The European Fund for Sustainable Development (EFSD) is part of the External Investment Plan (EIP) which has been established in 2016.
Built on the success of the Fund, the European Commission put forward a proposal in 2020 in order to expand the Fund’s coverage and raise the funds dedicated to leverage private investment for sustainable development and the guarantees to de-risk such investment.
In December 2020, the European Commission has concluded the deployment of the €1.549 billion EFSD Guarantee which is designed to leverage additional financing by allowing risk sharing with private investors, international financial institutions and development banks, fostering economic and social development in Sub Saharan Africa and EU Neighbourhood countries.
Which objectives?
Contributing to the Sustainable Development Goals 2030, in particular poverty eradication, and, to the implementation of the European Neighbourhood Policy and the New Partnership Framework with Third Countries under the European Agenda on Migration thus addressing root causes of irregular migration. It will also contribute to the implementation of the Paris agreement on climate change (COP 21). In short, the EFSD is an innovative instrument to support investments and involve the private sector in particular micro-, small- and medium-sized enterprises.
Overall, the mechanism is a Guarantee Instrument. How it works – finance | EU External Investment Plan (europa.eu)
For which countries?
The programme is particularly interesting for our members under the EU Neighbourhood Policy and also other third countries.
What is in for our sector?
From 2021, the EFSD Guarantee will finance a large number of innovative solutions and approaches in different sectors such as renewable energy and energy efficiency, access to finance for Micro, Small, and Medium-Sized Enterprise and municipal infrastructure.
The EFSD Guarantee has the capacity to adapt to unprecedented changing conditions and will help the private sector in EU’s Southern and Eastern partner countries to better face the impact of the socio-economic crisis and to build more resilient economies.
Management
The Fund will be managed by the European Investment Bank (EIB) and it should be composed of regional investment platforms.
In Practice: The EFSD will operate as a “one-stop shop” to receive financing proposals from financial institutions and public/private investors and deliver a wide range of financial support to eligible investments. It will offer guarantees and use blending mechanisms to encourage the private sector to invest in more risky contexts, such as fragile states or conflict-affected areas.