group for that purpose.

It is expected that around 75 % of the EU guarantee under the EU compartment would be allocated to implementing partner or partners that can offer financial products in all Member States.

It also includes the detailed coverage of the EU guarantee in function of the different nature of the financing that can be provided under it.

Chapter IV – Governance

The InvestEU Fund will have an advisory board meeting in two configurations: (i) representatives of the implementing partners; and (ii) representatives of the Member States. Its tasks include advising the Commission on the design of financial products to be implemented under the InvestEU Fund and giving advice on market failures and sub-optimal investment situations, as well as on market conditions in the configuration with the implementing partners. The Advisory Board will also inform Member States about the implementation of the InvestEU Fund and allow for a regular exchange of views on market developments as well as the sharing of best practices.

A project team composed of experts put at the disposal of the Commission by the implementing partners will prepare the scoreboard on potential financing and investment operations for the assessment of the Investment Committee whether to grant the benefit of the EU guarantee to these operations or not. The Commission has to confirm that a proposed financing or investment operation is compliant with EU law in order for a proposal to be submitted to the project team.

The Investment Committee approves the use of the EU guarantee for financing and investment operations. Its members will be external experts with expertise from the relevant sectors. The Committee will meet in four different configurations which correspond to the policy windows. Each configuration has six members out of which four are permanent members who take part in all configurations. The remaining two members are selected to take more specifically into account the areas covered by that particular policy window.

Chapter V – InvestEU Advisory Hub

The InvestEU Advisory Hub will provide advisory support for the identification, preparation, development, structuring, procuring and implementation of projects, including related capacity building. It will be available for public and private project promoters as well as for financial and other intermediaries.

Chapter VI – InvestEU Portal

The InvestEU Portal will be established, building on the experience with the Project Portal under the Investment Plan for Europe. It will include systematic checks of the consistency of the projects received with Union law and policies and an obligation on implementing partners to consider projects meeting the consistency test falling within their scope of action. Its objective is to provide visibility on investable projects in the EU that are in search of funding. However, a project does not have to be posted on the Portal in order to benefit from EU funding. Similarly, a submission to the Portal does not mean that the project will in the end benefit from the EU guarantee.

Chapter VII – Monitoring and reporting, evaluation and control

It is proposed that the use of the EU guarantee will be evaluated through an interim and a final evaluation in line with the requirements of the [Financial Regulation]. This Chapter also provides for regular monitoring and reporting while laying down the indicators against which performance will be measured in Annex III. Moreover, it contains provisions on audit and on OLAF's rights with regard to financing and investment operations in third countries.

Finally this Chapter lays down the procedure for the delegated acts and foresees an application of the Regulation as of 1 January 2021.

Chapter VIII – Transparency and visibility

The standard provisions are included to ensure adequate transparency and visibility.

Chapter IX – Transitional and final provisions

This final Chapter includes provisions in relation to the use of revenues, repayments and recovery from the predecessor programmes. A list of those programmes, in addition to the EFSI, is in Annex IV.