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RECOMMENDATIONS FROM THE PROJECT ON FINANCING ECO-INNOVATION
Morten Larsen, Oxford Research, Brussels 30 November 2010
Oxford Research A/SFalkoner Allé 20, 4. sal2000 Frederiksberg CDanmark
Oxford Research ABNorrlandsgatan 11103 93 StockholmSverige
Oxford Research ASKjøita 424630 KristiansandNorge
Todays agendaAgenda
1.Overall policy considerations and conclusions
2.Existing instruments
3.How to attract more financing to eco-innovation
Financing eco-innovation
Work in
progress
Financing eco-innovation
Overall policy considerations:
Framework for eco-innovation finance: a mix of micro policy and macro policy
Policy stability important Investment rationale of financial actors is
the same as for investments in other innovative sectors (look for same rate of return)
Double externality challenge Some eco-innovative SMEs have high risk
profile
HOW TO IMPROVE ACCESS TO FINANCE - ON REASONABLE TERMS FOR BOTH PUBLIC AND PRIVATE PROVIDERS OF FINANCE?
MACROPOLICIES, INSTITUTIONAL
AND REGULATORY FRAMEWORK
MICROPOLICIES, R&D,
INNOVATION AND
ENTREPENEURSHIP POLICIES
FINANCING ECO-
INNOVATION INITIATIVES
AND PROGRAMMES
•Financing eco-innovation
Overall policy considerations and conclusions:
Market maturity differs between sub-sectors
Energy is in some respects different from other types of eco-innovation
Venture capital flows mainly to energy related investments (generation + efficiency)
HOW TO IMPROVE ACCESS TO FINANCE - ON REASONABLE TERMS FOR BOTH PUBLIC AND PRIVATE PROVIDERS OF FINANCE?
Financing eco-innovation
Many eco-innovative SMEs are not VC fundable
Early stage: Debt financing is also important – used by almost half of the early stage SMEs in our survey
SMEs and VCs perceive banks to be insufficiently engaged in eco-innovation (non-energy)
Small-scale financing is requested by eco-innovative SMEs (less than €300,000)
Overall policy considerations and conclusions:
Financing eco-innovation
A DIVERSE SET OF EU INSTRUMENTS AND PROGRAMMES FOR FINANCING (ECO-) INNOVATION ALREADY EXISTS:
GRANTS
EIP Market Replication and First Application Projects Private-sector focused Support market uptake of first commercial deployment and market demonstration
LIFE+ - Action Grants Support public-sector development and implementation of new legislation, policies, programmes and strategies Public-sector focused Awareness raising
Financing eco-innovation
A DIVERSE SET OF EU INSTRUMENTS AND PROGRAMMES FOR FINANCING (ECO-) INNOVATION ALREADY EXISTS:
Financial instruments CIP - €1.1 billion for 2007 to 2013 High Growth and Innovative SME Facility (GIF)
- EIF co-invests in VC Funds to increase risk capital for innovative SMEs – early stages (GIF1) and expansion phase (GIF2)
SME Guarantee (SMEG) Facility - Loan guarantees – in one instance focused on eco-innovation - Micro-Credit Guarantees - Equity Guarantees- Securitisation
Risk sharing finance facility
- Debt-financing instrument under FP7 (loans and/or guarantees)- Provide additional loan finance for R&D, Demonstration and Innovation- E.g. for renewable energy and energy efficiency projects
Financing eco-innovation
HOW TO ATTRACT MORE FINANCIAL ACTORS AND FINANCING TO ECO-INNOVATION?
General policy stability and focus is an important issue but there are also unique conditions for eco-innovative SMEs that should be addressed.
Market failure – knowledge gap
Public R&D fundingPrivate financing for
commercialisation and scaling up
Knowledge of new solutions and regulation needed to make informed investment decisions
Knowledge of new solutions and regulation
More knowledge => perceived risk reduced
Work in
progress
Calls for further investigation of flexible risk sharing instruments, including:
• Small scale financing
• Debt financing
• Business Angel co-financing
• Links between instruments
THANK YOU
Morten Larsen, Oxford Research, Brussels 30 November 2010
Oxford Research A/SFalkoner Allé 20, 4. sal2000 Frederiksberg CDanmark
Oxford Research ABNorrlandsgatan 11103 93 StockholmSverige
Oxford Research ASKjøita 424630 KristiansandNorge
