Periodic Reporting for period 1 - DEFINITE-CCRI (Deal Engine, with finance, investment and technical expertise for the Circular Cities and Regions Initiative)
Reporting period: 2022-11-01 to 2024-04-30
The current landscape of European CE projects shows that there is discrepancy between projects with high impact and those with a high degree of bankability. This means in practice that projects receiving European or national funding are often based on CE strategies with lower circular transformation potential - e.g. “end-ofpipe” solutions like recovery or recycling strategies - while those with higher transformation potential (e.g. strategies based on principles such as reduce, rethink or refuse) are sometimes left aside due to uncertainties in the return on investment. Getting circular economy innovations to bankability often involves additional transaction costs for project owners. Financiers on the other hand are often reluctant to spend additional resources at the initial preparatory stage for developing projects and therefore upfront this cost. In some cases, such costs are then reflected in the cost of capital, which makes it more challenging for projects to receive investment. This dilemma is partly grounded in the difficulty to balance economic, social and environmental priorities and goals and in the absence of established business models, which bear the potential to be both profitable and highly impactful in terms of environmental and social gains.
The project DEFINITE-CCRI supports the CCRI by creating a project development assistance (PDA) instrument to deliver bankable projects to investors and thereby actively contribute to the implementation of the European Green Deal, the Circular Economy Action Plan and the bioeconomy strategy in practice, demonstrating the financial viability—and reducing risk of circular economy investments.
The project DEFINITE-CCRI supports the CCRI by creating a project development assistance (PDA) instrument to deliver bankable projects to investors and thereby actively contribute to the implementation of the European Green Deal, the Circular Economy Action Plan and the bioeconomy strategy in practice, demonstrating the financial viability—and reducing risk of circular economy investments.
Within the reporting period, the project consortium has successfully established the Deal Engine mechanism (project pipeline), including all relevant frameworks and processes as well as onboarded 11 projects. Methodologies for financial, technology and impact potential assessment have been developed and applied to 10 projects. Seven projects have been selected for the due diligence phase, which foresees in-depth in-kind support to improve projects bankability and prepare them for investor appraisal (RP2). Furthermore, the Circular Investment Readiness Network (community of practice) has been launched and held two events within the reporting period and multiple other outreach activities have been completed.
Objective 1 (O1): To build and operate a deal engine for the CCRI and establish it as a sustainable service offering for cities in Europe. The Deal Engine is established by:
(1) Creating of a pipeline of at least 15 project outlines submitted for pipeline consideration by 10 different cities, as well as ongoing efforts to engage more cities in the submission of project outlines over time,
(2) Creating a proof of concept by implementing initial technical impact assessment and financial and investment baselining processes for 6-10 project outlines, 6 of which would be projects with a high-degree of innovation and impact on closing material loops and reaching higher stages of the “9-R” Framework with limited existing examples of similar activities,
(3) Implementing the full ‘deal engine’ approach as a proof-of-concept via four selected projects led to the project appraisal stage, and
(4) Generating a ‘spin-off’ of the deal-engine based on a clear spin-off plan and a formal agreement of the consortium partners that details and commits to continuing the activities and processes created by the project independently beyond the project life time.
Objective 2 (O2): To close the gap between circular economy projects in cities and regions and investors and finance partners, and to mitigate investment risks for circular economy projects by:
(1) Signing at least 10 agreements with finance and investment partners ready to consider investing in adequately developed projects according to their criteria, and targeted efforts to grow the list of partnerships over time,
(2) The capacitation of local government officials, financiers, investors, service providers and their relevant partners via a capacity building program for over 300 participants, and
(3) The successful engagement of 30 partners in a community of practice for knowledge sharing, service provision and practical support to further generate and develop projects for the pipeline and exploit know-how and experiences created around DEFINITE-CCRI.
Objective 3 (O3): To increase the investment viability of innovative, high-impact circularity projects by mitigating risk and increasing their investment readiness. DEFINITE-CCRI will operationalize the EU Taxonomy circular economy pillar, the 9R-framework and develop processes and PDA services for projects with high impact potential based on the EC Categorisation System for the Circular Economy. Supporting mature projects will refine the DEFINITE-CCRI deal engine and pave the way to increase trust of investors, while higher-risk projects will follow in replicating their success, by adopting and applying the learnings and methodologies of the deal engine to at least 6 innovative projects with high risk profiles or immature business models up to the technical impact assessment and finance and investment baseline steps foreseen in the deal engine, and disseminating the knowledge gained in these processes via 2 policy briefs, capacity building and the community of practice.
Objective 4 (O4): To successfully launch four investments in circular economy projects up to 20 million Euro investment volume per project in CCRI cities and regions. A project pipeline of local initiatives will be established by supporting cities, regions and local project owners in creating complete and clear project concepts as a basis for in-depth PDA. Among the projects in the pipeline, 4 suitable initiatives will receive PDA and deal brokerage services during the lifecycle of DEFINITE-CCRI. The projects will receive end-to-end support for those activities necessary to prepare and mobilise finance, such as generating feasibility studies, stakeholder and community mobilisation, business plans and preparation for tendering procedures as necessary. Innovative finance instruments will be adopted or generated for projects that require novel approaches.
(1) Creating of a pipeline of at least 15 project outlines submitted for pipeline consideration by 10 different cities, as well as ongoing efforts to engage more cities in the submission of project outlines over time,
(2) Creating a proof of concept by implementing initial technical impact assessment and financial and investment baselining processes for 6-10 project outlines, 6 of which would be projects with a high-degree of innovation and impact on closing material loops and reaching higher stages of the “9-R” Framework with limited existing examples of similar activities,
(3) Implementing the full ‘deal engine’ approach as a proof-of-concept via four selected projects led to the project appraisal stage, and
(4) Generating a ‘spin-off’ of the deal-engine based on a clear spin-off plan and a formal agreement of the consortium partners that details and commits to continuing the activities and processes created by the project independently beyond the project life time.
Objective 2 (O2): To close the gap between circular economy projects in cities and regions and investors and finance partners, and to mitigate investment risks for circular economy projects by:
(1) Signing at least 10 agreements with finance and investment partners ready to consider investing in adequately developed projects according to their criteria, and targeted efforts to grow the list of partnerships over time,
(2) The capacitation of local government officials, financiers, investors, service providers and their relevant partners via a capacity building program for over 300 participants, and
(3) The successful engagement of 30 partners in a community of practice for knowledge sharing, service provision and practical support to further generate and develop projects for the pipeline and exploit know-how and experiences created around DEFINITE-CCRI.
Objective 3 (O3): To increase the investment viability of innovative, high-impact circularity projects by mitigating risk and increasing their investment readiness. DEFINITE-CCRI will operationalize the EU Taxonomy circular economy pillar, the 9R-framework and develop processes and PDA services for projects with high impact potential based on the EC Categorisation System for the Circular Economy. Supporting mature projects will refine the DEFINITE-CCRI deal engine and pave the way to increase trust of investors, while higher-risk projects will follow in replicating their success, by adopting and applying the learnings and methodologies of the deal engine to at least 6 innovative projects with high risk profiles or immature business models up to the technical impact assessment and finance and investment baseline steps foreseen in the deal engine, and disseminating the knowledge gained in these processes via 2 policy briefs, capacity building and the community of practice.
Objective 4 (O4): To successfully launch four investments in circular economy projects up to 20 million Euro investment volume per project in CCRI cities and regions. A project pipeline of local initiatives will be established by supporting cities, regions and local project owners in creating complete and clear project concepts as a basis for in-depth PDA. Among the projects in the pipeline, 4 suitable initiatives will receive PDA and deal brokerage services during the lifecycle of DEFINITE-CCRI. The projects will receive end-to-end support for those activities necessary to prepare and mobilise finance, such as generating feasibility studies, stakeholder and community mobilisation, business plans and preparation for tendering procedures as necessary. Innovative finance instruments will be adopted or generated for projects that require novel approaches.