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

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

AuthorDate

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

OrganisationSpin-out

Licensing

Collaboration (contract research,…)

IP / Idea

“technology IP” “prototype IP”

R&D Technology Transfer Marketable 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

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 EuropeFund 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 Capital1 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 Phase Emerging Growth Phase Development 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 Loans4

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!!!

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