European Commission launches two financial instruments

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The European Commission has launched two new financial instruments for ESI Funds investments to help young businesses and sustainable urban development…

The European Commission has announced two new financial instruments for young businesses and urban development promoters.

The “off-the-shelf, ready-to-use” instruments will help member states to double their European Structural and Investment (ESI) Funds investments, something the commission has been pushing since 2014.

The financial instruments include loans, equity and guarantees, and are compliant with ESI Funds Regulation and State Aid rules. It is hoped it will increase the uptake by member states of revolving financial support, rather than traditional grants.

Three instruments are already in place: a risk-sharing loan, a capped guarantee, and a renovation loan. The first is based on sharing the risks between public and private resources; the second sees public money act as a guarantee against default inside a bank’s loan portfolio; and the third is based on improving energy efficiency and renewable projects in the residential building sector.

The two new instruments being launched are a co-investment facility, which will provide financial aid to start-ups and SMEs, and an urban development fund to help support sustainable urban projects.

The former will help develop business models and attract additional funding through a collective investment scheme. SMEs could see up to €15m in combined public and private investment through the scheme.

The latter will focus on improving public transport, energy efficiency or the regeneration of urban areas. Projects must be deemed financially viable and part of an Integrated Sustainable Urban Development strategy. Projects could see up to €20m funding through public and private resources. It will involve a loan fund, managed by a financial intermediary. ESI Funds resources and a contribution of at least 30 per cent from private capital will also be included.

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