The partnerships with private sector financial institutions will support startups and SMEs making a positive contribution to the UN SDGs and adopting more sustainable business models.
The European Investment Fund (EIF) has signed portfolio guarantees with French fund manager Wormser Frères Gestion to support venture debt financing of up to €22m for some 15 French startups, small and medium-sized enterprises and small mid-caps, including those contributing directly to the progress of the UN’s Sustainable Development Goals (SDGs)
The transaction is backed by InvestEU, the EU’s funding programme for sustainable investment, innovation and job creation, which aims to mobilise over €372bn in additional investment for EU policy priorities over the period 2021-27 through an EU budget guarantee of €26.2bn.
The financing, which will be provided through the WF Venture Loan II fund, includes guarantees from the EIF focusing on key InvestEU policy thematics, referred to as ‘windows. These include the innovation and digitalisation window, the SME competitiveness window and the sustainability window.
The latter includes portfolio guarantees for SMEs that are either already considered sustainable or which plan to invest in sustainable projects.
In response to questions from Impact Investor, Marc Wormser, general manager of Banque Wormser Frères, of which Wormser Frères Gestion is a subsidiary, explained that for investments that fell under the sustainability window, the fund would target what he called “impact native SMEs”.
“Companies that from the beginning have developed a product or service that directly contributes to one or more of the SDGs,” explained Wormser, adding that eligible companies would have to demonstrate that at least 50% of their turnover had contributed directly to one or more of the SDGs as well as be able to show a positive net impact overall.
Although WF Venture Loan II is not a strict impact fund, Wormser said that 25% of all its portfolio investments could be qualified as such and that the bank had plans to launch impact investment funds in the coming months.
“The fund has a specific impact questionnaire to evaluate its direct contributions to an SDG. This internal assessment is also counter-checked by an external auditor,” he added.
To be eligible for financing, companies will also have to demonstrate profitability or the potential to achieve it within a 12-month timeframe. The financing offered of €1m to €4m per transaction will have a four-year maturity and will be amortised after one year.
Boosting the green energy transition in Germany
The EIF is part of the European Investment Bank Group, which also announced earlier last week that the European Investment Bank (EIB) had signed a new partnership with Deutsche Bank, making €400m available as a loan portfolio for medium-sized German companies looking to finance their transition to more sustainable business models.
The loan portfolio will be made available to firms with between 250 and 3,000 employees, for investments in areas including renewable energy, energy efficiency and other projects that meet the sustainability criteria of the EU Taxonomy. At least half of the loans have been earmarked for financing projects that boost renewable energy production.
The EIB will provide guarantees covering up to 50% of the loan sum.
These guarantees are part of an EU-wide linked risk-sharing (LRS) programme, which the EIB explained used risk-sharing to reduce some of the access barriers to finance caused by current economic uncertainties, such as supply chain bottlenecks, inflation, rising interest rates and insecure energy supply.
Hauke Burkhardt, global head of corporate bank lending at Deutsche Bank, said: “The energy transition in particular entails a high need for transformational financing for many companies. Sustaining this significant financing volume requires strong partnerships, especially between promotional and commercial banks. The LRS programme serves just this purpose. The new partnership between the EIB and Deutsche Bank provides corporate clients with reliable support for their transformation projects.”