Commission Delegated Regulation (EU) 2021/1078 of 14 April 2021 supplementing Regulation (EU) 2021/523 of the European Parliament and of the Council by setting out the investment guidelines for the InvestEU Fund

Article 1

The investment guidelines for the financing and investment operations under the InvestEU Fund established by Regulation (EU) 2021/523, as laid down in the Annex, are adopted.

Article 2

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

ANNEX

1. SCOPE

These investment guidelines lay down the eligibility requirements for financial products and financing and investment operations under the policy windows of the InvestEU Fund pursuant Article 8(9) of the Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing the InvestEU Programme and amending Regulation (EU) 2015/1017 (¹) (the ‘InvestEU Regulation’):

(a) the financial products referred to in Article 2(9) of the InvestEU Regulation and the financing and investment operations referred to in Article 2(10) of that Regulation must comply with the requirements laid down in the InvestEU Regulation and in these investment guidelines;

(b) the Investment Committee, when deciding in accordance with Article 24 of the InvestEU Regulation, must verify compliance with these investment guidelines.

These investment guidelines concern both the EU and Member State compartments set out in Article 9 of the InvestEU Regulation, unless otherwise specified in these guidelines. The definitions set out in Article 2 of the InvestEU Regulation apply also to these investment guidelines.

2. HORIZONTAL PROVISIONS

2.1.   Contribution to Union policy objectives and Union added value

Financing and investment operations supported under the InvestEU Fund shall focus on investments that provide Union added value. The nature of the Union added value can vary for financing and investment operations under specific financial products as set out in each policy window in Section 6 of these investment guidelines. The Union added value of financing and investment operations under financial products can also result from risk diversification at financial product level across various sectors or geographies. Furthermore, Union added value can also be derived from the contribution to the resilience of the Union in areas of strategic importance as further set out in Section 2.10.

To achieve Union policy objectives in the policy areas supported by InvestEU, as set out in Article 3 and Annex II of the InvestEU Regulation in relation to the sectors therein, financing and investment operations may complement grant financing and other support in particular through blending operations and combinations. The InvestEU Fund may in particular complement relevant policy objectives of Horizon Europe (²), the Connecting Europe Facility (³) (CEF), the Digital Europe programme (⁴), the Single Market programme (⁵), the European space programme (⁶), the European Regional Development Fund (ERDF) (⁷), the Cohesion Fund (⁸), the European Social Fund+ (ESF+) (⁹), the Recovery and Resilience Facility (RRF) (¹⁰), the European Agricultural Fund for Rural Development (EAFRD) (¹¹), the Creative Europe programme (¹²), the Asylum and Migration Fund (¹³), the Internal Security Fund (¹⁴), the European Maritime, Fisheries and Aquaculture Fund (EMFAF) (¹⁵), the Programme for the Environment & Climate Action (LIFE) (¹⁶), the ETS Innovation Fund (¹⁷), EU4Health (¹⁸), the Just Transition Fund (JTF) (¹⁹) and the European Defence Fund (²⁰).

2.2.   Market failures, suboptimal investment situations and additionality

In accordance with Article 209(2)(a) and (b) of the Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (the ‘Financial Regulation’ (²¹)) the EU guarantee shall address market failures or suboptimal investment situations and achieve additionality, as laid down in Section A of Annex V to the InvestEU Regulation (²²).

2.3.   Common requirements for the financing and investment operations

According to Article 2(13) of the InvestEU Regulation, implementing partners are eligible counterparts, such as financial institutions, with whom the Commission has concluded a guarantee agreement.

Implementing partners can provide financing directly (²³) to final recipients or indirectly through private or public financial intermediaries.

Implementing partners may also become advisory partners to provide, directly or indirectly, technical assistance and capacity-building support to financial intermediaries and final recipients under the InvestEU Advisory Hub. Financial intermediaries may also provide technical assistance and capacity-building support to final recipients or may benefit from it themselves.

Direct operations concern direct financing by implementing partners to final recipients (²⁴).

For indirect operations, the implementing partners may conclude agreements with financial intermediaries in accordance with Article 208(4) of the Financial Regulation. In the case of intermediated financing, pursuant to Article 208(4) of the Financial Regulation those financial intermediaries must be selected by the implementing partners following procedures equivalent to those applied by the Commission. Such procedures must respect the principles of open, transparent, proportionate and non-discriminatory procedures, and must avoid conflict of interests. They could, for example, take the form of a call for expression of interest. Indirect operations may also consist of providing financing through investment platforms as defined in Article 2(18) of the InvestEU Regulation.

In accordance with Articles 209(2)(a) and 219(3) of the Financial Regulation, financing and investment operations shall provide support only to final recipients deemed economically viable according to internationally accepted standards at the time of the Union financial support.

The eligible final recipients must be natural or legal persons including:

(a) private entities such as special-purpose vehicles (SPVs) or project companies, large corporates, midcap companies, including small midcap companies (²⁵), and SMEs;

(b) public-sector entities (territorial or not, but excluding financing and investment operations with entities (²⁶) giving rise to direct Member State risk) and public-sector type entities;

(c) mixed entities, such as public–private partnerships (PPPs) and private companies with a public purpose; or

(d) not-for-profit organisations.

The targeted final recipients under a financial product will be defined in the guarantee agreement.

Implementing partners must not be in any of the situations referred to in Article 136(1) or (4)(a) or (b) of the Financial Regulation. With regard to financial intermediaries and final recipients, the application of Article 136 must be specified in the guarantee agreements. Where financing and investment operations benefit final recipients that are large corporates, public-sector and public-sector-type entities that benefit from easier access to capital markets or bank financing or display lower levels of risk, the implementing partner must demonstrate high policy value added.

Based on the information received from the implementing partner, the Investment Committee shall verify that an InvestEU supported financing or investment operation submitted by an implementing partner or a combination of such operations submitted by more than one implementing partner:

(a) for direct operations, shall not exceed 50 % (²⁷) of the total project cost;

(b) for indirect equity operations, shall not exceed 50 % of the fund size (²⁸);

(c) for indirect debt operations, at least 20 % of the exposure shall be retained by the financial intermediary.

These requirements apply unless otherwise specified in these investment guidelines under Section 5.

For indirect operations, the implementing partner shall contractually require that a financial intermediary cannot include the same transaction with final recipients or other intermediaries in more than one portfolio supported by InvestEU.

For indirect equity operations, in respect of the requirement in point (b) above, the implementing partner shall request that potential financial intermediaries inform it about their intention to seek investment from another implementing partner and/or financial intermediary benefiting from the EU guarantee, subject to confidentiality requirements binding on the potential financial intermediaries.

Final recipients shall be contractually required to confirm that the combination of support from the InvestEU Fund and from other Union programmes does not exceed the total project cost, where applicable, and that InvestEU supported financing is not used to pre-finance a grant from Union programmes or that a grant from Union programme will not be used to reimburse InvestEU support.

Implementing partners shall ensure the visibility of the InvestEU support in accordance with Article 32 of the InvestEU Regulation as further specified in the guarantee agreements taking into account the nature of the financial product and of final recipients.

Key performance indicators that demonstrate the achievement of policy priorities will be set in order to prioritise the policy objectives under each financial product. In addition, one or more of the following means will be used:

(a) target amounts for financing granted to certain policy priorities;

(b) specific dedicated criteria to target relevant final recipients;

(c) different coverage by the EU guarantee of risks for specific policy priorities;

(d) concentration limits per sector/geography;

(e) a duly justified performance-based mechanism to reflect the delivery of specific policy priorities;

(f) definition of milestones and targets linked to the allocation of additional EU guarantee tranches to new or existing financial products of an implementing partner; or

(g) any other appropriate means.

The prioritisation and applicable means will be specified in the guarantee agreement.

Furthermore, a close dialogue will be established between the Commission and each implementing partner to provide policy steer and review the pipeline of operations foreseen under the InvestEU Fund.

To ensure flexibility and responsiveness to potentially changing market and policy needs as required under each policy window, the Commission and the relevant InvestEU governance bodies may prioritise the eligible areas for financing set out in Annex II to the InvestEU Regulation based on the means described in this Section. The Commission may in particular:

(a) periodically review the project pipeline provided by implementing partners together with them. The project pipeline consists of aggregate information (or detailed information, subject to confidentiality commitments in place between the implementing partner and the final recipient, if so agreed in the guarantee agreement) regarding the projected amount of financing under the relevant policy areas, at sub-sector level, and geographical coverage of operations. More granular information will need to be provided for thematic products defined under Section 2.3.2.2 and for financing and investment operations benefiting from blending defined under Section 2.9.

(b) give guidance on the interpretation of eligibility criteria and prioritisation means referred to in these guidelines.

(c) review the performance and scope of the relevant financial products in order to optimise the achievement of the policy priorities referred to in these guidelines.

Within the framework set out in this Section 2.3.2.1, indicative targets focusing on specific policy objectives may be set under general financial products.

Financial products may take the form of general financial products, thematic financial products, and joint general or thematic financial products.

General financial products shall support one or more policy areas covered under each policy window as further defined in Section 6 of these investment guidelines.

In duly justified cases, depending on the risk profile of the financing and investment operations targeting specific policy objectives, thematic financial products can be created under policy windows.

A thematic financial product shall focus on a clearly defined, higher Union added value policy area where the market failure or suboptimal investment situation cannot be addressed by general financial products because it significantly departs from the terms and conditions of these available general financial products. This may in particular be due to the high-risk profile of the financing and investment operations, which require higher EU guarantee coverage through asymmetric, limited or no risk sharing with the implementing partner. In any case, the financial contribution of the implementing partner shall comply with Article 13(4) and (5) of the InvestEU Regulation on a portfolio basis.

A thematic financial product shall be based on a market failure or suboptimal investment situation assessment, which shall be proportionate to the features of the proposed thematic financial product, to the extent that the product was not already covered by existing assessments and studies.

In addition to the pipeline review, the implementing partner shall provide specific information regarding eligibility to the Commission on each financing or investment operation under a thematic product, as laid down in the guarantee agreement.

A joint general or thematic financial product may be developed to address policy objectives falling under more than one policy window in a more efficient manner. Such products shall combine resources from two or more windows.

The InvestEU Fund shall not support activities referred to in Section B of Annex V to the InvestEU Regulation.

Member State resources involved in financing and investment operations supported under the InvestEU Fund under EU and Member State compartments may in certain instances qualify as State aid in the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (‘TFEU’). However, they are exempted from the notification requirement for State aid measures laid down in Article 108(3) TFEU if they meet the requirements, which are laid down in the General Block Exemption Regulation (²⁹), in particular the InvestEU specific section thereof (³⁰), or in another block exemption regulation (³¹). Any State aid that does not meet the requirements laid down in one of the block exemption regulations must be notified to the Commission pursuant to Article 108 TFEU.

2.4.   Risk assessment

For all direct debt-type operations, the implementing partners shall carry out their standard risk assessment, involving the computation of the probability of default and the expected recovery rate and the classification according to the internal rating or grading system of the implementing partner, and report accordingly to the Commission.

To reflect the overall risk of the operation, such computation shall be performed without taking into account the EU guarantee and the financial contribution from the implementing partner. However, it must take into account the fact that some operations under thematic products may, under the rules and procedures of the implementing partner, fall outside the scope of its regular risk metrics. In such cases, adequate risk assessment shall be developed by the implementing partner in cooperation with the Commission as to ensure adequate risk reporting.

Information on the expected risk profile of debt-type operations shall also be submitted to the Investment Committee as part of the application for InvestEU Fund support. A debt-type operation is an operation that has the risk characteristics of debt, which may include instruments in the legal form of debt. Examples of debt include loans, financial leases, mortgages, letters of credit, guarantees, standby credit facilities, and securities issued on the capital markets such as bonds; these may be senior, mezzanine or subordinated and secured or unsecured.

For equity-type operations, the EU guarantee may be used to support investments in individual entities or projects (equity-type investments) by the implementing partners or through investments in funds (including funds of funds, co-investment vehicles or other types of intermediaries) or other types of financing vehicles presenting equity-type portfolio risks (equity-type portfolio).

An equity-type operation is an operation that has the risk characteristics of equity. This may include instruments in the legal form of equity, such as investments in common or preferred shares, and of quasi-equity or hybrid instruments, such as deeply subordinated loans with profit participations, mezzanine finance, venture loans, convertibles, warrants or other forms of equity kickers when exposing the holder to equity-type risk. For direct equity-type operations, the implementing partner shall carry out their standard assessment and report accordingly to the Commission. For operations that fall outside the scope of regular equity metrics, the implementing partner shall develop an adequate method of assessment in cooperation with the Commission so as to ensure adequate reporting.

The implementing partner shall use its standard risk assessment to determine whether an operation is classified as equity-type or debt-type, irrespective of its legal form and nomenclature, and shall report this accordingly to the Commission.

For intermediated operations, the implementing partners may rely on the standard procedures of financial intermediaries with respect to the assessment of the risk of the final recipients or the valuation of the operation, as applicable. The guarantee agreement will provide that the outcome of analysis performed by the implementing partners, based on the input received from financial intermediaries at portfolio level, shall be reported to the Commission so that it can assess the impact of such operations on the risk borne by the EU guarantee and the adequacy of the provisioning needs.

Financing and investment operations shall be mapped against a common rating system put in place in accordance with Article 11(1)(b)(ii) of the InvestEU Regulation. Relevant information on the risk assessment of a financing or investment operation shall be made available to the Investment Committee in line with Article 24(4) of the InvestEU Regulation and to the Commission for reporting purposes. The detailed requirements shall be laid down in the guarantee agreements, taking into account the interests of the EU as the guarantor and ensuring that appropriate protection is given to the confidentiality of private and/or commercially sensitive information.

2.5.   Currency of financing