Highlights
What we do
The EIF designs financial instruments that absorb some of the risk that banks, guarantee institutions, microfinance lenders and funds take when they finance small businesses, individuals and infrastructure projects. This encourages banks to lend, funds to invest and private investment to crowd in, creating a sustainable financing ecosystem for Europe’s small and medium-sized enterprises (SMEs).
Our objectives
We believe in small – Europe’s small businesses. This means working with our partners to deploy capital in areas that need it, from businesses active in the digital economy to traditional farmers. It means identifying underserved areas, whether that be geographical or structural, like early-stage or growth-stage businesses. It means knowing our markets so well that one comparatively small commitment to a carefully selected bank or fund can generate millions of extra euros for small businesses.
Our stakeholders
The EIF works with many stakeholders – Member States, the European Commission (EC), a large network of banks, including national promotional institutions (NPIs), leasing and micro-finance providers, lending platforms, funds, private investors and our parent organisation, the European Investment Bank (EIB). Resources invested by the EIF include the EIF’s own funds, as well as resources entrusted to us by the EIB and the European Union (EU), national and regional institutions, and other public bodies, or private capital.
What have we been doing this year?
Launch of the InvestEU
The EU’s new financing programme, InvestEU, was launched this year and has been the main driving force behind our work. With its thematic focus designed to strengthen European competitiveness and strategic autonomy in key sectors, its approach is entirely in line with the EIF’s own public policy goals. InvestEU represented around 45% of our activity during 2022, building on the successful implementation of previous EU programmes while introducing a number of novelties, not least the first guarantee instrument dedicated exclusively to sustainability, a strong focus on female representation in the venture capital and private equity ecosystem, as well as climate and infrastructure funds, a dedicated mechanism to support scale-ups and IPOs, and a reinforced advisory support component.
Thematic priorities
We have also been pressing ahead with the thematic approach to our work, closely aligning our interventions to public policy objectives, notably the move to a green, digital, and more inclusive economy. With the public policy goals in place and the organisation’s orientation firmly fixed in that direction, this has been very much reflected in this year’s activity. From disruptive technologies to cleantech, digitalisation to culture, and from inclusive finance to energy efficiency, this has been a year that has seen the EIF become even more impact-driven in our operations. Indicatively, innovation & digitalisation represented 27% of our activity this year and sustainability & green transformation accounted for 30%.
“With the simplification of processes, better data management and more importantly the digitalisation efforts, we have now doubled the number of investment compliance controls of equity transactions that a single officer can perform”
Jacobo Cominero EIF
The imagery in this year’s Annual Report has been developed using artificial intelligence, letting pictures tell a thousand words. Illustrator Alberto Seveso has made use of AI generated images, which featured in parts of the collage or used as a treatment on some of the photographic elements in the composition. AI-generated images are one-off creations, so we have very little control on the details that are generated. They are generated by prompting a software with a text string. Using the same text string twice will generate two similar but completely different images.
Driving the recovery
This year saw the culmination of our efforts in deploying the European Guarantee Fund, through a series of equity and securitisation transactions. Overall, the response from the EIB Group to the economic fallout caused by the pandemic was greatly welcomed by the markets and stakeholders, re-confirming the added value of our financial instruments on the European markets, particularly during difficult times and always complementing national measures.
In order to ensure continuity in support for small businesses as they recover from the pandemic and are faced with a number of new challenges, from supply chain disruptions to the war in Ukraine and inflationary pressures, a lot of work has gone into setting up the platform that will allow EU Member States to connect resources from their Recovery & Resilience Facility allocations into the InvestEU programme. By agreeing the modalities of this blending for the Member State compartments, the capacity of InvestEU can be significantly enlarged and it becomes easier, simpler and more efficient for Member States to channel resources towards small businesses through the InvestEU instruments. On the back of these arrangements, a series of guarantee agreements are expected to be signed in early 2023. In parallel, a number of equity agreements have already been signed in the course of this year.
Inclusion & Cohesion
At the same time, the horizontal cohesion objective has remained an item of focus, with a series of new regional mandates taking shape, mainly through joint investment programmes in connection with the EIF-NPI Equity platform. Overall, 39% of our financing benefitted entities in cohesion regions of the EU. This has been flanked by a strong showing in the areas of social impact, human capital and inclusive finance, making our contribution to bridging inequalities also at the micro level. Meanwhile, on the equity side, our ecosystem building work has continued in less developed markets, with significant focus also on first-time teams.
Internal changes
And as the world around us keeps changing, the EIF wasn’t going to be an exception. This year has seen a number of developments in-house. Most importantly, in our governance, with a changing of the guard at the very top. As of January 1st 2023, the EIF will have a new Chief Executive, Marjut Falkstedt, and a new Chair of the Board, EIB Vice-President Gelsomina Vigliotti. This is the first time that the organisation is led by two women. Meanwhile, total staff numbers continued to grow steadily, reaching 628 at year-end.
At the same time, important progress has been made on the digitalisation front, with the Digital Transformation Programme taking shape. The EIF’s digitalisation is about the interface with our partners, smoothening out processes, modernising our core processes internally, but also about better data management in order to inform decision-making. 2021 saw the early conceptualisation of the EIF’s digital transformation programme, while this year we tackled the programme’s mobilisation, including the approval of the strategy by the Board in March, securing the €105m budget, recruitment and consultancy, internal (EIF and EIB) stakeholder engagement and the various processes and controls that will allow for the roll-out of the programme to begin early in 2023.
Mandates in Focus
The EIF’s work and impact is made possible thanks to our partners who entrust us with the resources necessary to pursue public policy objectives through the design and deployment of financial instruments. At the moment, the EIF is servicing around 150 mandates, with some already in deployment for many years. 2022 was marked by a few mandates in particular:
InvestEU
The launch of the EU’s new flagship InvestEU programme has definitely been the highlight of 2022 for the EIF. InvestEU combines the financial firepower previously scattered across 13 EU financial instruments and the European Fund for Strategic Investments into one instrument, with a single rule-set.
It is designed to focus investments on four groups of EU policy priorities namely sustainable infrastructure; research, innovation & digitalisation; SMEs; and social investment & skills. The EIF is implementing a range of products under InvestEU that address different sectors and markets, with the objective of providing more targeted support and delivering policy added value.
On the guarantee side, financial intermediaries are able to sign one single contract with EIF to support SMEs and other beneficiaries across various thematic areas, creating efficiencies and simplifying procedures. And on the equity side, the EIF is able to modulate the intensity of our support depending on the individual need and fit of any given proposal with InvestEU’s policy objectives.
The programme includes a strong focus on fostering economic empowerment of women and increasing their participation in the fields of venture capital & private equity, introducing, for the first time, gender criteria which are met if a financial intermediary’s management team is composed of at least one third female partners, or its senior investment team provides for at least 40% female representation, or at least 40% of female representation is provided in its investment committee.
Building on the success of pilot initiatives under the European Fund for Strategic Investments (EFSI), InvestEU will also focus on a number of key policy areas like education and skills, digitalisation and the blue economy, and will also include a focus on scale-ups and IPOs, supporting in particular businesses transitioning to public equity markets.
InvestEU is designed to allow for blending in with other instruments, such as the Recovery & Resilience Facility, but also for top-ups from other sectoral programmes from fields like media, digital, defence, blue economy, space and semiconductors, giving it the possibility to increase firepower and act as a catalyst for market-building purposes in specific sectors. A Member State compartment also allows for blending in national resources as well, to maximise synergies and boost support for key policy priority areas.
In relation to under-served sectors and markets, InvestEU foresees a strong market development and capacity-building dimension, offering advisory support to financial intermediaries in the identification of opportunities, awareness-raising, and in general increasing their capacity to offer financing to specific EU priority areas. One such initiative was the launch, in cooperation with the EIB Advisory Hub, of a web-tool that helps with assessing eligibility for the sustainability guarantee and impact indicators within the context of InvestEU’s sustainability guarantee instrument, in an effort to facilitate the smooth operation of this new instrument and ensure the focus on investments in sustainability.
In total, the EIF plans to leverage €11bn of InvestEU resources to attract additional investments through guarantee and equity instruments, aiming to mobilise €145bn in investments for the benefit of European SMEs, small mid-caps and mid-caps, infrastructure projects, and individuals. In the course of 2022, the EIF committed €4.1bn through 101 transactions, representing close to 45% our total volumes for the year, with strong demand for the entire range of products available.
Overall, transactions have been signed across 23 Member States, including several multi-country deals, with portfolio guarantee transactions representing around €2.3bn, and equity investments just over €1.8bn. Around 43% of those commitments corresponded to the public policy goal of sustainability and the green transformation, while one third was aimed at the public policy goal of innovation and digitalisation.
Once fully deployed, these transactions are expected to mobilise investments that will create more than 166,000 jobs. On the equity front, the newly introduced gender criteria are bearing fruit: €500m have been invested into a total of 15 funds that complied with InvestEU gender criteria.
InvestEU - A new information point for financial intermediaries
European Guarantee Fund
While the European Guarantee Fund’s (EGF) deployment was concentrated mainly in 2021, this year saw the culmination of our efforts, mainly in the areas of equity and securitisation. In total, it is expected that the EGF will make available around €110bn for European businesses to help them in their post-pandemic recovery efforts.
June 2022 marked the end of the implementation period for the last product that was launched under EGF, namely the synthetic Asset Backed Securities (ABS). The EIB and EIF’s joint efforts resulted in the full utilisation of the resources available. A total of just under €1.4bn was signed covering first loss pieces (junior tranches) for 15 operations, ten of which were signed in the last month of delivery. These 15 operations are spread across seven Members States: Germany, Spain, Italy, Greece, Poland, Bulgaria and the Netherlands.
The final picture for the ABS product shows a total of €15.3bn of expected investment mobilised, giving us a multiplier effect of more than 12x the amount invested.
The end of June 2022 also marked the end of the period for equity commitments to become unconditional and the EIF’s efforts resulted in the utilisation of 114% of the amount envisaged for the product in the EGF Business Plan, an overachievement made possible by the extension of the signature period until February 2022.
Recovery & Resilience Facility and Regional Mandates
Building on the EGF’s role in financing the recovery, a key tool is the EU’s Recovery and Resilience Facility (RRF), which is aimed at mitigating the impact of the pandemic on the European economy. Its objective is to address the challenges and opportunities related to the green and digital transitions in the Member States as well as the overall competitiveness of local enterprises.
As part of their national Recovery and Resilience plans (RRPs), several Member States have foreseen the deployment of debt and equity instruments managed by the EIF. To date, the EIF has been designated as the implementing partner for equity instruments under the RRPs in Romania, Bulgaria and Cyprus, while a number of guarantee mandates are expected to be signed in early 2023.
The implementation of the EIF guarantee instruments under RRF will be organised through the InvestEU Member State compartment with the use of existing frameworks and products agreed for the InvestEU facility.
Apart from RRF resources, the EIF has continued to team up with local authorities, both national and regional, to create bespoke financial instruments, bringing together EIF expertise and local financial resources in pursuit of local and European policy objectives.
In recent years, German mandates have grown to one of the largest regional mandate families. The German Future Fund – EIF Growth Facility (GFF), a mandate of up to €3.5bn aimed at improving the availability of growth financing has, after its first full business year, by the end of 2022, made commitments into more than 20 growth funds for a total volume of around €850m.
Overall, the EIF’s German equity mandates, which include GFF, the ERP-EIF Facility, the MDD Facilities, the LFA-EIF Facilities and the Corona Matching Facility, have made available more than €9bn for investments in small businesses and mid-caps in Germany, helping them to take ideas from the drawing board to the market and fuelling their growth ambition. This investment activity has a substantial spill-over effect on neighbouring countries and the European economy in general and so far has reached more than 4000 companies.
Risk Capital Resources
The Risk Capital Resources (RCR) mandate is central to the EIB Group’s equity strategy. Throughout 2022 it has continued to play an instrumental role in expanding the EIF’s activities, helping to bridge market gaps in SME finance, and contributing to the pursuit of public policy objectives, most notably sustainability and the green transformation.
As part of the review of the RCR mandate in 2021, the policy objectives of the mandate were updated to reflect the EU Climate Bank’s ambitions. On this basis, the EIF will be reinforcing its focus on investments targeting sustainability and the green transformation.
RCR financing amounted to close to €1.2 bn this year representing 30% of the equity signed amount. Co-investing with other EIF resources, RCR is expected to generate more than €19bn of additional investment for the European economy.
The RCR mandate will be further strengthened with the addition, in 2023, of resources under the new ETCI and REPowerEU mandates, boosting EIF activity in the field of scale-up financing and energy respectively.
European Tech Champions Initiative
In February 2022, the EIB Group expressed its support for the pan-European Scale-up Initiative launched by EU Member States during a summit organised by the French Presidency of the European Council. This initiative has since been developed into the European Tech Champions Initiative (ETCI), which aims to provide financing for Europe’s high-tech companies in their later-stage development. In such phases, investee companies typically seek to raise amounts of over €100m on the private markets, and a lack of European funds specialising in this segment makes it difficult for companies to pursue their plans or forces them to seek capital outside Europe. This is the market gap that ETCI aims to tackle.
By year-end, beside the EIB Group’s €500m contribution, which includes €400m of RCR resources, the ETCI had secured commitments from Germany, France, Spain, Belgium and Italy during the initial subscription period, with formal signing expected in early 2023. The size of the fund is expected to reach €3.75bn at this first stage and to grow further with additional commitments in the future.
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