the role of investment funds in financing eco-innovation david walker eib group brussels, 29th...
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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?
