Environment

Encouraging investment in Europe’s natural capital

29/04/2016

Investing in nature protection – for example to fight water pollution or to implement sustainable farming practices – is often seen as too long term or risky for private companies acting alone. The EU’s new Natural Capital Financing Facility aims to change this.

The Natural Capital Financing Facility (NCFF), a financial instrument launched by the European Commission in 2015 and managed by the European Investment Bank, aims to make green infrastructure and nature-based projects attractive investments for the private sector. The NCFF is funded through the LIFE programme, the EU's funding instrument for the environment and climate action.

The NCFF focuses exclusively on bankable nature-based projects for climate adaptation and biodiversity that can either create revenue or save costs.




James Ranaivoson, EIB

Currently in a pilot phase, the programme initially supports investments in about ten projects. These could include initiatives to develop natural water collection and reuse systems, mitigate flooding and soil erosion, build green roofs, counter water and soil pollution, or regenerate forests and land areas through sustainable forestry and agriculture.

The programme will provide up to €125 million for the selected projects through intermediated debt and equity financing. "The NCFF has been designed to go into smaller and riskier projects than the EIB would traditionally fund," explained James Ranaivoson, managerial advisor on Structured Finance for Climate Action and Environment at the EIB. "It focuses exclusively on bankable nature-based projects for climate adaptation and biodiversity that can either create revenue or save costs."

Win-win projects

One project currently being considered for funding, the Irish Forestry Fund, aims to use €13 million of NCFF financing to leverage a €50-million investment to reforest plantations and barren land in Ireland with native tree species. As well as boosting reforestation and biodiversity protection efforts, in the long run the project will generate a return for investors through sustainable timber production. It will also have climate change adaptation benefits by reinforcing the resilience of forests to climate impacts such as storms or high winds.

These funds can help biodiversity blossom and truly become an engine for growth.




Karmenu Vella, Commissioner for Environment, Maritime Affairs and Fisheries

The Rewilding Europe Capital project will support small businesses in rural areas and help restore landscapes, biodiversity and natural ecosystems degraded by land abandonment or land-use changes.   

The NCFF takes an innovative approach to supporting EU efforts to help ecosystems adapt to climate change, protect biodiversity and support green infrastructure. It is one of two new financial instruments under the LIFE programme – the other being the Private Finance for Energy Efficiency.

In addition, the LIFE programme is providing an extra €10 million through a support facility to provide technical assistance to final recipients and financial intermediaries for project preparation, implementation, monitoring and evaluation.

"To protect the diversity of our natural surroundings we need to promote the diversity of our funding sources. These funds can help biodiversity blossom and truly become an engine for growth," said Karmenu Vella, European Commissioner for Environment, Maritime Affairs and Fisheries.

 

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