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EC Tenders for Promotion of the Natural Capital Financing Facility

Brussels, 18 June 2014

Lack of financing was identified as one of the major sources of failure to reach the 2010 EU biodiversity  objectives.  There  is  now  wide  recognition  that  new  financing  sources  for biodiversity  are  needed,  both  within  the  EU  and  at  global  level,  and  that  financing  from  the private sector in particular needs to be stepped up. Yet, there are strong market failures which need  to  be  overcome.  The  Natural  Capital  Financing  Facility  (NCFF),  currently  being established by the European Investment Bank (EIB) and the European Commission, seeks to address these market failures. 

A  first  pilot  phase  of  the  NCFF  is  planned  to  be  funded  both  from  the  Commission's  LIFE programme budget, and from EIB own funds, during the period 2014 to 2017.

The NCFF will combine direct and  indirect financing of projects through debt and equity. An expert support facility will be provided in order to ensure that projects reach a sufficient stage of maturity for financing. The NCFF will provide mainly debt instruments (i.e. loans) to finance upfront project investments and operating costs. The loans would be repaid from the revenues generated by the project and/or the general business activity of the recipient. Equity would be used for specific cases, mainly for investments in funds. Indirect  operations will be undertaken with intermediaries such as banks or investment funds which will then finance a portfolio of projects.

The  EIB,  together  with  its  network  of  partners  across  the  EU,  will  work  on  identifying  a pipeline of potentially relevant projects, also building on specific requests for financing received from  potential  recipients  across  the  EU.  Recipients  investing  in  natural  capital  management projects might include for example utilities, SMEs, local public authorities, and land managers.

Projects fall into four broad categories:

  • Payments for Ecosystem Services (PES): projects involving payments for the flows of benefits  resulting  from  natural  capital,  usually  a  voluntary  small  scale  bilateral transaction  with  a  well  identified  buyer  and  seller  of  an  ecosystem  service.  They  are based on the beneficiary pays principle, whereby payments take place to secure critical ecosystem services.
  • Green  Infrastructure  (GI):  GI  is  a  strategically  planned  network  of  natural  and  seminatural areas with other environmental features designed and managed to deliver a wide range of ecosystem services. It incorporates green spaces (or blue if aquatic ecosystems are concerned) and other physical features in terrestrial (including coastal) and marine areas. On land, GI is present in rural and urban settings. GI projects have the potential to generate revenues or save costs based on the provision of goods and services including water  management,  air  quality,  forestry,  recreation,  flood/erosion/fire  control, pollination, increased resilience to the consequences of climate change.

  • Biodiversity  offsets:  these  are  conservation  actions  intended  to  compensate  for  the residual,  unavoidable  harm  to  biodiversity  caused  by  development  projects.  They  are based on the polluter  pays principle,  whereby offsets are undertaken for compliance  or to mitigate reputational risks. Projects aimed at compensating damages done to Natura 2000  sites  according  to  Article  6.4.  of  the  Habitats  Directive  are  not  eligible  for financing under the NCFF.

  • Innovative pro biodiversity and adaptation investments: these are projects involving the supply  of  goods  and  services,  mostly  by  SMEs,  which  aim  to  protect  biodiversity  or increase the resilience of communities and other business sectors.

The  aim  will  be  to  identify  and  finance  projects  with  a  sufficiently  broad  geographical  and sectorial coverage, while testing various financial mechanisms, to ensure replicability across the EU during the operational phase. The contractor will assist the Commission in preparing actions to raise awareness and  inform  a  range  of  targeted  potential  beneficiaries  and  other  relevant  actors,  and  in developing associated promotional material.

Indicative Budget: EUR 100,000

Deadline: 11 August 2014

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