Session 6.4: Building a funding strategy for circular economy...
Transcript of Session 6.4: Building a funding strategy for circular economy...
Session 6.4: Building a
funding strategy for circular
economy projects
Gianni Carbonaro - Kieran Kearney
Municipal & Regional Unit,
Advisory Services Department
European Investment Bank
Overview
• Urban challenges and the impact investing paradigm
• 2007-2013 JESSICA strategic investing: The case of the
London Green Fund
• Potential sources of financial and non-financial support for
circular economy investing:
Urban challenges and the
impact investing paradigm
The global urban challenge
YEAR:
% OF URBAN
POPULATION 30% 70% 60% 50%
1950 2010 2030 2050
9,2
(6,44)
8,3
(4,98)
6,9
(3,45)
2,5
(0,75)
The global distribution of top 400 "urban areas" with at least 1,000,000 inhabitants in 2006
The need for strategic impact investing • The core element is to have efficient, productive, attractive and livable
cities characterized by low maintenance/management costs and low “break-even point” on fixed assets
• Cities need clear objectives, strategic planning, a roadmap, governance, technical data and systems to tackle market distortions/ long-term risks - managed through strategic impact investors.
• Circular economy impacts – need for strategy, skills and metrics
2007-2013 JESSICA strategic investing: The case of the London Green Fund
What is JESSICA?
JESSICA: Joint European Support for Sustainable Investment in City Areas
• A centrally-funded technical assistance initiative of the European
Commission and EIB supported by CEB in 2007-13 programming period
Mission: To assist Managing Authorities in defining long‐term strategies for:
• sustainable urban development through investment activity
• financed through investing some of their EU structural fund allocations
in “revolving” financial instruments.
Support for projects including: urban infrastructure, heritage or cultural sites,
redevelopment of brownfield sites, creation of new commercial floor space for
SMEs, IT and/or R&D sectors, university buildings, energy efficiency
improvements.
EIB role in implementing JESSICA
• Technical assistance, feasibility studies, evaluation studies to
establish viability of implementation;
• Supporting/contributing to networking platforms and “horizontal”
studies to promote the rollout of UDFs throughout Europe;
• Management of JESSICA Holding Funds; and
• Providing additional funding where possible and appropriate,
normally at project level.
JESSICA Cycle and success factors
Strategy
Stakeholder Identification
Incentive Structure
UDF Selection
Communication & Marketing
Project Selection
• The London Green Fund (a JESSICA Holding Fund) established in late 2009 to invest in carbon reduction projects in line with the Climate Change component of the London Plan
• Focused on energy efficiency, waste and decentralised energy as the “3 biggest carbon reduction opportunities for London”
• Governed by an Investment Board , chaired by a private sector independent, and with representatives from:
• Greater London Authority (as Managing Authority);
• Environmental Agency; and the
• London Waste and Recycling Board
• Strategic relationship between public sector sponsors and UDF managers in terms of identifying and/or co-financing projects
• Considered a “trailblazer” for the UK’s Green Investment Bank, which focuses on the same sectors, and is also a co-investor in one of the first waste projects…
Strictly private and confidential - Not to be disclosed without prior consent of the EIB
The London Green Fund - Strategy
The London Green Fund (a
JESSICA holding fund)
established in late 2009 to invest
in carbon reduction projects in
line with the Climate Change
component of the London Plan
Focused on energy efficiency,
waste and decentralised energy
as the “3 biggest carbon
reduction opportunities for
London”
Governed by representatives
from the Greater London
Authority, the Environmental
Agency and the London Waste
and Recycling Board. The
Mayor’s environmental advisor
sits on the Investment Board
Aiming to deliver outputs/impacts on job creation, tons of carbon saved, and minimum energy usage savings
11 JESSICA Financial Instruments – Into the new programming period
The London Green Fund (Holding Fund)
Energy Efficiency
Urban Development
Fund
£35m
ERDF
London Green Fund
£100m*
Managed by EIB
London Waste &
Recycling Board
London
Development
Agency
£50m
Private
finance
£ 50 m £32m £ 18 m
Urban Projects Urban Projects
Private
finance
Waste Urban
Development Fund
Equity type
investment
Loan type
investment
Low risk High risk
Min £50m Min
£35m
£12m Greener
Social
Housing
Fund
....the waste UDF will primarily finance, via
equity or equity-type investment, the
construction or expansion of:
Waste to energy/fuel facilities (excluding
incineration)
Value added re-use, recycling or
reprocessing facilities
Bank lending
Project sponsors
Venture capital trusts
Pension funds/ private investors
LWaRB £18m
London Green Fund UDF: £60m
Pari passu: £120m
Investment programme
£204m
In line with the Mayor’s municipal waste strategy, and in close collaboration
with the London Waste and Recycling Board…
JESSICA Financial Instruments – Into the new programming period
London – Foresight Environmental Fund (UDF)
Bank lending Project sponsors London Waste and
Recycling Board
Pension funds/ private investors
London Green Fund ERDF
£18m
UDF £60m
Investment Programme £200m+
The Foresight Environmental Fund UDF is primarily financing,
via equity or equity-type investment, the construction and
expansion of:
• Waste to energy / fuel facilities (excluding incineration)
• Value added re-use, recycling or reprocessing facilities
JESSICA Financial Instruments – Into the new programming period
Foresight Environmental Fund
Best practice
because…
It will also produce over 36,000 tonnes p.a. of AD digestate and 14,000
tonnes p.a. of compost for agricultural use
TEG will be central London’s first Anaerobic Digestion (AD) plant
The new facility will be capable of processing 49,000 tonnes per annum of food and green waste via AD and
In-vessel composting
The facility will generate approximately 1.4MW of electricity, sufficient to power approximately
2,000 homes
Background: Construction of a £21m organic waste TEG facility in the Sustainable Industries Park in Dagenham, London, the UK’s largest concentration of environmental industries
Strictly private and confidential - Not to be disclosed without prior consent of the EIB JESSICA Financial Instruments – Into the new programming period
Foresight Environmental Fund -TEG project
Building management technologies
As a provider of cheap debt, return expectations for the fund are low. The fund manager has a significant component of fees linked to maximising carbon reduction and energy efficiency impacts.
Insulation
Cooling equipment Low carbon heating
Designed to provide cheap loan financing for retrofit and low carbon heating projects in local authority, university, hospital, social housing and other public buildings
The EIB managed ELENA facility is providing technical assistance for project preparation
Low cost financing in exchange for carbon reduction benefits
Leveraging other EIB/EC products
JESSICA Financial Instruments – Into the new programming period
London Energy Efficiency Fund (LEEF)
Circular economy projects:
potential sources of
financial and non-financial
support
ESIF 2014-20 – Financial Instruments by Thematic Objective
ESIF 2014-20 – circular economy Financial Instruments potential
Financial Instruments (FI) 2014-2020
Objectives Trends
Available Funding
Clear & detailed rules
from the outset: COCOF, optimization, legal certainty
Support to Integrated Urban Development
Strengthening of revolving FI
Increased TA for MAs: combined with FIs,
advisory via EU platform
(Financial) Incentives for Managing Authorities
Expansion of FI: (i) all 11 thematic areas,
(ii) combination of resources from different ESIF and OPs,
(iii) more flexible implementation, (iv) more compatible with grants
Possible delegation of managing ESIF resources: combination of different
funding sources into an ITI measure
Dedicated resource
allocation under ERDF:
(i) min. 5% of the ERDF resources
to urban development,
(ii) more emphasis on
territorial interventions
One legal framework for all ESI Funds (CPR) and
bundling possible
Urban Development Network for capacity-building
and networking between cities
11 thematic sectors for 2020 (all „core” for cities)
FI: more leverage, multi-fund programmes
EU 2014-2020 Cohesion Policy: ca. EUR 325 bn
Contributions in kind (Art. 32 Financial
Instruments)
Energy: EUR 20-25 bn
ERDF resources for cities: 5%, ca. EUR 18bn
Leverage on budgetary finance: by a factor of 2-4
Tackling Regulatory Bottlenecks
Delivering the Europe
2020 Strategy: sustainable growth, jobs and innovation.
EE/RE investment at min. 20%
(developed regions) or 6% (less developed regions)
of ERDF
JESSICA Financial Instruments – Into the new programming period
S t a n d a r d F u n d / P r o d u c t T y p o l o g y
Strategy options for DFI utilisation: i. National dedicated Priority Axis (mono-/multi-thematic)
ii. Regional dedicated Priority Axis (mono-/multi-thematic)
iii. Integrated Territorial Investment Strategy (urban/local-based)
iv. Priority Axis for Financial Engineering Instruments
(national/regional)
National Managing Authorities EIB JESSICA Services
• Fund and structuring services (FSS) • Holding Fund (HF) • Middle Office (MO)
Competitive/Smart City
1. RDI 2. ICT 7. Sustainable transport 10. Education and training 11. Public Administration
Resilient/Social communities
3. Competitiveness of SMEs 8. Employment 9. Social inclusion
Energy Efficient City
4. Low-carbon economy 5. Adaption and Risk
management 6. Environment and
resource efficiency
+ Optional thematic objectives
+ Optional thematic objectives
11 Thematic
objectives
High growth/innovation metropolitan poles
Problematic/high unemployment urban areas
Eastern and Northern European countries
Priority area
targets
+ Optional thematic objectives
Rural investment product
9. … agricultural sector
+ Optional thematic objectives
Rural areas
EIB Advisory Services
• Technical Assistance Platform (TAP) • Support to ex-ante assessment
JESSICA Financial Instruments – Into the new programming period
ESIF 2014-2020 Financial Instruments (decentralised) Options
ESIF: Three forms of support available for Financial Instruments
EIB delivery of Technical Assistance Platform (TAP)
EIB may deliver at MA/MS request…
EIB may take part…
JESSICA Financial Instruments – Into the new programming period
EIB – Lending, Blending, Advising
Lending within the EU: • Cohesion and convergence (‘regional development’)
• SME financing
• Environmental sustainability
• Knowledge economy
• Trans-European Networks
• Sustainable, competitive and secure energy
Blending: • Combining grants and loans to leverage EU funds
Advising: • Sharing EIB know-how through technical and financial advice
EIB Financing support
Instrument Circular economy projects/programmes could
potentially access finance through:
Investment Loans Direct loan for a specific investment
project or programme, usually > EUR
25m
•Loan to a City to finance an urban renewal project
•Loan to co-finance an Integrated Territorial Investment
with structural funds
•Loan to a private partner
•R&D loans
Framework Loans Loan for a programme of investments
meeting defined criteria but not finally
prepared at time of signing
•Framework loan to a city or region to finance a
programme of small or medium investments
•Framework loan to co-finance investments under a
structural fund operational programme
•Framework loan to a bank to finance investments
Global Loans Credit lines to banks
•Multi-purpose credit line
Funds Investment in a fund
•Investment into an urban development fund, brownfield
fund etc
Municipal and Regional Unit /
Advisory Services Department
European Investment Bank 98-100 Boulevard Konrad Adenauer, L-2950 Luxembourg
www.eib.org/jessica
Gianni CARBONARO
Head, Municipal and Regional Unit
email: [email protected]