European Union News
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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