The European Commission has announced new measures intended to boost public and private investment in Europe and beyond, including beefing up the European Fund for Strategic Investments (EFSI) with a greater focus on clean energy and other environmental objectives.
The plans were unveiled by Commission president Jean-Claude Juncker in his “State of the Union” speech to the European Parliament yesterday, 14 September, with the Commission then providing more details.
The EFSI is a key vehicle for implementing the Commission’s Investment Plan for Europe, formerly known as the Juncker plan.
It is a joint initiative with the European Investment Bank (EIB), which is the main investor.
The Commission is proposing to double its duration and financial capacity.
The EFSI was initially established for three years, with the aim of mobilising at least €315bn in investments in its first three years (2015-18), with “maximum” private sector contributions.
The Commission is proposing to extend the EFSI to reach a target of “at least” €500bn in investments by 2020, with the member state contributions.
“And,” said Juncker, “we will work beyond that to reach €630bn by 2022.”
Some €116bn in investments has been mobilised so far under the EFSI.
EFSI2.0, as the Commission refers to the beefed-up fund, will focus “even more on sustainable investments across sectors to help to meet COP21 targets and help the transition to a resource efficient, circular and zero-carbon economy”.
At least 40% of EFSI-approved “infrastructure and innovation” projects “should contribute to climate action in line with the COP21 objectives”, according to the Commission.
The EFSI’s increased firepower, however, will not solely be for more environmental projects.
The Commission is also proposing to increase to €1bn the total amount of financing for social enterprises and microfinance, from €193m.
It said this was expected to mobilise almost €3bn in overall investment.
The envisaged new-and-improved EFSI is also intended to have a broader geographical and sectoral reach and offer more transparency on investment decisions and governance procedures.
The Commission is going “global” with its investment plan for Europe, as Juncker put it, launching a €44bn plan for Africa and “EU Neighbourhood” countries.
Member states and other partners are encouraged to match the EU’s contribution to the new External Investment Plan (EIP).
“The logic is the same that worked well for the internal Investment Plan,” said Juncker. “We will be using public funding as a guarantee to attract public and private investment to create real jobs.”
The Commission said the EIP would contribute to achieving the UN Sustainable Development Goals (SDGs), which are becoming more of a focus for some large European pension fund investors.
Juncker also emphasised the “urgent” need to “accelerate” the Commission’s capital markets union (CMU) project to free up non-bank financing of the European economy.
“The Commission is putting a concrete roadmap for this on your table today,” he said.
This is based on “accelerating the delivery” of already-announced initiatives, such as new securitisation rules, and “new and substantive” proposals the Commission wants to make by the end of the year.
This includes steps to unlock private investment in infrastructure and SMEs by amending insurance legislation and banking legislation.
For insurers, this will involve amending Solvency II rules to reduce capital charges.
“New legislative initiatives may also be warranted in the future for other priorities,” said the Commission.
This includes “a possible framework for an EU personal pension product”, it said.
Also as part of its CMU project, the EU executive announced that it would establish an expert group to develop a European strategy on sustainable finance “to support green technologies and ensure the financial system can finance growth in a way that is sustainable”.
It will adopt non-binding guidelines on the methodology companies should use to report to investors and consumers on environmental, social and governance issues and said it was “assessing the follow-up” to its recent consultation on long-term and sustainable investment.