The EU's new natural capital finance facility
A fund of 100million euro has been made available by the European Commission and the European Investment Bank to support natural capital projects in Europe, writes Coillte's Ciaran Fallon
The Natural Capital Finance Facility (NCFF) is loan facility that was launched by the European Commission and the European Investment Bank on the 16th February 2015. The NCFF aims to provide innovative financial solutions to support bankable natural capital projects which have the potential to be revenue generating or cost saving.
The objective is to showcase natural capital projects that are generating positive cash flows capable of servicing investment loans. It is hoped that a portfolio of performing natural capital loans will encourage interest from private sector financiers after the facility closes in 2017.
"The objective is to showcase natural capital projects that are generating positive cash flows capable of servicing investment loans"
The total fund of €100m is financed by the European Investment Bank and the European Commission's LIFE programme. The NCFF is targeted at loans in the range of €5 to €15m with terms up to and 10 years and will be limited to 9 to 12 projects across the European Union. The European Investment Bank will manage the facility on behalf of the two partners and it will apply the normal rigour of a triple A rated lender.
The fund is structured with the European Commission’s stake exposed first, reducing the risk to the European Investment Bank somewhat and it is hoped that this will promote an innovative and flexible approach to lending. In addition to loaning money the NCFF will provide of €10m of grant support for technical assistance to support project preparation, implementation and monitoring.
The facility is targeted at projects that are at an advanced stage of development and have the potential to be replicated within the EU. Applications may be made under the headings:
Green Infrastructure Payment for Ecosystem Services Biodiversity Offsets Pro-Biodiversity and Adaption Businesses
Green Infrastructure has an urban focus and considers projects such green roofs and walls, ecosystem based rainwater collection and reuse systems and flood protection projects. Payment for Ecosystem Services includes projects and programmes to encourage sustainable forestry or promote biodiversity or to reduce soil or water pollution.
Biodiversity offsetting is the least developed of the four and is aimed at biodiversity compensation pools and transfer schemes. This is a controversial area in Europe and a strong emphasis is placed on offsetting beyond legal obligations. In contrast the Pro-Biodiversity and Adaption Business theme is already quite well developed and covers a wide range of established enterprises such as sustainable forestry, farming and aquaculture and eco-tourism businesses.
Most natural capital investment in Europe is publicly financed and ultimately the aim of this initiative is to encourage an inflow of private capital. It is hoped that the NCFF will produce a portfolio of performing natural capital projects that can be showcased in private capital markets. The NCFF is conceived as a pump priming initiative to address a short-term market gap. The organisers are confident that there are a significant number of bankable natural capital project that will benefit from this intervention and indicate that several applications are at an advanced stage of application. No details have been made available on the lending interest rate. The NCFF will only be relevant if the interest rate is attractive to promoters of natural capital projects.
If you're interested in learning more about the NCFF, you can join a live webinar presented by the European Commission and the European Investment Bank on September 3rd from 2pm to 3.30pm. Register your interest here. Dr. Ciarán Fallon Director of Stewardship & Public Goods Coillte