European Commission, EIB to finance research, innovation

The European Commission and the European Investment Bank (EIB) have signed a cooperation agreement establishing the new risk-sharing finance facility (RSFF) to support research and innovation in Europe.

This new instrument will help to make more financing available for promoters of research and innovation projects, which often face more difficulties than traditional business sectors in accessing finance, due to the relatively high levels of uncertainty and risk inherent to their activity.

The RSFF, part of the EU’s 7th Research Framework Programme (FP7) and EIB’s programme for R&I, will partially cover the financial risks assumed by the EIB when financing this type of activity. The contribution of EUR 1 bln each from FP7 and the EIB will therefore unlock billions of additional financing in this area.

“Europe needs to find ways to boost investment in research, particularly from private companies,” said Science and Research Commissioner Janez Potočnik.

“The RSFF is one of the most exciting new ideas in the EU’s 7th Research Framework Programme, and through co-operation with the EIB will unlock billions of new investment for research, development and innovation in Europe.”

“By targeting higher risk financing in support of research and innovation projects, the facility will in an efficient way complement the existing support instruments including national and EU grants as well as market debt and equity funding,” said EIB President Philippe Maystadt.

The 4th European Conference on Research Infrastructures (ECRI 2007) in Hamburg also saw the launch of the European X-ray Free-Electron Laser (XFEL), identified in the European Strategy Forum for Research Infrastructures (ESFRI) roadmap. This European research infrastructure, supported by 13 partner countries, will be a world leading facility for the production of intense, short pulses of X-rays for scientific research in a wide range of disciplines.

If the EU is to reach its target of investing 3% of its GDP in research, it is important to boost private sector investment in R&D.

An important pre-condition to achieving this is mobilising financial markets. However, financial markets and financial institutions are often reluctant to back research intensive companies or research projects due to the relatively high levels of uncertainty and risk inherent to their activity compared to more traditional business areas.

The RSFF is a direct answer to these challenges. Its objective is to improve access to debt financing for promoters of R&I investments by sharing the underlying risks between the EU and the EIB. This risk-bearing instrument will cover, through capital allocations and provisions, the risks born by EIB when lending directly to the promoter, or when guaranteeing loans made by financial intermediaries (e.g. banks in member states and associated countries).

Initially, RSFF is likely to benefit mostly medium and large innovative companies and large scale research undertakings such as European or national research infrastructures. However, RSFF will also be open to private and public entities of any size and ownership promoting eligible RDI activities, including SMEs, research organisations and public-private partnerships (PPPs) contributing to FP7 objectives.

In 2006, ESFRI published its roadmap identifying 35 priority EU-scale infrastructures required in key scientific areas. For a total estimated cost of EUR 14 bln, these major infrastructures will require a coordinated approach from national, private and other sources of funding. The RSFF could boost the emergence of these new research facilities.