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EC and EIF support funds investing in eco-innovative SMEs

28/07/2011

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The European Commission supports the development of eco-innovative enterprises, particularly SMEs, by facilitating their access to finance through the European Investment Fund (EIF).

One aim of the Competitiveness and Innovative Framework Programme (CIP) is to improve access to finance for the start-up and growth of small and medium-sized enterprises (SMEs) as well as to enhance investment in innovation activities. This is also encouraged by supporting the emergence of a performing European venture capital market.

Total CIP resources from the Commission allocated to financial instruments amount to €1.1 billion for 2007 to 2013. Approximately half of them are budgeted for the CIP High Growth and Innovative SME Facility (GIF) targeting the lack of capital for innovative SMEs with a high growth potential. The facility is implemented by the EIF – a specialised EU financial institution supporting SMEs.

The EIF has significant means – at the end of 2008 it had a portfolio of €4.5 billion invested in 299 venture capital funds and the mandate to invest substantially more. Its funding comes from the European Investment Bank (EIB), European Commission and Member States under different mandates. EIF makes equity investments in venture capital funds that support particularly technology-oriented SMEs in the early and later stages of development, acting as a fund of funds. It is in this context that EIF implements GIF for the Commission.

There are two GIF windows: one aimed at risk-capital funds targeting investments in SMEs that are in seed and start-up stage (GIF 1); and the other for those targeting expansion-stage SME investments (GIF 2).

For risk-capital funds focused on eco-innovative SMEs, higher investment rates are allowed under GIF. In GIF 1, EU investment may represent up to 50% of fund size compared with 25% for funds investing in more traditional industrial sectors. With GIF 2, the financing caps are 25% for eco-innovation and 15% in other cases.

Under GIF, a specific ‘envelope’ of over €200 million is dedicated to venture-capital funds with an eco-innovation focus. EIF has committed more than €50 million in four deals with eco-innovative funds – see BOX.

More information

CIP GIF eco-innovative deals

CAPRICORN (June 2008)

EIF invested in the Capricorn Cleantech Fund under GIF 1. This Belgian based European fund is investing in cleantech and eco-innovation SMEs. The fund has €112 million under management for investments in early to mid-stage ventures.

More information:

‘European Investment Fund invests in Capricorn Cleantech Fund’ (EIF press release):
http://www.eif.org/venture/news/2008-EIF-supports-first-cleantech-fund-under-CIP.htm

WHEB (January 2009)

EIF invested in the UK-based WHEB Ventures Private Equity Fund 2, which supports the growth of cleantech enterprises in Western Europe in an early stage of development (GIF1). The fund will invest in innovative young companies with high growth potential.

More information:

‘European Investment Fund supports UK clean technology fund’ (EIF press release):
http://www.eif.org/venture/news/2009-WHEB-Ventures-Private-equity-Fund-2.htm

PINOVA (January 2009)

EIF invested, under GIF 2, in Pinova Fund 1, which focuses on lower mid-market and expansion stage phases of SMEs in Germany and Austria, helping engineering, services and environmental businesses to become international players.

More information:

‘European Investment Fund supports German small and medium sized businesses’ (EIF press release):
http://www.eif.org/venture/news/2009-Pinova-Fund-1.htm

DEMETER (May 2009)

The EIF invested in the Demeter 2 Fund which will provide €200 million for expansion and venture capital to companies in the sustainable energy and eco-industry sectors in France, Spain and to a lesser extent Germany and the rest of Europe.

More information:

‘European Investment Fund intensifies its commitment to European clean technology’ (EIF press release):
http://www.eif.org/venture/news/2009_Demeter-2.htm