Society & Sustainability
Historically, the EIF has been very active in supporting initiatives that achieve social impact and contribute to sustainable development. This aspect of our work is growing and makes us particularly proud.
This has included cornerstone investments in intermediaries that are making a difference, focused on delivering positive societal impact and pursuing objectives aligned to the Sustainable Development Goals (SDGs).
With the new European Green Deal and the EIB Group’s Climate Bank Roadmap, climate action and environmental sustainability is more than ever becoming a key priority for the EIF. We have been taking concrete steps throughout 2020 in adapting our processes and procedures to align with the principles and goals of the Paris Agreement and strengthen our commitment to a greener economy.
A big part of these efforts is also assessing and measuring our financial flows and, where possible, their impact. This year has seen important progress in this regard, expanding our impact methodology from social impact funds to include other purpose-driven actors.
We also intensified our focus on human capital as we launched the Skills & Education Guarantee Pilot initiative with the EC, to help individuals and businesses investing in Europe’s most prized asset, its people, and improving their skillset to better deal with a changing world.
In parallel, we have mobilised additional EFSI resources to focus more on impact investing, on both the social and the environmental fronts. Additionally, we have expanded our toolkit under the EaSI programme to ramp up our support to social entrepreneurship and the inclusive finance ecosystem through capacity-building activities and broadening our outreach to include very small actors from the microfinance scene.
Support for the cultural and creative sectors - that generate so much more than just good business - has also continued unabated.
Focus on climate and sustainability
Adapting to a new norm and in particular re-orienting our work to address climate action and environmental sustainability, is picking up pace, as the various building blocks of this transition start to take shape. The first important step was taken this year with the approval of the EIB Group Climate Bank Roadmap. The Roadmap is an extraordinary milestone which will be guiding our activities over the coming five years as the EIB Group seeks to increase financing flows for climate action and environmental sustainability, support EUR 1tn of investments in these sectors by 2030 and align all our new financing activities with the principles and goals of the Paris Agreement as of 2021.
This will ensure that we support a Green Recovery from the COVID-19 crisis, that we fully back the European Green Deal, including just transition, and that our work contributes to the achievement of the SDGs.
Internal work streams are underway to ensure the successful rollout of the Climate Bank Roadmap. A significant part of the ongoing work so far has been dedicated to developing frameworks, criteria and thresholds to ensure the alignment with the principles and goals of both the Paris Agreement and the EU Taxonomy for sustainable investment.
As of 2021, the EIF will gradually start tracking green financing in its intermediated operations, in line with the EU Taxonomy principles as this develops over time. This is a dimension that will require strong commitment and cooperation from our intermediary partners. The EIF will ensure proportionality principles are kept in mind when tracking financing targeting SMEs.
Managing climate, environmental and social risks are a matter of good market practice. There is a risk that, as economic activities decarbonise, non-aligned assets will become stranded or that they are impacted by natural disasters worsened by climate change. This is a potential financial risk for the EIF’s operations and can negatively impact the financial position of counterparties. In line with developing regulations and supervisory recommendations, the EIB Group has started to strengthen its capability to manage the financial risks from climate change by developing counterpart-level climate risk assessment models. In this regard, climate risk screening tools have been developed for the EIF’s equity portfolio and will be further enhanced in 2021 for its debt and guarantee portfolio.
The EIF will continue to leverage its diverse toolkit to support the development of a much wider innovative, green and sustainable ecosystem, ranging from nurturing innovative green solutions to supporting businesses in their transition to a low carbon economy and ensuring that no one is left behind. Within the context of InvestEU and other initiatives, the EIF will look to support the transition to low carbon energy production; digitalisation and sustainable ICT; cleaner, safer and smarter mobility; energy efficiency in buildings and industrial sectors; circular economy, more resilient agriculture and enhanced bio-economy.
The importance of investing responsibly: UN PRI
In October, the EIF joined the list of signatories of the UN-sponsored Principles for Responsible Investment (PRI) for its equity finance activities and now sits on its Private Equity Advisory Board.
PRI is the leading global network for investors committed to integrating environmental, social, and governance (ESG) considerations into their investment practices. As a PRI signatory, the EIF will further enhance its ESG investment practices and processes, underlining our strong commitment to support the European Green Deal and the EU Climate Bank new level of ambition.
Furthermore, as of January 2020, the EIF is already implementing, within the due diligence of all new transactions, an ESG questionnaire, to better assess the intermediaries’ practices related specifically to ESG matters.
Backing transparent disclosures
The EIF has expressed its support for the recommendations of the Financial Stability Board’s Task force on Climate-related Financial Disclosures (TCFD). TCFD aims to promote transparency in investment and lending decisions in order to prevent potential systemic risks caused by climate change, to make markets more efficient and economies more stable and resilient.
Committing to change with the UNDP
The EIF also teamed up with the United Nations Development Programme (UNDP), signing a memorandum of understanding, which re-affirms our commitment to address the socio-economic consequences of the COVID-19 pandemic, respond to climate change and tackle inequalities. The EIF and UNDP have agreed to explore cooperation opportunities in relation to the SDGs, risk management, socio-economic and environmental impact assessments, as well as the design and delivery of financial instruments to support inclusive, private sector-led, growth.
Building on successes: impact methodology
Leveraging on the experience gained through the Social Impact Accelerator (SIA) instrument, the EIF is seeking to widen the scope of application of its impact framework beyond social impact to include other purpose-driven funds. The impact measurement methodology is thus being systematically implemented wherever possible in other areas of impact financing, such as climate and environment.
Climate impact fund managers are required to "walk the talk" and set environmental objectives for each company in the portfolio through a number of key performance indicators such as reducing energy consumption for example. The extension of the EIF’s impact methodology to these sectors and its wider adoption by the VC community is helping to set new standards for impact investment for fund managers and LPs alike.
Nikoleta’s Sweet Creations: The sweet side of life
Glykorizo, Arta, Greece
Cooperative Bank of Epirus
EaSI Guarantee Financial Instrument; EFSI
renovation & equipment
Number of employees
“They told me not to, but you know, I’m pretty stubborn...Both my husband and my father were reluctant in the beginning. They were afraid of the risk. But if you don’t risk, you don’t gain anything, right? Now they’ve both come round and are rubbing their eyes in disbelief.”
Impactful private credit investments
The EIF took a cornerstone investment of EUR 50m, using EFSI Private Credit resources, in Tikehau IM's first private credit fund fully dedicated to impact investment. Borrowers will be required to contribute actively and measurably to the fund's impact strategy of climate action, innovative growth and social inclusion. This will be achieved through attaching impact roadmaps to each loan: concrete measures on which borrowers will need to improve (e.g. job creation, reducing carbon emissions, waste reduction), triggering a reduction in interest rates.
The fund as a whole (target size EUR 350m) will focus on SDGs related to social, innovation and/or environmental impact.
Using EFSI Private Credit resources, the EIF made a cornerstone investment of EUR 50m in the first climate-focused diversified debt fund, Idinvest Sustainable Maritime Infrastructure (ISMI). At target size of EUR 300m, ISMI will be able to support at least 50 European businesses operating small/medium-sized vessels with new financing in support of the decarbonisation and ecological transition of their vessels, contributing to the transition of the maritime sector towards a carbon-neutral economy by 2050, an ambition announced in the European Green Deal.
The fund targets investments in (i) oceangoing and inland sustainable/fuel-efficient vessels, (ii) vessels supporting the development of offshore wind farms, and (iii) innovative port and inland infrastructure equipment.
Reducing energy consumption in Austria through securitisation
In December, the EIF signed its second synthetic securitisation transaction with Hypo Vorarlberg in only three years. With a EUR 56m mezzanine tranche on a EUR 330m SME loan portfolio, the transaction frees up regulatory capital for Hypo Vorarlberg, which will be re-invested into the construction of new highly energy efficient residential buildings. As a result, the transaction is beneficial for both the environment and local SMEs who will perform the construction of these innovative residential buildings.
First closing of Yotta Smart Industry fund
In line with the overall goals of the European Green Deal, the EIF made an investment of EUR 30m in the mid-market fund Yotta Smart Industry.
The fund reached first closing in 2020, raising just over EUR 100m that will be focusing on digital transformation and reduction of carbon emissions, while also integrating ESG in its investment strategy and monitoring through setting ESG performance targets in the portfolio companies.
Boosting the electric mobility market in Greece
The EIF closed a EUR 130m securitisation transaction with Olympic, the franchisee for AVIS in Greece, the proceeds of which will be employed to finance hybrid/electric vehicle leases. This is the largest non-banking securitisation ever implemented in Greece and the only one since 2010 to achieve investment grade rating by two major rating agencies.
By deploying EUR 93m resources alongside the EBRD’s EUR 37m investment, the EIF was the cornerstone investor in a complex trade that achieves greening policy objectives, investment-grade rating and helps a non-bank lender in one of the most troubled capital markets in Europe, to issue bonds to international investors.
From accelerator to impact investing in Spain
Ship2B is an accelerator based in Barcelona specialising in seeding Spanish social enterprises with a focus on health, social and climate sectors with a technological angle. With an EIF investment of EUR 20m from EFSI resources, Ship2B Ventures II, a EUR 40m social impact investment fund, has grown out of the accelerator to target investments in social enterprises with a technology component and focusing on improving the lives of vulnerable populations, fighting climate change, providing quality education and reducing education inequalities. The EIF is proud to have supported Ship2B from its acceleration activity up to a social impact fund of institutional scale.
Blue Invest: protecting the seas and oceans
In February 2020, the EC and the EIF launched the Blue Invest Fund, a EUR 75m equity investment initiative dedicated to the blue economy. Blue economy refers to all economic activities related to oceans, seas and coasts.
Managed by the EIF and backed by EFSI, this initiative is providing financing to underlying equity funds that strategically target and support the innovative blue economy. This sector can play an important role in the transformation to a carbon-neutral economy by 2050.
The blue economy sector ranges from companies in the marine environment to land-based businesses producing goods or services that contribute to the maritime economy. It harbours many promising early-stage ventures and companies that develop solutions for renewable energy, sustainable seafood, blue biotechnology, maritime IT and much more.
In total, three funds have been supported to date, with two more in the pipeline for early 2021, expected to generate, in total, at least EUR 230m in financing for the sector.
Hegyvidéki Ízlelő: Restaurant with a cause
EaSI Guarantee Financial Instrument (Social Entrepreneurship)
setting up the business, renovation, equipment
Number of employees
“Too many people with disabilities work in segregated workplaces, doing assembly line, repetitive work for minimum wage. We want to break with this philosophy and show that disabled people are able and capable.”
Noémi Ambrus Kiry
Skills & Education Guarantee Pilot
Investments in skills contribute to growth, competitiveness and social convergence, while addressing the challenges linked to digital transformations and the transition to a carbon-neutral economy. For this reason, in collaboration with the EC, we launched a new pilot guarantee facility, backed by EFSI, to improve access to finance for individuals and organisations looking to invest in skills and education and help higher education providers with their offering of education and training programmes.
The Skills & Education Guarantee Pilot (S&E Pilot) was conceived to help get more people into the labour market and to respond to the European economy’s changing needs. This initiative is particularly relevant in the difficult economic climate of the COVID-19 pandemic.
It will support companies and students, as well as providers of education, during and after the crisis, to ensure that Europe can develop and stay at the helm of global technological developments, drive its knowledge economy forward and accelerate its economic recovery.
The S&E Pilot provides an EU guarantee of up to EUR 50m backed by EFSI, making available more than EUR 200m for skills and education projects across Europe. It offers financing for three types of beneficiaries: i) students and learners; ii) enterprises investing in the re-skilling of their employees; and iii) organisations offering/investing in education and training.
The first intermediary the EIF entered into an agreement with was Fundação José Neves in Portugal, offering shared income agreements - an innovative education financing product which mitigates the risk of over-indebtedness by payments being income linked and contingent - for students, learners and everyone who is interested in improving their skills through further education.
In total, 23 applications were received, exceeding the available budget, thus confirming the strong interest in the market for the support of education and training through financial instruments.
Supporting social entrepreneurship
The Social Entrepreneurship window of the EaSI programme got off to a relatively slow start, with few specialised actors in the market and generalist actors unacquainted with the business models of social enterprises. Take-up has since picked up, however, and 2020 saw strong progress, with more and more mainstream financial institutions entering this space and offering critical mass to the initiative. This window supports a broad range of activities ranging from the classical work-integration social enterprises (WISEs), including integration of migrants and asylum seekers, to the many social enterprises set up to improve the environment.
In particular, we had the first EaSI social entrepreneurship guarantees in Portugal (Mbcp and Banco Montepio), expected to mobilise EUR 168m and EUR 140m respectively for Portuguese social businesses.
Impact investing under EFSI
The Impact Investing initiative, backed by EFSI, aims to promote an investment approach where social and environmental goals are intrinsic to the strategy of our financial intermediaries. Investments will target enterprises offering entrepreneurial solutions to societal issues and generating benefits to society alongside economic value creation.
Launched this year, a budget of EUR 50m had initially been foreseen for this area. However, in another sign that the market for impact investing has been growing, demand for this instrument tripled that figure, and by the end of 2020, the EIF had committed more than EUR 86m into six impact funds, with several others in the pipeline. The first fund to be supported under the EFSI Impact Investing initiative was Norrsken VC Fund (Sweden).
This initiative complements previous pilots in the social impact space that targeted different schemes such as funds linked to incubators and accelerators, or Payment-by-Results schemes.
“This is a growing trend across Europe: people want to put their money where they know it will be put to good use, to have impact, not just returns. It will take time, but the needs from clients are there, the demand is there and there are constantly new initiatives, new ideas that keep coming up. I think this market is poised for growth.”
Fund Manager at Helenos
Payment-by-Results (PbR) scheme in Finland
Epiqus Koto-SIB is a Social Impact Bond transaction signed in 2017, in which the EIF invested EUR 10m from EFSI. Its social objective is the integration of migrants and refugees into the Finnish labour market. Apart from its direct financial and social goal in promoting the employment and integration of refugees and migrants, the investment aimed at raising awareness of social impact bonds and encouraging intermediaries to expand into the SIB space.
By September 2020, 2,217 immigrants had participated in the experiment, of which 1,034 have found employment in the logistics, hospitality, cleaning, construction, financial administration, information technology and manufacturing industry sectors.
Tech for impact in Sweden
Some of the more inspirational initiatives involve successful entrepreneurs that channel resources into impact investing. One such case involves Niklas Adalberth, better known as the co-founder of Klarna – one of Europe's largest fintechs and unicorns.
In 2020, the EIF invested SEK 212m of EFSI resources (around EUR 20m) into NVC Fund 1, a SEK 1.1bn impact investing fund founded by Niklas that is focusing on impact-driven enterprises using digital technologies to address societal challenges.
This is the first fund of its kind at this scale in Sweden and is a great example of how a global tech-champion entrepreneur is using proceeds to invest in generating positive social impact.
Reaching smaller actors in microfinance
True to our mantra of ‘believing in small’, the EIF managed to extend support to very small intermediaries, namely AsCAR-RV (Romania) and LCCU (Lithuania), both very small credit unions servicing their respective markets of vulnerable entrepreneurs.
Under the EaSI GFI cover, AsCAR-RV expects to generate a loan portfolio of around EUR 9m and at least double the business loans portfolios of the intermediaries over the next five years.
Through these EaSI GFI transactions with the LCCU and AsCAR-RV and their respective intermediaries, the EIF has been able to support several small non-bank financial institutions, dedicated to increasing access to finance for micro-enterprises in rural and small urban areas.
This constitutes an innovative transaction structure that groups together several credit unions and thereby allows very small microfinance providers with a broad regional outreach and strong social mission to access the EaSI GFI.
EaSI Funded Instrument - first signatures
The EaSI Funded Instrument, with an overall size of EUR 200m - including contributions from the EC, the EIF and the EIB - aims at boosting the lending capacity of financial intermediaries that operate in the microfinance and social entrepreneurship finance space, through senior and subordinated loans.
This year saw the first three signatures under this instrument, in particular senior loans in favour of OBS in Serbia (EUR 10m), Agricover (EUR 7.3m) and FAER (EUR 2.1m) in Romania.
In parallel, during 2020 the EC substantially increased the available resources for the EaSI Capacity-Building envelope from EUR 26m to EUR 45m. This allowed us to reinforce efforts towards improving the capacity of financial intermediaries to better serve micro and social enterprises by supporting digitalisation projects or the opening of new branches closer to rural clients, for instance.
Non-financial support to microfinance
The EIF contributed to the revision and further development of the EU Code of Good Conduct for Microfinance Providers, sitting also on the Code Steering Group. In addition, EIF staff participated in EaSI Technical Assistance workshops and webinars, sharing technical expertise with micro and social finance providers in an effort to further build up the European inclusive finance ecosystem.
Movimento Film: Non Odiare
CDP / Intesa San Paolo
Cultural & Creative Sectors Guarantee Facility, EFSI
Number of employees
“Cinema is such a powerful art. It can influence our behaviour and transform the way we see things and society...We are not pointing fingers, we just want to show people society’s many contradictions to get them thinking. That’s how influential films can be.”
Strengthening the cultural and creative sectors
Responding to the particularities of financing in the cultural and creative sectors, our Cultural and Creative Sectors Guarantee Facility (CCS GF) has continued to expand its outreach. A total of 22 agreements have been signed to date, expected to generate no less than EUR 3.2bn in debt financing for the cultural and creative sectors. The 3,707 companies supported under this programme come from a range of sectors, with the lion’s share (around 40%) in the audio-visual and multimedia world, followed by books and press (25%).
These efforts have been boosted by strong capacity-building activities aiming to better equip financial intermediaries to serve these sectors. So far, the activities undertaken show that intermediaries have expanded their interest beyond financing film to also supporting other sub-sectors like music, video games and fashion. They have also been keen to boost capacity through tailor-made support in the form of local market studies and support in their risk assessment and due diligence process.
In December 2020, the EIF signed an interesting multi-country transaction under CCS GF with a new intermediary located in Denmark, REinvent Finance (RF), that will also target the four other Nordic countries: Norway, Sweden, Finland and Iceland.
Thanks to CCS, RF will support Nordic film and TV series production companies and the worldwide distribution of Nordic audio-visual content while providing an alternative finance solution to traditional banks through three different products: i) bridge financing loans; ii) gap financing, by acquiring distribution rights (in the form of minimum guarantees); and iii) project/content development loans (new dedicated product).