The External Investment Plan is a new initiative to boost investment in partner countries and address issues like migration. It takes an integrated three pillar approach focusing on innovative financing, technical assistance, and improving the investment climate. A key aspect is the European Fund for Sustainable Development, which provides an EU guarantee to leverage more private investment in priority areas like SMEs and clean energy. The plan aims to help close the major estimated investment gaps needed to achieve development goals through crowding in private resources and promoting a business friendly environment. Private actors are encouraged to engage through upcoming one-stop shops and structured policy dialogues to help remove constraints on investment.

1. The EU's
External Investment Plan
4th Eastern Partnership Business Forum –
Tallin - October 27th, 2017
#EIP #InvestGlobal
A game changer to mobilise the private sector for
development cooperation.

2. #EIP #InvestGlobal
#EIP #InvestGlobal
1.Why… a Game Changer for Development Cooperation
2.How… the EIP building blocks
3.You… the role of the private sector
4.Questions for discussion
Topics

3. Why we act
#EIP #InvestGlobal
#EIP #InvestGlobal
European
Neighbourhood Policy
European Agenda for migration
Paris Agreement on
climate change
Addis Ababa Action Agenda on Financing for Development

4. "It is in Europe's own interest that we all work to ensure
sustainable and balanced economic growth in our partner
countries. Involving the private sector and securing the
most conducive environment for it to thrive will support
these efforts."
Johannes Hahn
Commissioner for European Neighbourhood Policy and
Enlargement Negotiations
#EIP #InvestGlobal
#EIP #InvestGlobal
Why we act

5. Why we act
3.9
1.4
2.5
Total annual
Investment
needs
Current Annual
Investment
Total
Investment gap
Source: World Economic Forum estimate for
Sustainable Development Goal achievement
Estimated investment gap in key sectors, 2015-30
Trillions of USD, annual average
#EIP #InvestGlobal
#EIP #InvestGlobal

6. Where we act

7. #EIP #InvestGlobal
E
I
P
TOOLS
PILLAR 1
INNOVATIVE
FINANCING
PILLAR 3
INVESTMENT
CLIMATE
PILLAR 2
TECHNICAL
ASSISTANCE
ACTIONS Mobilise investment for economic and social
development
IMPACT
CONTRIBUTE TO THE
SUSTAINABLE
DEVELOPMENT GOALS
ADDRESS THE ROOT
CAUSES OF MIGRATION
EIP Rationale

8. How
Funding investments:
Blending - Eur 2.6B
New EFSD Guarantee –
Eur 1.5B
Develop sustainable
and bankable projects
Assist regulation and
policy making
Improve investment
climate and business
environment
#EIP #InvestGlobal
Pillar 1 Pillar 2 Pillar 3

9. #EIP #InvestGlobal
Pillar 1: EU Blending Experience
Blending = using EU cash grants to leverage loans or
equity from public and private financiers €
€
€
€
€
€
€
€
€
Regional blending facilities combine funds, e.g.
Neighbourhood Investment Facility (NIF)
NIF has mobilized >€15 billion from FIs with EU
providing core funding of >€1.6 bn (2008-2016)

10. #EIP #InvestGlobal
Pillar 1: NIF Blending Data €
€
€
€
€
€
€
€
€

11. #EIP #InvestGlobal
Pillar 1: NIF Blending Data €
€
€
€
€
€
€
€
€

12. #EIP #InvestGlobal
Pillar 1: EFSD Guarantee Features
Innovation
• EU contingent liability complements cash contributions
• Scales up capital mobilization to innovative/risky operations
• Reinforced focus on leveraging private capital
Key Features
• Unconditional, irrevocable guarantee on first demand
• Pari Passu and Partial first-loss guarantee (debt or equity)
• Provided through Eligible Counterpart institutions
• Portfolio approach within sector-based "Inv. Windows"

13. #EIP #InvestGlobal
Strategic Board of the EFSD
Strategic Guidelines
Operational Board of the NIP
Adoption of Investment Window
Investment Window established
Investment Window published
IFIs and
EDFIs
Private
sector
Partner
Countries
Civil
Society
Int. Org.
Political guidancePossible inputs by:

14. #EIP #InvestGlobal
IFI Proposal
COM – IFI
Guar. Agr.
COM – IFI
Guar. Agr.
Final
Beneficiaries
Final
Beneficiaries
Final
Beneficiaries
Final
Beneficiaries
COM – IFI
Guar. Agr.
Final
Beneficiaries
Final
Beneficiaries
Other (mainly
private)
investors
Operational Board of the NIP
1. Drafting Proposed
Investments Programs
2. Submission of proposals
3. Assessment
4. Signature of Guarantee
Agreements
Investment Window

15. • Sustainable Energy and Connectivity
• Micro, Small and Medium Enterprise (MSME) Financing
• Digital for Development
• Sustainable Agriculture, Rural Entrepreneurs and Agro-business
• Sustainable Cities
#EIP #InvestGlobal
EFSD Guarantee: Initial Investment Windows

16. Window: Micro, Small and Medium Enterprise (MSME) Financing
Targeting MSMEs as engines for
inclusive job growth and innovation
Through (local) financial partners (e.g.
banks, venture or seed capital)
Catalyse bank lending and equity
investments for new and innovative MSMEs
#EIP #InvestGlobal
© countrypixel - fotolia.com
Covering e.g. commercial, political and
currency risks

17. Digital technologies as enablers of
sustainable development
Technologies enabling trade, education,
health, governance, financial inclusion or
job growth
Mobilize investment for early stage
technologies / early stage digital
businesses
Improve inclusiveness of more mature
technologies
Window: Digital for Development
#EIP #InvestGlobal

18. #EIP #InvestGlobal
INNOVATIVE SMEs
X% guarantee + capped at X% of SME portfolio
ELIGIBLE FINANCIAL
INSTITUTION
EU COMMISSION
Guarantee (+Debt/Equity?)
Pillar 1: Guarantee Scheme Example – Innov. SME lending
EFSD Guarantee
VC
Fund
Local
Bank
Local
Bank
VC
Fund
…
GUARANTEE BENEFICIARIES

19. EFSD Guarantee
Guarantee for FX losses + IFI Equity/Mezzanine
‘A’ SHARES
Private investors & lenders
‘B’ SHARES
Public Finance Institutions
‘C’ SHARES
First loss tranche
ELIGIBLE FINANCIAL
INSTITUTION
EU COMMISSION
STRUCTURED INNOVATION FUND
Greenfield
Project
Innovative
SME
R&D
Investment
END BENEFICIARIES
Pillar 1: Guarantee Scheme Example – Structured Fund

20. #EIP #InvestGlobal
Local
currency
• Challenge: Lack of local currency lending
• Hedging (e.g. TCX) and FX liquidity not available as
required or not affordable
• Partial first-loss FX risk guarantee could cover
risk of local currency devaluation.
• Alternatively, guarantee could back FX risk of a
hedging partner, thus reducing cost
Pillar 1: Guarantee Coverage Example

21. TA for preparation and implementation of bankable projects
Same procedures as for the existing blending facilities
(NIF: € 425 million of technical assistance grants 2008-2016)
Pillar 2: Technical Assistance in support of Pillar 1 (EFSD)
#EIP #InvestGlobal

22. Support to developing effective institutions and legal frameworks,
improving the investment climate
Support to public-private sector dialogue
Promote access to finance, skills, business development services,
market information, infrastructure for SMEs
#EIP #InvestGlobal
Pillar 2: Technical Assistance in support of Pillar 3 (Policy)

23. Pillar 3: Promoting a conducive investment climate
#EIP #InvestGlobal

24. You in the EIP – Channels to engage?
✓ Via One-stop-shop (upcoming)
– Single online entry point for businesses, investors and partners
– Objective: Accessibility, transparency and efficiency
✓ Through Eligible Counterparts
– Eligible European and internat. FIs: AFD, EBRD, EDFIs, EIB, KfW, …
– Local offices usually best point of contact
✓ Structured dialogue
– Events and regular discussions to identify constraints for investment
– Country, sector and strategic level – facilitated by the EU and its Delegations
=> Remove investment constraints via policy dialogue and financial support
#EIP #InvestGlobal

25. You in the EIP – Approach for Private Sector Actors
✓ Startups and MSMEs
– Contribute to structured dialogue e.g. on constraints to innovation and growth
– Approach local financial institutions (banks, funds) benefiting from EIP
✓ Promoters of large-scale projects
– Contribute to structured dialogue about constraints to obtaining finance
– Suggest portfolio approaches, in particular for EFSD Guarantee usage
– Propose specific projects to Eligible Counterparts (e.g. under Guarantee)
✓ Financial Institutions
– Contribute to structured dialogue about key constraints to investment
– Approach One-Stop-Shop / Eligible Counterparts to suggest specific
approaches, in particular for EFSD Guarantee usage via financial sector
#EIP #InvestGlobal

26. Summary: Key EIP Innovations
Integrated 3-pillar
approach
Synergies &
Efficiency
One-stop-shop Transparency &
Accessibility
EFSD guarantee Leveraging scarce grant funds &
Crowding in private capital
#EIP #InvestGlobal

27. Thank you!
Fulvio Capurso
fulvio.capurso@ec.europa.eu
EIP Secretariat