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Financial instruments

Financial instruments

In addition to action and operating grants, LIFE funding is channeled through two new financial instruments, the Private Finance for Energy Efficiency (PF4EE) and the Natural Capital Financing Facility (NCFF).

Private Finance for Energy Efficiency (PF4EE)

The Private Finance for Energy Efficiency (PF4EE) aims to increase private financing for investments in energy efficiency enhancing projects. It thus supports Member States in making progress towards the EU's energy efficiency targets. It is also aligned to the EU Investment Plan.

The Commission has committed €80 million for 2014-17 anticipating an 8-fold leverage effect. The management of the instrument is entrusted to the European Investment Bank (EIB).

The PF4EE will combine lending from the EIB to financial intermediaries with protection against losses associated with making loans for energy efficiency projects. The financial instrument will help intermediary banks in Member States to develop and offer specific loan programmes for energy efficiency projects. These loan programmes will be aligned with the national energy efficiency action plans.

The financial instrument will also provide support and technical assistance to the financial intermediaries.

Final recipients will be private investors in Member States investing into energy efficiency enhancing projects. The beneficiaries could include SMEs and private individuals (e.g. house or hotel owners) as well as small municipalities or other public sector bodies. The size of the loans could range from €40,000 to €5 million and higher in exceptional cases.

Natural Capital Financing Facility (NCFF)

Under the Natural Capital Financial Facility (NCFF), the European Investment Bank (EIB) provides loans and investments in funds to support projects which promote the preservation of natural capital, including adaptation to climate change, in the Member States.  

The total budget for this facility amounts to €100-125 million for 2014-2017. The European Commission contributes €50 million as a guarantee for the investments and finances a €10 million support facility.

The main aim of the NCFF is to demonstrate that natural capital projects can generate revenues or save costs, whilst delivering on biodiversity and climate adaptation objectives.  The NCFF is to establish a pipeline of replicable, bankable operations that will serve as a "proof of concept" and that will demonstrate to potential investors the attractiveness of such operations.

Potentially eligible projects address payments for ecosystem services, green infrastructure, biodiversity offsets and innovative pro-biodiversity and adaptation investments.

Recipients can be public and private entities, including public authorities, land owners and businesses. The size of NCFF projects ranges from €5 million to €15 million. The NCFF provides finance to project developers both directly and indirectly through financial intermediaries.

A €10 million support facility for capacity building and project preparation and implementation is available for projects for which there is a reasonable probability that they, once developed in full, can be awarded NCFF funding.

Investment Plan

The LIFE financial instruments complement the European Commission's Investment Plan by helping to remove market barriers through investments in projects that would not be funded otherwise because they are considered as too high risk.

According to a task force report under the plan, attracting sufficient private investment in improving energy efficiency remains a challenge in most parts of Europe. This challenge can be addressed in part through dedicated project development assistance, potentially complemented with targeted use of public resources, to share risk with private financial intermediaries.

Improving access to finance will contribute to boosting demand and creating jobs with real added value to the European economy, in line with the goals of the Investment Plan.