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Community support for environmental investments by SMEs

The European Commission, DG II, has published a call for expressions of interest for institutions interested in taking part in the "Growth and Environment" pilot project. The creation of the "Growth and Environment" pilot project was suggested by the European Parliament, whic...

The European Commission, DG II, has published a call for expressions of interest for institutions interested in taking part in the "Growth and Environment" pilot project. The creation of the "Growth and Environment" pilot project was suggested by the European Parliament, which requested the Commission to implement a special programme to enhance and facilitate the access of small- and medium-sized enterprises (SMEs) to bank loans for investments producing environmental benefits. The pilot project set up by the Commission establishes a mechanism through which SMEs may benefit from loan guarantees extended by the European Investment Fund (EIF). These loan guarantees are provided at no cost to either the borrowing enterprise or the financial institution involved as guarantee premiums will be covered by the EC budget. Interested financial institutions can take part in the project in two possible ways: - They can participate as "intermediary banks", in which case the loan guarantees in favour of the beneficiary SMEs are extended by the EIF; - They can become involved as "guarantors", in which case the type of guarantee provided could take several forms: . Co-insurance with EIF; . Re-insurance by EIF of a guaranteed portfolio of eligible loans; . Other guarantee arrangements. As the loan guarantees or the credit insurance will be extended to banks providing environmental loans to SMEs, the guarantors should apply in conjunction with one or several "associated banks". The applying institution should clearly state whether it is applying as an intermediary bank or a guarantor. After evaluation by an internal committee, and in consultation with the EIF, the authorizing department will draw up a list of institutions which meet the requirements for participating in the scheme. A number of institutions from this list will be invited to participate in this project in conjunction with the European Investment Fund (EIF), through which the scheme will be implemented. The institutions invited to take part will be selected on the basis of the objectives of the pilot project and the volume of budgetary credits available (ECU 9 million for 1995). This pilot project is aimed primarily at enterprises employing up to 50 employees. Larger enterprises will not, however, be excluded provided that they do not employ more than 100 employees and represent a minority part in the overall lending portfolio which is guaranteed under the scheme. No sectorial exclusions or limitations apply under the current programme, although special incentives will be provided for certain sectors. Only newly signed loans of less than ECU 1 million and with a maturity of less than seven years are eligible for guarantees under the scheme. The investments financed with the guaranteed loans must produce significant environmental benefits. Only new investments qualify for support. In order to avoid delays in the processing and approval of loans applications presented by beneficiary firms, decisions relative to the eligibility of the enterprise, the loan and the investment will be delegated to the financial institutions participating in the scheme. The three types of eligible investments are: - Investments directly aimed at achieving environmental improvements. Such investments should, inter alia, generate ecological improvements which are related to one of the following elements: . Savings of energy and natural resources; . Prevention, reduction, or (re)treatment of all forms of pollution (water, air, waste, etc.); . Protection of soil and ground water; . Enhanced safety and hygienic measures (for the benefit of the environment, workers, etc.); - Other investments producing environmental improvements (investments not directly aimed at achieving immediate ecological advancement but in which such advancement constitutes a significant and measurable part of the effects produced); - Investments carried out by enterprises producing "clean" equipment, technology, products or services. The cost of the guarantee premiums will be borne by the Community budget, except where this Community support would be provided as a total or partial substitute for (as opposed to a supplement to) existing public support from national, regional or local levels. The ceiling applying to the size of the loan portfolio for each of the institutions being invited to participate in the scheme will be set at a level allowing for an involvement of each institution during a meaningful period. It will thus notably be based on the estimated volume of operations of the participating intermediary bank under the rules of the scheme. The following principles will apply to EIF guarantees extended under the present scheme: - The EIF will guarantee a portfolio of eligible loans within an agreed loan volume and agreed maximum risk exposure for the Fund. Within this framework, the Fund may guarantee up to 50% of project cost and up to 75% of residual loss per individual loan (after recovery) will be covered; - The guarantee will cover reimbursement of capital and payment of accumulated interest over a specified period; - For any given loan, the guarantee becomes effective upon acknowledgement by the EIF of the receipt of the list of approved loans, sent at regular intervals, together with accompanying loan information. These proposals should provide for cooperation and/or complementarity with the EIF as regards the management and/or the reduction of risk In addition, the programme will cover part of the costs incurred by financial intermediaries for the following purposes: - Costs made to promote the scheme, to increase awareness among potential beneficiary firms (e.g. printing of information brochures, marketing of the scheme, etc.); - Costs related to the evaluation of the environmental eligibility of the investments (e.g. appraisal of the environmental benefits of a particular loan application). These costs will be co-financed by the Community budget at a rate of 50%, the remaining 50% to be borne by the financial intermediary. The overall size of the Community's contribution to these costs will, moreover, be limited to approximately 5% of the volume of guarantee premiums. Other costs are ineligible. In the case of actions either targeted at specific sectors causing environmental concerns (of which the Commission will provide a list), or concentrated on innovative environmental technology, the above-mentioned costs could be borne in their entirety by the Community budget. The scheme will be implemented through the EIF, with whom the institutions will make the necessary contractual arrangements. For further information and submission of expressions of interest, please contact: European Commission DG II/E.1 200 rue de la Loi (BU-5 2/183) B-1049 Brussels Fax +32-2-2964312