Natural Capital Financing Facility

1

NCFFObjectives:

To encourage investments in revenue-generating or cost-saving projects promoting the conservation of natural capital to meet biodiversity/adaptation objectives and support green growth;

To demonstrate to private investors the attractiveness of natural capital projects; build project pipeline

€ 100-125 million Investment facility during 2015-2017

Operations between €5 million and €15 million:

Direct loans to individual, large projects

Indirect loans through financial intermediaries aimed at smaller projects

Indirect investment aimed at smaller projects via equity funds

€ 10 million Support facility for project development

EIB executes the Facility

EU contribution to the EIB of € 60 million for guaranteeing investments and financing the Support Facility. Budget comes from the LIFE programme, which is the EU’s funding instrument for the environment and climate action.

NCFF - Four project categories

Projects using Payments for Ecosystem Services (PES): payments involving payment or compensation for the benefits provided by ecosystems, such as cleaner water, higher soil qualiy or enhanced carbon sequestration

Green Infrastructure (GI) projects: investments in natural capital that generate a range of goods and services, such as water quality, flood protection and climate change adaptation

Projects developing Biodiversity offsets: conservation measures designed to compensate for the unavoidable damage to biodiversity arising from development projects.

No support for compensation to comply with article 6(4) of the Habitats Directive

Innovative pro-biodiversity and adaptation businesses: projects involving the supply of goods and services from conservation activities, such as sustainable forestry, agriculture, aquaculture and ecotourism. Innovation may relate to innovative approaches to ecological restoration/conservation or innovative business models

NCFF - Eligibility criteria

Projects must:

Promote one or both of the following objectives: conservation, restoration, management and enhancement of ecosystems, including through ecosystem-based solutions

application of ecosystem-based approaches that enable businesses and communities to address identified risks associated with current and projected impacts of climate change, including through urban, rural, and coastal green infrastructure projects.

Demonstrate financial and economic benefits, including the ability to generate revenues or save costs, with overall benefits exceeding costsContribute to the objectives of the EU LIFE programme for nature and biodiversity, and/or climate adaptationMeet the standard criteria set by the EIB for its investments

NCFF – Further information

Launch by two Commissioners and EIB vice-president on 16 February 2015

http://ec.europa.eu/environment/life/funding/financial_instruments/ncff.htm

http://www.eib.org/products/blending/ncff/index.htm and NCF_Instrument@eib.org

Promotion:

First leaflet available on the website. Further leaflets and brochure under development

Multi-stakeholder workshop on 8 May

Green Week session 'investing in nature' on 3 June

Example of Potential Project (1)

What is the project?Forest PES Scheme - forest-based nature conservation agreements and nature management projects. Scale-up for an existing successful Nature conservation initiative

Who are the actors involved? Ministries of Agriculture and Environment respectivelyGovernment-owned PES company

How does it generate revenues/cost savings?The PES company leases biodiversity benefits; establishment of VCS and CCB certificates

Relevance to the NCFFNCFF expected to leverage additional private sector involvement through certification /verification. The value of the NFF is: reducing dependence on public support, maximising social and environmental ROI through certification, providing a demonstration effect and adding legitimacy, demonstrating the viability of alternative financing structures.

Benefits Establish favourable conservation trends in forest ecosystems, Active voluntary-based conservation agreements between private forest owners and authorities, improve country’s network of protected areas, enhance the application of nature management methods in commercially managed forests, improve the knowledge base on forest biodiversity conservation, increase collaboration between forest and environmental organisations.

Example of Potential Project (2)

What is the project?GI +PES - Fund green investments in business improvement districts for which local businesses would be willing to pay, because of improvements in the business environment and delivery of ecosystem services – installation of green roofs, walls, rainwater harvesting etc...

Who are the actors involved? Business Development Districts in large cityPublic-private regeneration partnership comprising of local authorities city statutory bodies, local businesses and partner organisations.

How does it generate revenues/cost savings?The main opportunities for revenue generation lie in the financing of ambitious GI and pro-biodiversity schemes. Cost savings can also be attributed to GI installations.

Relevance to the NCFFWhile small scale GI installations are being delivered within traditional financing mechanisms, it is impossible to attract that same financing to larger scale, public realm interventions. Despite evidence of revenues and cost savings, there are also barriers to securing commercial finance due to the novel and innovative nature of the approach, and perceived risks among potential financiers. NCFF investment will address these barriers and demonstrate new financial models of urban green infrastructure.

Benefits Potential for increasing the stock of natural assets within an intensively-used sub-region at the centre of the city. The city is rapidly growing with plants to continue this rapid growth. A strategic intervention from the NCFF will support this growth to be pro-biodiversity and sustainable. Clean air, protection against surface water flooding, pollination of plants and provision of “green lungs” in the form of GI with dense urban areas – all of these ate vital natural capital assets with associated positive multiplier effects on quality of life and economic productivity.