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Financing for innovation

Challenges

Limited access to appropriate forms of finance can be a restraint to water related innovations, both inside the single market and for European firms seeking to market their products and expertise outside the EU. A key challenge is to increase overall financial flows to the sector through innovation in pricing methodologies and practices. Crucial factors in financing for innovation are creditworthiness and perceptions of risk versus reward; where appropriate blending of grants with loans and other financial instruments can have an important part to play. Equally, non-financial instruments matters like appropriate incentives, and training and knowledge sharing can help to unlock financing.

Bottlenecks

There are insufficient overall financial flows into the sector and weak profitability arising from inadequate cost recovery. Furthermore, the water services sector, as well as other industrial sectors such as the process industry, have a high capital-intensity, with built-in risk aversion due to public health concerns. SMEs frequently do not have the resources to respond to market opportunities, nor the capacities to access already available sources of funding. In addition, accessing funding from EU financial mechanisms can have a very high administrative burden, while these mechanisms do not provide opportunities for companies focused on export markets.

Market opportunities

The global water market is a huge economic opportunity. Financing to support innovations is an enabler, for the regional as well as the global market. Demonstration of new technologies on Incubator Platforms increase visibility and acceptability of new products.

Objective

The overall objective for financing for innovation is to explore, develop and implement new approaches to increase financial flows in the water sector, with three priorities:

  1. Improve access to finance for SMEs, especially those with potentially disruptive technologies.
  2. Incentivize public sector innovation, notably through public procurement, support to the pre-commercial phase of new technologies and increasing overall financial flows to the sector by applying appropriate cost recovery principles.
  3. Financial support mechanisms for European companies in water-related export markets.

Initial Actions

The Steering Group of the EIP Water invites Action Groups to develop and test:

  1. An EU wide common structure to build interfaces between funders, industry, companies, SMEs and research organizations to foster relationships promoting innovation and improve knowledge about access to finance.
  2. Options to improve access to finance for SMEs active throughout the water cycle, especially those with potentially disruptive technologies and those with high export potential.
  3. Frameworks and instruments to stimulate public sector innovation in the priority areas identified by the EIP, based on a review of public procurement best practices in relevant sectors of industry in Europe and other OECD countries.
  4. Innovative financial instruments at an EU level to support European companies proposing innovative goods and services and to facilitate access into overseas water sector export markets in line with the objectives of the EIP.