EUROPEAN COMMISSION Brussels, 29.5.2020 COM(2020) 403 final 2020/0108(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the InvestEU Programme



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL For the Multiannual Financial Framework (MFF) 2021-2027, there is a need to provide an EU investment programme to cater for cross-cutting objectives in terms of simplification, flexibility, synergies and coherence across relevant EU policies. The considerations put forward in the Commission's Reflection Paper on the future of EU finances highlight the need "to do more with less" and leverage the EU budget at a time of budgetary constraints and massive investment needs. These needs have increased significantly because of the impact of the COVID19 pandemic on the European economy and the risk of an asymmetric recovery across the EU and within Member States. This is why the Commission is withdrawing its earlier proposal presented in May 2018 for the InvestEU Programme and is putting forward a new proposal to the European Parliament and the Council. This new proposal fully reflects the partial agreement already reached between the European Parliament and the Council in April 2019. It increases the initially proposed financial envelope and amends the scope of the proposal to reflect the specific post-pandemic needs of the European economy. The Commission is now in parallel proposing to address the negative socio-economic consequences of the Covid-19 pandemic for workers, households and companies in the Union. Many European companies are already facing difficulties because of the crisis and the problems will accentuate as restrictions on economic and social activities remain in place and the distancing rules continue to impact business activities across many sectors. The difficulties may be long-lasting even beyond the current lockdowns. To respond to the economic and social crisis caused by the Covid-19 pandemic, the Commission’s 2018 InvestEU proposal needs to be amended to better suit the changed circumstances. The amendments to the partial agreement reached by the co-legislators consist in an increase of the financial envelope foreseen for the originally proposed InvestEU Programme to reflect the higher investment needs overall and an environment of increased risk. The new proposal also expands the scope of the InvestEU Programme. In order to cater to the future needs of the European economy and to secure or maintain strategic autonomy in key sectors, a new window is added to the programme. In order to meet the ambitious policy objectives of the Union, attracting private capital to finance investment remains essential while adjusting the approach towards more policy relevance. The InvestEU Programme will contribute towards meeting policy objectives of the Union, whenever the use of repayable investment support is appropriate. The InvestEU Programme is uniquely suited to provide long-term funding and to support Union policies in a recovery from a deep economic and social crisis. In the current crisis, market allocation of resources is not fully efficient and perceived risk impairs private investment flow significantly. Under such circumstances, the key feature of InvestEU of de-risking projects to crowd in private finance is particularly valuable and should be exploited. An enhanced InvestEU Programme will be able to provide crucial support to companies in the recovery phase and will at the same time, and in line with its original goals, ensure a strong focus of investors on the Union’s medium- and long-term policy priorities such as the European Green Deal, the European Green Deal Investment Plan and the Strategy on shaping Europe’s digital future. The programme will increase the risk-taking capacity of the European Investment Bank Group and national promotional banks and institutions as well as other implementing partners in support of economic recovery under the current circumstances where they are experiencing increased strain on their risk-taking capacity. The Covid-19 pandemic is a major shock to the global and Union economy. Due to the necessary containment measures, economic activity in the EU dropped significantly. The contraction in EU GDP in 2020 is expected to be around 7.5%, far deeper than during the financial crisis in 2009 and with inevitable adverse social effects. The outbreak of the pandemic has shown the interconnectivity of global supply chains and exposed some vulnerabilities, such as the over-reliance of strategic industries on non-diversified external supply sources. Such vulnerabilities need to be addressed, to improve the Union’s emergency response as well as the resilience of the entire economy, while maintaining its openness to competition and trade in line with its rules. In the economic downturn, a strong response is needed at Union level, in particular to bolster the resilience of economic actors and thereby strengthen and maintain the autonomy of strategic sectors so as to secure the competitiveness of the European economy in the long run. This can only be achieved based on a strong Single Market and a level playing field. It is crucial that the economies of Member States hardest hit by the impact of the pandemic benefit from the support of programmes under the EU budget. Furthermore, the Commission should be able to participate in a possible capital increase (in one or more rounds) of the European Investment Fund (EIF), which will play a key role in supporting the economic recovery through issuing guarantees, undertaking securitisation operations and supporting equity investments throughout the Union. A financial envelope of up to EUR 900 000 000 should be reserved in the Multiannual Financial Framework 2021-2027 for this purpose so that the Union, represented by the Commission, will be able to maintain its overall share in the EIF capital. •Reasons and objectives The creation of the InvestEU Programme provides for a single EU investment support mechanism for internal action for the 2021-2027 MFF. The InvestEU Programme builds on the successful experience of the EFSI and the current financial instruments for internal policies. It will stand on four legs: (i) the InvestEU Fund providing for the EU guarantee; (ii) the InvestEU Advisory Hub providing in particular project development-related technical assistance; (iii) the InvestEU Portal providing an easily accessible data-base for promoting projects in search for financing; and (iv) blending operations. The InvestEU Fund will be demand-driven in attracting private investment. It will foster in particular research, innovation, digitisation, sustainable infrastructure investment and support strategic companies but will also cater to the needs in the social sector and those of SMEs. Reaching also smaller and local projects will be important. Crisis-related novelties The current situation is detrimental to Union companies, as they can be negatively affected by factors outside their control and the control of national and Union-level authorities. As a result of the current Covid-19 outbreak Union companies can face liquidity risks that could lead to insolvency, but also a more systemic risk of asset devaluation that could result in weakening strategic parts of the Union industry. Moreover, to address the shortcoming experienced during the crisis due to disruption of supply chains, the Union industry should reinforce its capacity to cover wider parts of strategic value chains. By identifying and addressing certain investment areas as ‘strategic’, the EU will push for the much-needed large-scale industrial transformation and secure an increased autonomy for the Union economy, in line with overarching policies such as the Strategy on shaping Europe’s digital future and the European Green Deal. Such long-term policy priorities should be combined with recovery measures taken in the wake of the Covid-19 outbreak. Targeted and ambitious action at Union level, allowing to make the full use of the potential of the Single Market, irrespective of the fiscal capacities of Member States to step in and support investment, will lead to a more competitive, more resilient and more secure Union in the future. Therefore, alongside an increase of resources under the sustainable infrastructure window, it is proposed to further enhance InvestEU by a Strategic Investment Facility, i.e. a fifth window – the strategic European investment window – which will focus on building stronger European value chains in line with the strategic agenda of the Union and the New Industrial Strategy for Europe presented by the Commission. Such a reinforcement is of particular importance in the post-crisis situation, as some Member States might not have the financial means to support such projects with national State aid, and many projects are cross-border and require a European approach. Moreover, an optimal use of the potential of the Single Market, including its innovation and efficiency drivers, requires participation of companies from many Member States, and not only those that are fiscally able to invest following this difficult period. This proposal will help overcome these difficulties. The primary focus of the strategic European investment window would be to support those final recipients established in a Member State and operating in the Union whose activities are of strategic importance to the Union in particular in view of the green and digital transitions and of enhanced resilience in one of the following areas: a) critical healthcare provision, manufacturing and stockpiling of pharmaceuticals, medical devices and medical supplies, strengthening of health crisis response capacity and of the civil protection system;

b) critical infrastructure, whether physical or virtual, including infrastructure elements identified as critical in the fields of energy, transport (including rail freight), environment, health, secure digital communication, 5G, internet of things, online service platforms, secure cloud computing, data processing or storage, payments and financial infrastructure, aerospace, defence, communications, media, education and training, electoral infrastructure and sensitive facilities, as well as land and real estate crucial for the use of such critical infrastructure; c) the provision of goods and services instrumental to the operation and maintenance of the critical infrastructure under point b); d) key enabling, transformative, green and digital technologies and game-changing innovations where the investment is strategically important for the Union’s industrial future, including: i) artificial intelligence, blockchain, software, robotics, semiconductors, microprocessors, edge cloud technologies, high-performance computing, cybersecurity, quantum technologies, photonics, industrial biotechnology, ii) renewable energy technologies, energy storage technologies including batteries, sustainable transport technologies (including renewal and retrofitting of mobile assets using these technologies), clean hydrogen and fuel cell applications, decarbonisation technologies for industry, carbon capture and storage, circular economy technologies, iii) biomedicine, nanotechnologies, pharmaceuticals and advanced materials (like graphene); e) manufacturing facilities for mass production of Information Communication and Technology components and devices in the EU; f) supply and stockpiling of critical inputs to public actors, businesses or consumers in the Union, including energy, raw materials, engineered materials or food security having regard to resource efficiency and circularity in strategic value chains; and g) critical technologies and inputs for the security of the Union and its Member States (such as defence and space sectors and cybersecurity) and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009. The fifth window would bring value added compared to the original windows in the current context by focusing on recipients or projects because of their high European strategic importance, an aspect not accentuated under the other windows. For instance, these could include companies active in the targeted industries or SMEs participating in such supply chains by producing specific components. Such operations may often be inherently more risky in the post-Covid-19 environment as promoters are more exposed to increased demand- or supply-side risk. Certain areas such as semiconductors (including microprocessors), data technologies, 5G and quantum technologies are of particular importance for security, trust and innovation. At the same time, they require massive investments to cover the full value chain of strategic inputs that are sometimes coming almost entirely from limited sources outside the EU, acquire and protect essential technological know-how, as well as to deploy and replace critical infrastructure to mitigate excessive dependency on non-EU suppliers. The fifth window would target both specific projects (e.g. supporting large consortia or public-private partnerships aimed at developing a specific technology and building critical infrastructure) and provide financing in a more diffused way, for instance by supporting the emergence of whole ecosystems of entrepreneurs active in the targeted sectors (e.g. innovative SMEs working on technologies of potential relevance to industrial biotechnology and pharmaceuticals). Furthermore, Important Projects of Common European Interest should be able to benefit from support under this window. The additionality requirements under this window would differ from the additionality envisaged for the original InvestEU windows. For instance, the additionality of the support under the fifth window to large corporates would be in maintaining and developing their production within the Union or, where public order or security considerations so indicate, under the control of European investors and in scaling up the deployment of innovative technologies, rather than in purely risk-related considerations of the InvestEU support. This support would be complementary to that made available under the research, innovation and digitisation window that will focus on the upstream development of new strategic capacities. A particular synergy will also be ensured for follow-up investments in the scaling up of strategic EU start-ups and SMEs emerging from the European Innovation Council (EIC) of EU Research and Innovation Framework Programmes (Horizon Europe). InvestEU Fund The InvestEU Fund consists of an EU budget guarantee that will back the financial products provided by the implementing partners. It targets EU added-value projects and promotes a coherent approach to financing EU policy objectives. It offers an effective and efficient mix of EU financing tools for specific policy areas. As a single investment scheme for internal Union policies, the InvestEU Programme is both a policy instrument and a delivery tool. As a policy instrument, the InvestEU Programme's overall objective is to support the policy objectives of the Union by mobilising public and private investment within the EU, hereby addressing market failures and investment gaps that hamper the achievement of EU goals regarding sustainability, competitiveness and inclusive growth as well as strategic autonomy of the Union. The purpose is to supply financing to economic actors with a risk profile that private financiers are not always able or willing to address in order to promote competitiveness of the EU economy, sustainable growth, convergence, social resilience, inclusiveness and the integration of capital markets in the EU in line with EU policy objectives in different sectors. Underpinned by an EU guarantee, the InvestEU Programme will contribute to the modernisation of the EU budget and increase the impact of the EU budget by "doing more with less". For economically viable projects with a revenue generating capacity, a more systemic use of a budgetary guarantee can help increasing the impact of public funds. The InvestEU Programme should have the capacity to shape an EU strategy in tackling the still subdued investment activity in the Union accentuated by the crisis caused by the Covid-19 pandemic. By diversifying the sources of funding and promoting long term and sustainable finance, the InvestEU Programme will contribute to the integration of European capital markets, within the framework of the Capital Markets Union, and to the strengthening of the Single Market while also contributing to the implementation of the European Green Deal and the European Green Deal Investment Plan. It is an important tool to pursue the goals of the New Industrial Strategy for Europe. As an EU-wide resource pooling financial, market, technical and policy expertise, the InvestEU Programme should also be a catalyser for financial innovation at the service of policy objectives. As a delivery tool, the InvestEU Fund aims to implement the EU budget through a budgetary guarantee more efficiently, achieving economies of scale, increasing the visibility of EU action and simplifying the reporting and accountability framework. The proposed structure has the objective of simplification, increased flexibility and removal of potential overlaps between seemingly similar EU support instruments.

In addition to the EU guarantee at Union level, the proposal foresees the possibility for the Member States to use part of the funds under shared management through a dedicated compartment in the EU guarantee under the InvestEU Fund in pursuit of the same objectives where market failures or sub-optimal investment situations are present at national or regional level. The overall EU guarantee is proposed to amount to up to EUR 75 153 850 000 with a specifically dedicated part to the strategic European investment window of up to EUR 31 153 850 000. InvestEU Advisory Hub and Portal The InvestEU Advisory Hub will provide project development advisory support and accompanying measures throughout the investment cycle to foster the origination and development of projects and access to financing. The InvestEU Advisory Hub will be provided in the InvestEU Programme's policy areas and will also ensure a single point of access for project promoters and intermediaries. The InvestEU Advisory Hub will be complementary to technical assistance activities carried out under the shared management programmes. To make sure that the strategic European investment window and the other four windows can fully benefit from all features of the InvestEU Fund, the advisory component and other accompanying measures of the InvestEU Programme should be commensurate to the objectives of the proposal. The overall financial envelope, including the accompanying measures, should amount to up to EUR 724 733 000 to cater for the needs of the new window as well as the increasing needs of the other four windows under the current circumstances. Finally, the InvestEU Portal will reinforce the visibility of investment opportunities in the Union and thus help project promoters in search of financing. This proposal provides for a date of application as of 1 January 2021. •Consistency with existing policy provisions The proposal is fully aligned with existing policy provisions since the InvestEU Programme provides the EU guarantee in order to efficiently use EU budgetary funds when operations with revenue-generating capacity are financed in line with EU policy objectives. These include the Capital Markets Union, the Digital Single Market Strategy, the Clean Energy for All Europeans package, the EU Action Plan for the Circular Economy, the Low-Emission Mobility Strategy, the European Defence Action Plan and the Defence Fund, the Space Strategy for Europe, the European Pillar of Social Rights, the European Green Deal, the European Green Deal Investment Plan and the New Industrial Strategy for Europe. Within its scope of application, the InvestEU Fund supports from a financing perspective these mutually reinforcing strategies. The proposal is complementary to the Solvency Support Instrument under the EFSI. The Solvency Support Instrument is intended to provide support for the near-term solvency needs arising from the immediate fallout from the Covid-19 induced economic contraction for the most affected companies, aiming to rebuild their capital position, whereas the InvestEU will focus on long-term investments to support EU policy goals, including the strategic autonomy and resilience of the European economy. The strategic European investment window under this proposal will be more focused and forward-looking in its approach than the Solvency Support Instrument under the EFSI. The new window will support projects and companies relevant for achieving or maintaining strategic autonomy in key value chains in the Single Market by supporting the scaling up of Union-based projects, and strengthening the capital base and long-term financing of Union companies as an alternative to possible takeovers from non-EU companies. Strategic companies having cross-border activities would also be supported. •Consistency with other Union policies The InvestEU Programme is complementary to grant financing and other actions under the policy areas it supports, such as Horizon Europe, the Connecting Europe Facility, the Digital Europe Programme, the Single Market, Competitiveness of SMEs and European Statistics Programme, the European Space Programme, the European Social Fund+, the Creative Europe, the Programme for Environment & Climate Action (LIFE) and the European Defence Fund. Synergies with external policy instruments will be ensured, where relevant. It is also consistent with other Union policies, such as the European Green Deal, the European Green Deal Investment Plan, the Strategy on shaping Europe’s digital future, the New Industrial Strategy for Europe, the Capital Markets Union, the Strong Social Europe for Just Transitions and other EU policies and programmes relevant to the strategic autonomy and resilience of the Union such as the European Defence Fund, the EU Space regulation and the FDI screening regulation. Blending with grant financing will ensure complementarity with other spending programmes. The InvestEU Programme is also complementary to the European Structural and Investment Funds. In order to facilitate the deployment of certain Funds under shared management (European Regional Development Fund (ERDF), the European Social Fund+ (ESF+), the Cohesion Fund, the European Maritime and Fisheries Fund (EMFF) and the European Agriculture Fund for Rural Development (EAFRD)) through financial products, the Member States will have the possibility to rely on the InvestEU Programme. This is a major simplification compared to the current situation since only one set of rules will apply in this case. The InvestEU Programme's actions should be used to address market failures or sub-optimal investment situations, in a proportionate manner, without duplicating or crowding out private financing and have a clear European added value. This will ensure consistency between the actions of the InvestEU Programme and EU State aid rules, avoiding undue distortions of competition in the internal market. The Commission will develop in cooperation with implementing partners a sustainability proofing guidance, using appropriately the criteria established by [Regulation on establishment of a framework to facilitate sustainable investment] on the basis of which implementing partners will assess the environmental, climate and social impacts of the projects financed. Such guidance would support the policy objectives of the European Green Deal and provide that projects that undermine the climate, environmental and social objectives of the Union would not be supported under InvestEU. Moreover, targeted incentives could be considered for financial products dedicated to climate, environmental and social priorities that are difficult to achieve, for example under the SME window, and for which higher risks are identified that would justify such additional incentives. The InvestEU Fund will also provide for a dedicated scheme to generate additional investment to the benefit of just transition regions (pillar 2 of the Just Transition Mechanism) in complementarity with the Just Transition Fund (pillar 1) and the public sector loan facility (pillar 3). 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The proposal is based on Article 173 (Industry) and the third paragraph of Article 175 (Economic, Social and Territorial Cohesion) of the Treaty on the Functioning of the European Union (TFEU).

In line with established jurisprudence, the legal basis is referred to reflect the main contents of the proposal. The procedures laid down for both Articles regarding the legal basis are the same (ordinary legislative procedure). •Subsidiarity (for non-exclusive competence) The objectives of the proposal cannot be sufficiently achieved by the Member States and can therefore be better achieved by the Union. The economic crisis caused by the Covid-19 pandemic calls for a response at European level to underpin a swift recovery of the Union economy by supporting companies and preserving Union value chains. The proposal is of particular importance in the post-crisis situation to build up a resilient, inclusive and integrated European economy and preserve the Single Market also to the benefit of those Member States that have less financial means to support such projects with national financing sources. Projects that are cross-border will also require a Union-level approach. The support provided by this proposal will help overcome these difficulties. The multiplying effect and the impact on the ground will be much higher than could be achieved by an investment offensive in individual Member States. It would support the industrial policy of the EU and promote combined efforts between Member States to reach technological and strategic autonomy by pooling investments. The Union's Single Market will provide for greater attractiveness for investors and better risk diversification across sectors and geographies. The InvestEU Programme will cover investments and access to finance supporting EU policy priorities by addressing EU-wide market failures and investment gaps. It also supports the design, development and EU-wide market testing of innovative financial products, and the systems to spread them, for new or complex market failures and investment gaps. The voluntary Member State compartment would allow addressing country specific market failures and investment gaps while drawing on financial products designed at central level, ensuring a more efficient geographical usage of resources, where this is warranted. It would allow Member States to implement part of their funds under the European Regional Development Fund (ERDF), the European Social Fund+ (ESF+), the Cohesion Fund, the European Maritime and Fisheries Fund (EMFF) and the European Agriculture Fund for Rural Development (EAFRD) through the InvestEU Fund. The proposed structure with two compartments in each policy window allows an effective application of the subsidiarity principle. In addition, the two compartments within each window will share the same InvestEU Fund rules, which will allow a clearer and simpler framework for the use of different sources of EU funds. •Proportionality The EU long-term goals regarding sustainability, competitiveness, inclusive growth and strategic autonomy and resilience require significant investments in different policy areas. This includes, inter alia, new models relating to mobility, renewable energy, energy efficiency, natural capital, innovation, digitisation, skills, social infrastructure, circular economy, climate action, oceans, small businesses' creation and growth as well as strategic autonomy and resilience of the Union. Renewed efforts are needed to tackle persisting market fragmentation and market failures caused by private investors' risk-averseness, the public sector's limited funding capacity and structural inefficiencies of the investment environment. Member States cannot sufficiently bridge those investment gaps alone. An intervention at EU level ensures that a critical mass of resources can be leveraged so as to maximise the impact of investment on the ground. The proposal does not replace Member State investment but on the contrary it is complementary to such investments, by focusing in particular on support for projects that provide EU added value. In addition, the EU level provides for economies of scale in the use of innovative financial products by catalysing private investment in the whole EU and making best use of the European institutions and their expertise for that purpose. The EU intervention also provides access to a diversified portfolio of European projects, thereby catalysing private investment, and allows for the development of innovative financing solutions which can be scaled up or replicated, as appropriate, in all Member States. Intervention at EU level is the only tool capable of effectively addressing investment needs linked to EU-wide policy objectives. In addition, structural reforms and an improved regulatory environment will continue to be necessary to address the remaining investment gaps in the period 2021-2027. The proposal envisages support to companies, value chains and ecosystems that are of strategic importance and it reacts to vulnerabilities exposed by the Covid-19 pandemic. Mobilising private funds to support investment and recovery alongside public funds leverages budgetary resources. It does not go beyond what is necessary to achieve the objectives pursued. •Choice of the instrument The purpose of the proposal is to provide a single instrument providing an EU budgetary guarantee to underpin financing and investment operations by the implementing partners in line with the conclusions of the Impact Assessment to build on the success of the EFSI and previous financial instruments while taking into account lessons learnt as regards, inter alia, the avoidance of fragmentation and possible overlaps. Therefore, a Regulation is proposed. 3.RESULTS OF RETROSPECTIVE EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Retrospective evaluations/fitness checks of existing legislation

The proposal builds on lessons learnt from evaluations of predecessor financial instruments and of the EFSI. In particular, an independent evaluation of the EFSI was conducted in 2018 in addition to several other evaluations on the EFSI since its inception: ·Commission evaluation on the use of the EU guarantee and the functioning of the EFSI guarantee fund accompanied by an opinion of the Court of Auditors , ·EIB evaluation on the functioning of the EFSI (October 2016) and ·independent external evaluation on the application of the EFSI Regulation (November 2016). Main findings of these evaluations were summarised in the Commission Communication on the Investment Plan for Europe (COM (2016) 764). All evaluations found that the EU Guarantee proved relevant and enabled the EIB to undertake riskier activities and introduce higher risk products to support a wider range of beneficiaries. The EFSI also proved a relevant tool to mobilise private capital. In terms of governance, the independent evaluation of 2018 pointed to the importance of the Investment Committee for the credibility of the scheme, the transparency of its decisions and the quality of the scoreboard, which was evaluated as a relevant tool that allows a consistent approach to project presentation and to summarise appraisal conclusions. Based on signed operations, the EFSI has mobilised EUR 401 billion of investment by end-2019, corresponding to 80 % of the target. In terms of approved operations, by that time the volume was EUR 458 billion and corresponds to 92 % of the target. Mobilised investment from approved operations reached the EUR 315 billion target by mid-2018. The target of EUR 500 billion is expected to be reached. The evaluations have noted some concentration in Member States with well-developed institutional capacities. However, if the investment mobilised is considered relative to Member States' Gross Domestic Product this concentration is much less pronounced. Nevertheless, in order to improve further the geographical balance, the EFSI 2.0 has strengthened the relevance of the European Investment Advisory Hub. As of 31 December 2019, the actual multiplier effect of the EFSI is broadly in line with what had been assessed at the outset – an aggregate global multiplier of 15.66 achieved by end-2019 against a target of 15 at the end of the investment period. The EFSI has also been effective in mobilising private investments. Around 69 % of investment mobilised is from the private sector. In terms of efficiency, the availability of the EU Guarantee proved to be an efficient tool to considerably increase the volume of riskier operations by the European Investment Bank. In particular, the EU Guarantee freezes less budgetary resources compared to financial instruments, as it requires prudent but limited provisioning compared to the level of financial engagement. It assumes a contingent liability and is consequently expected to achieve economies of scale that result in higher investment mobilised per euro spent. The evidence analysed as part of the independent evaluation in 2018 also clearly indicated that the size of the EU Guarantee under the EFSI was appropriate. It also found that the approach used for the modelling of the EFSI target rate was broadly adequate and in line with industry standards, but proposed some further developments. A budgetary guarantee has also proven more cost-efficient for the EU budget, as it limits the payment of management fees to the implementing partner. In the case of the EFSI, the EU is even remunerated for the EU Guarantee provided under the Infrastructure and Innovation Window. The 2016 independent evaluation stressed the need to better define and clarify the concept of additionality. Consequently, the EFSI 2.0 Regulation includes several measures which clarify the concept and the criteria and made the process more transparent. The independent evaluation of 2018, which could only assess operations approved under the EFSI and therefore could not test the new EFSI 2.0 measures, confirmed the need to further clarify the concept of additionality and the definition of sub-optimal investment situations. In particular, it concluded that the EFSI operations are characterised by a higher level of risk as compared to standard (non-EFSI) operations by the European Investment Bank, as required by the EFSI Regulation. However, the various surveys and interviews indicated that under the Infrastructure and Innovation Window of the EFSI some crowding out may have occurred. They concluded that it would be important to avoid this situation under the InvestEU Programme. The independent evaluation of 2018 also highlighted the non-financial added value of attracting new investors, providing demonstrations and market testing of new products and financing models, and support and adoption of higher operations standards by financial service providers. The 2016 EIB evaluation and the independent evaluation of 2018 confirmed the initial disruption caused by the EFSI to other EU level financial instruments by offering similar financial products, in particular the debt instrument under the Connecting Europe Facility and part of the InnovFin, which were partly resolved by re-focusing existing instruments towards new market segments. The proposal for the InvestEU Fund also builds on lessons learnt from evaluations of predecessor financial instruments spanning two decades (Connecting Europe Facility, Horizon 2020, COSME, etc., and instruments launched under earlier financial frameworks such as the Competitiveness and Innovation Framework Programme (CIP). In general, these evaluations confirm that financing gaps continue to exist in Europe in the sectors and policy areas covered by EU financial instruments and that EU-level investment support continues to be relevant and necessary in order to meet EU policy objectives. However, they also stress that the coherence between different EU-level financial instruments and other EU initiatives should be strengthened, that synergies with national and regional initiatives should be better exploited, and that overlaps exist among the current instruments. They point to a need for better coordination and design of investment support instruments to minimise potential overlaps. The expansion of activities has created a need to strengthen mechanisms for the overall coordination of actions, avoiding unnecessary proliferation and achieving greater synergies. As regards the COSME instruments offering support to SMEs which are crucial to the Union's future competitiveness, the evaluations show that these instruments are underpinned by a strong market failure rationale and being driven by the constraints in access to finance faced by SMEs. Especially start-ups, smaller SMEs and those lacking sufficient collateral are faced with persistent and structural market gaps for debt finance prevalent across the EU. The Court of Auditors found in a Special Report that the SME guarantee facility has had a positive impact on the growth of supported SMEs. In line with the Court's recommendations, some better targeting of beneficiaries and more coordination with national schemes is needed. Specifically regarding the InnovFin financial instruments under Horizon2020, the evaluations show that access to finance remains an essential issue in order to improve Europe's innovation performance. They confirm that InnovFin financial instruments have performed well against the backdrop of growing demand for risk finance in research and innovation, and made it possible for the European Investment Bank Group to cover new riskier segments. However, again, the need to strengthen synergies with other EU funding programmes is highlighted, as is the need to address remaining barriers in the context of helping innovative companies to grow from early stage to expansion. It was also pointed out that only a relatively small number of firms receiving grants under Horizon 2020 benefitted from financial instruments under Horizon 2020, which may hinder scaling up of innovative companies. The InvestEU Fund will build upon these experiences and target research and innovation recipients (including innovative SMEs and mid-caps) in order to provide them with better access to finance at all stages of their development. It will exploit synergies between grant and market based financing by facilitating blending. In addition, the European Court of Auditors' audit on the guarantee facility recommended better targeting of beneficiaries at more innovative companies. By pooling expertise and resources, the InvestEU Fund will increasingly focus support on companies that engage in higher-risk innovation activities. In the social area and regarding the Employment and Social Innovation (EaSI) Programme, there is empirical evidence that investments in social infrastructure, social enterprises producing goods ('tangibles') as well as social services, ideas and people ('intangibles') are crucially lacking in the Union, yet critical for its Member States to develop into a fair, inclusive and knowledge-based society.

Microfinance and social enterprises in Europe are still recent developments and part of an emerging market that is not yet fully developed. As highlighted by the EaSI mid-term evaluation conducted in 2017, the EaSI financial instruments have supported vulnerable persons and micro-enterprises and facilitated access to finance for social enterprises, thus having achieved significant social impact. The evaluation concluded that deploying the full potential shown by the results achieved so far justifies the continuity for investment support in the social field and need for additional firepower to be provided under the InvestEU Programme. The impact assessment report regarding the InvestEU Programme includes a detailed summary of these evaluation results. In January 2019, the European Court of Auditors published a Special report no 03/2019 on the European Fund for Strategic Investments. The report stated that EFSI has been effective in raising finance to support substantial additional investment in the EU. The report also identified some areas for improvement. Most of these were already mostly addressed by EFSI 2.0 Regulation, while others are addressed through the InvestEU legislative proposal. In particular, InvestEU will enhance complementarity and avoid duplications and overlaps between different instruments. Moreover, InvestEU will further strengthen and clarify the criteria related to the assessment of additionality and to the estimation of investment mobilised in line with the requirements of the new Financial Regulation (EU 2018/1046). Following the European Court of Auditors’ recommendation to improve the geographical spread, the EFSI Steering Board conducted a study in 2019 to analyse the root causes of the observed geographical spread and adopted measures to further improve the geographical balance while respecting the demand-driven nature of the EFSI. In May 2020, the European Court of Auditors published a Special report no 12/2020 on the European Investment Advisory Hub (EIAH). The report concluded that the EIAH had not yet proven to be an effective tool for boosting investment in the EU as of end 2018. During the audit period, only few assignments were concluded to have had a significant impact on the supply of projects suitable for investment and that most of the EIAH assignments related to the early stages of the project investment cycle, so they may only have effects in the longer term. The European Court of Auditors noted the high satisfaction of the beneficiaries for the tailored advisory services received through EIAH support and that most EIAH assignments were in high priority sectors and Member States. However, the European Court of Auditors found that the EIAH received few requests leading to fully-fledged advisory assignments compared to the available resources. Moreover, it needed a clearer strategy and better procedures for following up the investments resulting from EIAH assignments. Moreover, despite the EIAH’s efforts, cooperation with partners to improve geographical coverage developed slowly due to legal complexity and the NPBIs varying willingness and capacity to cooperate. The InvestEU Advisory Hub will broadly address the recommendations made by the European Court of Auditors incorporating lessons learned from the EIAH, for example by –further developing cooperation with NPBI’s to improve local presence and access to advisory services; –setting priorities and specific criteria for assessing the value of advisory support and developing a performance monitoring framework; –enhancing screening procedures for assessing the value of potential assignments, to maximise its contribution; –assessing advisory needs and the likely demand for targeted advisory initiatives and for developing projects that could be supported under the InvestEU Fund guarantee. •Stakeholder consultations The proposal is part of the package to counter the negative economic consequences of the Covid-19 pandemic and is a crisis measure. In view of the urgency to start providing support to European companies badly hit by the pandemic and the confinement measures it was not possible to carry out stakeholder consultations in relation to those elements that are new compared to the original Commission proposal of 2018. For the other elements, the impact assessment relied on the Open Public Consultation (OPC) on EU funds in the area of investment, research & innovation, SMEs and the single market and in particular on the replies related to EU Support for Investment . This proposal takes into account the results of this OPC. In particular most respondents expressed a view that the current EU support for investment does not sufficiently address policy challenges like reducing unemployment, supporting social investment, facilitating the digital transition, facilitating access to finance in particular for SMEs, ensuring a clean and healthy environment and supporting industrial development. The respondents stressed the importance of EU-wide policy challenges, among others, in areas like research, support for education and training, clean and healthy environment, and transition to low carbon and circular economy, and reducing unemployment. Around 60 % of respondents to the OPC on Strategic infrastructure expressed a view that difficulty to access financial instruments is an obstacle that prevents the current programmes from successfully achieving policy objectives. A vast majority of participants supported the identified steps that could help simplify and reduce administrative burdens. In particular, this included fewer, clearer and shorter rules, alignment of rules between EU funds as well as a stable but flexible framework between programming periods. The proposal aims to address these results by strengthening the focus on Union policy priorities in the context of the support under the InvestEU Fund. The single set of rules established by the InvestEU Fund should address the issue of possible overlaps and in particular make it easier for final recipients to request support. The InvestEU Fund also has an in-built flexibility, allowing it to adjust to developing market situations and needs. The reporting requirements have also been harmonised.

•External expertise An external evaluation was conducted in line with Article 18(6) of Regulation (EU) 2015/1017 of the European Parliament and of the Council of 25 June 2015 on the European Fund for Strategic Investments, the European Investment Advisory Hub and the European Investment Project Portal and amending Regulations (EU) No 1291/2013 and (EU) 1316/2013 – the European Fund for Strategic Investments as explained under the sub-heading 'Retrospective evaluations/fitness checks of existing legislation'. •Impact assessment The proposal is part of the package to counter the negative economic consequences of the Covid-19 pandemic and is a crisis measure. In view of the urgency to start providing support to European companies badly hit by the pandemic and the confinement measures it was not possible to conduct a formal impact assessment in relation to those elements that are new compared to the original Commission proposal of 2018. For the other elements, the impact assessment presented in the context of the original Commission proposal of 2018 examined in detail the main challenges for the next MFF, in particular the investment gaps and sub-optimal investment situations in different policy areas, like research and innovation, sustainable infrastructure, SME financing as well as social investment. It analysed and explained the choices for the proposed InvestEU Fund structure, its governance, objectives, target actions, financial products and final recipients. Where appropriate, the impact assessment described the considered alternative solutions and explained the reasoning for the proposed choices. This in particular related to the rationale for the creation of a single investment support instrument, the delivery mechanisms and the implementing partners, and for the proposed governance structure. The impact assessment underlined that the current experience with EU financial instruments and the EFSI budgetary guarantee demonstrated a need for simplification, streamlining and better coordination of EU’s investment support instruments during the next MFF. Experience with the EFSI also had revealed significant benefits and efficiency gains inherent in using, where possible, a budgetary guarantee instead of traditional financial instruments. The impact assessment identified the following main characteristics for the InvestEU Fund: ·A single structure, directly communicated to financial intermediaries, project promoters and final recipients in search of financing. ·Increase in leverage and more efficient use of budgetary resources through the use of a single budgetary guarantee underpinning different financial products that address a diversified portfolio of risks. This presents efficiency gains when compared to the option of having different financial instruments or ring-fenced budgetary guarantees addressing a limited range of risks, in that it requires a lower provisioning rate while providing an equivalent level of protection. ·Simplified and focused offer of investment support instruments targeting the main EU policy objectives. Such offer would also enable combining grants and finance from different EU programmes, EIB conventional lending or private finance. ·The ability to deliver sector-specific instruments to support particular market failures (e.g. green shipping, energy demonstration projects, natural capital). ·Flexibility measures that will enable the InvestEU Fund to quickly react to market changes and policy priorities that evolve over time. ·An integrated governance and implementation structure which enhances internal coordination and strengthens the position of the Commission towards implementing partners. This would also lead to management cost efficiencies, avoidance of duplications and overlap and would increase the visibility towards investors. ·Simplified reporting, monitoring and control requirements. Due to the single framework, the InvestEU Fund will foresee integrated and simplified monitoring and reporting rules. ·Better complementarity between programmes managed centrally and those under shared management. This includes a possibility for Member States to channel shared management allocations through the InvestEU Fund (in the Member State compartment). ·Association of the InvestEU Advisory Hub to the InvestEU Fund in order to support the development of and implementation of a pipeline of bankable projects. The range of interventions envisaged under the InvestEU Fund will be implemented through different products targeting different risks that would inherently require high, medium or low provisioning rates, depending on the type of guarantee coverage provided and the operations supported. The Commission will provide guidance and monitor the usage and the risks incurred under different products, so as to ensure that the overall portfolio is compatible with the provisioning rate laid down in the proposal. On 27 April 2018, the Regulatory Scrutiny Board issued a positive opinion with reservations. The Impact Assessment Staff Working Document addresses the issues raised. The report now better explains the current overlaps between the EFSI and centrally managed financial instruments. It also clarifies how the potential overlaps will be avoided under the InvestEU Fund. Moreover, the choice of the proposed governance structure as well as the role of the different bodies are presented in more detail. This includes a comparison of the governance arrangements currently in use for the EFSI and the financial instruments with the one proposed under the InvestEU Fund. Additional clarifications on the assumptions for the foreseen level of risk and the provisioning rate have been added, including further explanations concerning the risk assessment function within the governance structure. •Simplification Sub-optimal investment situations are currently addressed through a heterogeneous and fragmented portfolio of EU financial instruments and the EFSI. This situation also leads to complexity for financial intermediaries and final recipients, who are confronted with different eligibility and reporting rules.

The aim of the InvestEU Fund is to simplify the EU investment support by establishing a single framework that helps to reduce the complexity. Due to a reduced number of agreements under a single set of rules, the InvestEU Fund will simplify the access to EU support for the final recipients, the governance and the management of investment support instruments. Moreover, as the InvestEU Fund covers all investment support policy needs, it allows for the streamlining of and harmonisation of reporting requirements and performance indicators. •Fundamental rights The proposal does not have an impact on fundamental rights. 4.BUDGETARY IMPLICATIONS In accordance with the Communication of the Commission on the EU budget powering the recovery plan for Europe including a reinforced the Multi-Annual Financial Framework for the period 2021-2027, the budgetary framework (commitments in current prices) foreseen for the InvestEU Programme is EUR 33 524 733 000, including EUR 724 733 000 for project development assistance and other accompanying measures. The overall provisioning will amount to EUR 33 800 000 000, of which EUR 1 000 000 000 being covered by revenues, repayments and recoveries generated by existing financial instruments and the EFSI. Revenues and recoveries from the InvestEU Fund shall also provide additional contributions to provisioning. Out of the overall budgetary framework mentioned above, EUR 33 000 440 000 will be made available through the European Recovery Instrument based on empowerment provided in the new Own Resources Decision. The participation of the Union in a possible forthcoming capital increase (in one or more rounds) of the EIF will need a financial envelope of up to EUR 900 000 000 in the Multiannual Financial Framework 2021-2027. This relates to the Union share of the paid-in part of a capital increase. The Union should be able to maintain its overall share in the EIF capital, with due consideration of the financial implications. A legislative financial statement with further budgetary information is included. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements The InvestEU Fund (the EU guarantee) will be implemented through indirect management. The Commission shall conclude the necessary guarantee agreements with the implementing partners. The InvestEU Advisory Hub will be implemented through indirect or direct management depending on the nature of the assistance. The InvestEU Portal will mainly be implemented through direct management. The impact of the InvestEU Programme will be assessed through evaluations. Evaluations will be carried out in line with paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016, where the three institutions confirmed that evaluations of existing legislation and policy should provide the basis for impact assessments of options for further action. The evaluations will assess the InvestEU Programme's effects on the ground based on the InvestEU Programme indicators/targets and a detailed analysis of the degree to which the InvestEU Programme can be deemed relevant, effective, efficient, provides enough EU added value and is coherent with other EU policies. They will include lessons learnt to identify any lacks/problems or any potential to further improve the actions or their results and to help maximise their exploitation/impact. Monitoring of performance will be measured against indicators laid down in the proposal. In addition to these core indicators, more detailed indicators will be included in the investment guidelines or in the guarantee agreements on the basis of the specific financial products to be deployed. Moreover, specific indicators will be developed for the InvestEU Advisory Hub and the InvestEU Portal. Harmonised reporting will be requested from the implementing partners in line with the Financial Regulation. •Detailed explanation of the specific provisions of the proposal Chapter I – General provisions The general provisions provide for the general and specific objectives of the InvestEU Programme which are subsequently reflected in the policy windows. The financing and investment operations to be supported by the EU guarantee under the InvestEU Fund shall contribute to (i) the competitiveness of the Union, including research, innovation and digitisation; (ii) the growth and employment in the Union economy, its sustainability and its environmental and climate dimension contributing to the achievement of the Sustainable Development Goals and the objectives of the Paris climate agreement and to the creation of high-quality jobs; (iii) the social resilience and inclusiveness and innovativeness of the Union; (iv) the promotion of scientific and technological advance, of culture, education and training; (v) the integration of Union capital markets and the strengthening of the Single Market, including solutions addressing the fragmentation of the Union capital markets, diversifying sources of financing for Union enterprises and promoting sustainable finance; (vi) the promotion of economic, social and territorial cohesion by contributing to combatting the post crisis asymmetric recovery; or (vii) the recovery of the Union economy after the crisis caused by the Covid-19 pandemic, upholding and strengthening its strategic value chains, which often affect several Member States and regions, and maintaining and reinforcing activities of strategic importance to the Union in relation to critical infrastructure, technologies and inputs to businesses and consumers. The size of the EU guarantee is proposed to be EUR 75 153 850 000 and the provisioning rate 45 %, i.e. EUR 33 800 000 000 is needed for the provisioning (both amounts in current prices). The indicative allocation of the EU guarantee between the policy windows is laid down in Annex I. However, the strategic European investment window has a dedicated EU guarantee allocation of up to EUR 31 153 850 000. The size of the provisioning is based on the type of financial products envisaged and the riskiness of the portfolios, taking into account the experience under the EFSI and former financial instruments. A financial envelope of EUR 724 733 000 (in current prices) is proposed for the InvestEU Advisory Hub, the InvestEU Portal and accompanying measures. The size of the envelope is commensurate to the volume of the EU guarantee in order to facilitate smooth deployment of the available financing by providing adequate advisory support to, inter alia, project promoters. It is also foreseen that third countries could be associated to financial products under the policy windows of the InvestEU Fund, except under the strategic European investment window, by providing their full participation in cash. This possibility is foreseen in particular to allow, where justified, for the continuation of existing arrangements, inter alia, in the area of research, or to foresee possibilities for support in relation to the accession processes. Member States wishing to use part of their funds under shared management through the InvestEU Fund may also contribute. These amounts come in addition to the EU guarantee of EUR 75 153 850 000 (in current prices).

Chapter II – InvestEU Fund This Chapter identifies the five policy windows of the InvestEU Fund: (i) sustainable infrastructure; (ii) research, innovation and digitisation; (iii) SMEs; (iv) social investment and skills; (v) strategic European investment, and provides a detailed description of their scope. It also defines the two compartments of the EU guarantee: (i) EU compartment; and (ii) Member State compartment, which will be composed of one sub-compartment per Member State which decides to contribute part of its funds under shared management into the InvestEU Fund. The specific rules related to the Member State compartment foresee a contribution agreement between the Commission and the Member State concerned and define the main elements of the contribution, such as, for example, the size, provisioning rate and contingent liability. The Common Provisions Regulation and other relevant legal instruments will contain the necessary enabling provisions. Once the transfer to the InvestEU Fund takes place, the implementation of the Member State compartment will follow the rules of the InvestEU Fund. The Commission shall select the implementing partner based on a proposal by the Member State and sign the guarantee agreement with the Member State concerned. The Commission proposal for the 2021-2027 MFF sets a more ambitious goal for climate mainstreaming across all EU programmes, with an overall target of 25 % of EU expenditure contributing to climate objectives. The contribution of the InvestEU Programme to the achievement of this overall target will be tracked through an EU climate tracking system. An ambitious separate target of at least 60 % has been set for investment meeting Union objectives on climate and environment under the sustainable infrastructure window. The Commission will present the information annually in the context of the annual draft budget. To support the full use of the potential of the Invest EU Programme to contribute to climate objectives, the Commission will seek to identify relevant actions throughout the InvestEU Programme preparation, implementation, review and evaluation processes. Chapter III – Partnership between the Commission and the European Investment Bank Group A partnership between the Commission and the European Investment Bank Group is established. It covers in addition to the implementation of the 75 % of the EU guarantee, certain advisory tasks in relation to banking related aspects of the guarantee agreements, in particular in relation to financial risk, and in relation to the risk management of the portfolio. European Investment Bank Group will also play a central role in implementing advisory support under the InvestEU Advisory Hub. Moreover, it will advise the Commission and perform operational tasks in relation to the Hub. The European Investment Bank Group shall take all necessary measures and precautions in order to avoid conflicts of interests with other implementing partners in connection to the tasks it performs to the Commission under the partnership. Chapter IV – EU guarantee The provisions relating to the EU guarantee and its deployment are set out in this Chapter. They include the irrevocable and on-demand character of the EU guarantee, the investment period, requirements for the eligible financing and investment operations and eligible types of financing. The sectors eligible for financing and investment operations are laid down more in detail in Annex II. Moreover, this Chapter lays down the requirements for implementing partners – who, inter alia, have to pass the pillar-assessment in line with the Financial Regulation –, and for the guarantee agreements between the Commission and the implementing partners. Requirements related to the remuneration of the EU guarantee and the conditions for reducing the remuneration in duly justified cases are also included in this Chapter. In selecting the implementing partners, the Commission will consider their capacity to fulfil the objectives of the InvestEU Fund and to contribute their own resources, to crowd-in private investors, to provide adequate geographic and sectorial coverage and contribute to new solutions to address market failures and sub-optimal investment situations. Given its role under the Treaties, its capacity to operate in all Member States and the existing experience under the current financial instruments and the EFSI, the European Investment Bank Group should remain a privileged implementing partner under the EU compartment. It will implement 75 % of the EU guarantee. National promotional banks or institutions can also become implementing partners. Moreover, it will be possible to have other international financial institutions as implementing partners, in particular when they present a comparative advantage in terms of specific expertise and experience in certain Member States. It should also be possible for other entities fulfilling the criteria laid down in the Financial Regulation to act as implementing partners. It also includes the detailed coverage of the EU guarantee in function of the different nature of the financing that can be provided under it. Chapter V – Governance The InvestEU Fund will have an Advisory Board composed of (i) representatives of the implementing partners; (ii) representatives of the Member States; (iii) an expert appointed by the European Economic and Social Committee; and (iv) an expert appointed by the Committee of Regions. Its tasks include advising the Commission and the Steering Board on the design of financial products to be implemented under the InvestEU Fund and giving advice on market developments, market failures and sub-optimal investment situations as well as on market conditions. It also exchanges views on market developments and shares best practices. A Steering Board is established to determine strategic and operational guidance, to adopt the risk methodological framework, to oversee the implementation of InvestEU, to be consulted on the shortlist of candidates for becoming members of the Investment Committee, to adopt the rules of procedure for the secretariat of the Investment Committee and adopt rules applicable to the operations with investment platforms. The Steering Board is composed of four representatives of the Commission, three representatives of the European Investment Bank Group and two representatives of other implementing partners. In addition, the European Parliament is to appoint an expert as a non-voting member. A Commission representative shall be the chair. The Commission performs a policy check on proposed financing or investment operations to verify that they are compliant with EU law before a proposal is submitted to the Investment Committee. As regards the European Investment Bank, it is proposed that its proposals do not undergo a policy check since they are submitted to the Commission within the framework of the procedure provided for in Article 19 of Protocol No 5. Only if the Commission delivers an unfavourable opinion in that context, a financing or investment operation is excluded from the coverage of the EU guarantee. The investment committee approves the use of the EU guarantee for financing and investment operations. Its members will be external experts with expertise from the relevant sectors. The Committee will meet in five different configurations which correspond to the policy windows. Each configuration has six members out of which four are permanent members who take part in all configurations. The remaining two members are selected to take more specifically into account the areas covered by that particular policy window.

An independent secretariat is established to assist the Investment Committee. The secretariat will be administratively located at the Commission but it is answerable to the chair of the Investment Committee. The Investment Committee will also take care of granting the EU guarantee to operations under the EFSI Regulation. A scoreboard is required in relation to all financing and investment operations to be submitted to the Investment Committee. It will ensure independent, transparent and harmonised assessment of the guarantee requests. It shall contain detailed information on the financing or investment operation in question concerning, inter alia, the contribution of the operation to Union policy objectives, additionality, description of the market failure or sub-optimal investment situation, investment impact and financial profile. Chapter VI – InvestEU Advisory Hub The InvestEU Advisory Hub will provide advisory support for the identification, preparation, development, structuring, procuring and implementation of projects, including related capacity building. It will be available for public and private project promoters as well as for financial and other intermediaries. Chapter VII – InvestEU Portal The InvestEU Portal will be established, building on the experience with the Project Portal under the Investment Plan for Europe. Systematic checks of the consistency of the projects with Union law and policies will be undertaken by the Commission. Moreover, implementing partners are obliged to consider those projects meeting the consistency requirements that fall within their scope of action. Its objective is to provide visibility on investable projects in the EU that are in search of funding. However, a project does not have to be posted on the Portal in order to benefit from EU funding. Similarly, a submission to the Portal does not mean that the project will in the end benefit from the EU guarantee. Chapter VIII – Accountability, monitoring and reporting, evaluation and control The Chairperson of the Steering Board may be requested to report to the European Parliament or to the Council or reply orally or in writing to questions by them. This Chapter provides for regular monitoring and reporting while laying down the indicators against which performance will be measured in Annex III. Moreover, it contains provisions on audit and on OLAF's rights with regard to financing and investment operations in third countries. Furthermore, it is proposed that the use of the EU guarantee will be evaluated through an interim and a final evaluation in line with the requirements of the Financial Regulation. The interim evaluation will have to consider certain specific features of the Regulation, such as the functioning of the modalities under the partnership between the Commission and the European Investment Bank Group, the allocation of the EU guarantee between the European Investment Bank Group and the other implementing partners, the implementation of the InvestEU Advisory Hub. Chapter IX – Transparency and visibility The provisions are included to ensure adequate transparency and visibility vis-à-vis the final recipients and the general public, respectively. Chapter X – Transitional and final provisions This final Chapter includes provisions in relation to the use of revenues, repayments and recovery from the predecessor programmes. A list of those programmes, in addition to the EFSI, is in Annex IV. This Chapter also lays down the procedure for the delegated acts. It is foreseen that the Regulation applies as of 1 January 2021. 2020/0108 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the InvestEU Programme

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 173 and the third paragraph of Article 175 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee, Having regard to the opinion of the Committee of the Regions, Acting in accordance with the ordinary legislative procedure, Whereas: (1)The Covid-19 pandemic is a major shock to the global and Union economy. Due to the necessary containment measures, economic activity in the EU dropped significantly. The contraction in EU GDP in 2020 is expected to be around 7.5%, far deeper than during the financial crisis in 2009. The outbreak of the pandemic has shown the interconnectivity of global supply chains and exposed some vulnerabilities such as the over-reliance of strategic industries on non-diversified external supply sources. Such vulnerabilities need to be addressed, to improve the Union’s emergency response as well as the resilience of the entire economy, while maintaining its openness to competition and trade in line with its rules. Investment activity is expected to have dropped significantly. Even before the pandemic, while a recovery in investment-to-GDP ratios in the Union could be observed, it remained below what might be expected in a strong recovery and was insufficient to compensate for years of underinvestment following the 2009 crisis. More importantly, the current investment levels and forecasts do not cover the Union’s needs for structural investment to restart and sustain long-term growth in the face of technological change and global competitiveness, including for innovation, skills, infrastructure, small and medium-sized enterprises (SMEs) and the need to address key societal challenges such as sustainability or population ageing. Consequently, in order to achieve the Union's policy objectives and to support a swift, inclusive and healthy economic recovery, support is necessary to address market failures and sub-optimal investment situations and to reduce the investment gap in targeted sectors. (2)Evaluations have underlined that the variety of financial instruments delivered under the 2014-2020 Multiannual Financial Framework period has led to some overlaps in their scope. That variety has also produced complexity for intermediaries and final recipients who were confronted with different eligibility and reporting rules. The absence of compatible rules also hampered the combination of several Union funds, although such combinations would have been beneficial in order to support projects in need of different types of funding. Therefore, a single fund, the InvestEU Fund, which builds on the experience of the European Fund for Strategic Investments (EFSI) set up under the Investment Plan for Europe, should be set up in order to provide more efficiently functioning support to final recipients by integrating and simplifying the financing offered under a single budgetary guarantee scheme, thereby improving the impact of Union support while reducing the cost to the Union payable from the budget. (3)In the last years, the Union has adopted ambitious strategies to complete the Single Market and to stimulate sustainable and inclusive growth and jobs, such as 'Europe 2020 - A strategy for smart, sustainable and inclusive growth' of 3 March 2010, 'Action Plan on Building a Capital Markets Union' of 30 September 2015, 'A new European Agenda for Culture' of 22 May 2018, 'Clean Energy for all Europeans' of 30 November 2016, 'Closing the loop - An EU action plan for the Circular Economy' of 2 December 2015, 'A European Strategy for Low-Emission Mobility' of 20 July 2016, ‘European Defence Action Plan’ of 30 November 2016, 'Launching the European Defence Fund' of 7 June 2017, 'Space Strategy for Europe' of 26 October 2016, the Interinstitutional Proclamation on the European Pillar of Social Rights of 13 December 2017, the ‘European Green Deal’ of 11 December 2019, the ‘European Green Deal Investment Plan’ of 14 January 2020, the ‘Strong Social Europe for Just Transitions’ of 14 January 2020, the ‘Strategy for shaping Europe’s digital future’, the ‘Data Strategy’ and the ‘Artificial Intelligence Communication’ of 19 February 2020, ‘A New Industrial Strategy for Europe’ of 10 March 2020 and ‘SME Strategy for a sustainable and digital Europe’ of 10 March 2020. The InvestEU Fund should exploit and reinforce synergies between those mutually reinforcing strategies through providing support to investment and access to financing. (4)At Union level, the European Semester of economic policy coordination is the framework to identify national reform priorities and monitor their implementation. Member States, where appropriate in cooperation with local and regional authorities, develop their own national multiannual investment strategies in support of those reform priorities. Those strategies should be presented alongside the yearly national reform programmes as a way of outlining and coordinating priority investment projects that are to be supported by national funding, Union funding, or both. Those strategies should also use Union funding in a coherent manner and maximise the added value of the financial support to be received notably from the European structural and investment funds, the Recovery and Resilience Facility and the InvestEU Programme. (5)The InvestEU Fund should contribute to improving the competitiveness and socio-economic convergence and cohesion of the Union, including in the fields of innovation and digitisation, to the efficient use of resources in accordance with the circular economy, to the sustainability and inclusiveness of the Union's economic growth and to the social resilience and integration of the Union capital markets, including through solutions that address the fragmentation of Union capital markets and that diversify sources of financing for Union enterprises. To that end, the InvestEU Fund should support projects that are technically and economically viable by providing a framework for the use of debt, risk sharing and equity instruments backed up by a guarantee from the Union budget and by financial contributions from implementing partners as relevant. The InvestEU Fund should be demand-driven, while at the same time it should focus on providing strategic, long-term benefits in relation to key areas of Union policy which otherwise would not be funded or would be insufficiently funded, thereby contributing to meeting policy objectives of the Union. Support under the InvestEU Fund should cover a wide range of sectors and regions, but should avoid excessive sectoral or geographical concentration and should facilitate access of projects composed of partner entities in multiple regions across the EU. (6)The cultural and creative sectors are key and fast growing sectors in the Union, generating both economic and cultural value from intellectual property and individual creativity. However, restrictions on social contacts put in place during the Covid-19 crisis had a significantly negative economic impact on these sectors. Moreover, the intangible nature of the assets in those sectors limits the access of SMEs and organisations from those sectors to private financing which is essential to be able to invest, scale up and compete at an international level. The InvestEU Programme should continue to facilitate access to finance for SMEs and organisations from the cultural and creative sectors. The cultural and creative, audiovisual and media sectors are essential for our cultural diversity and democracy in the digital age, and an intrinsic part of our sovereignty and autonomy, and strategic investments in audiovisual and media content and technology will determine the long-term capacity to produce and distribute content to wide audiences across national borders. (7)With a view to fostering sustainable and inclusive growth, investment and employment, and thereby contributing to improved well-being, to fairer income distribution and to greater economic, social and territorial cohesion in the Union, the InvestEU Fund should support investments in tangible and intangible assets, including in cultural heritage. Projects funded by the InvestEU Fund should meet Union environmental and social standards, including standards on labour rights. Interventions through the InvestEU Fund should complement Union support delivered through grants. (8)The Union endorsed the objectives set out in the United Nations 2030 Agenda for Sustainable Development (the "2030 Agenda"), its Sustainable Development Goals (SDGs) and the Paris Agreement adopted under the United Nations Framework Convention on Climate Change ("Paris Agreement on Climate Change") as well as the Sendai Framework for Disaster Risk Reduction 2015-2030. To achieve those objectives, as well as those set out in the environmental policies of the Union, action pursuing sustainable development is to be stepped up significantly. Therefore, the principles of sustainable development should feature prominently in the design of the InvestEU Fund. (9)The InvestEU Programme should contribute to building a sustainable finance system in the Union which supports the reorientation of private capital towards sustainable investments in accordance with the objectives set out in the communication of the Commission of 8 March 2018 ‘Action Plan: Financing Sustainable Growth’ and the communication of the Commission of 14 January 2020 on the European Green Deal Investment Plan. (10)Reflecting the importance of tackling climate change in line with the Union's commitments to implement the Paris Agreement on Climate Change and the SDGs, the InvestEU Programme will contribute to mainstream climate actions and to the achievement of an overall target of 25 % of the Union budget expenditures supporting climate objectives. Actions under the InvestEU Programme are expected to contribute 30 % of the overall financial envelope of the InvestEU Programme to climate objectives. Relevant actions will be identified during the InvestEU Programme's preparation and implementation and reassessed in the context of the relevant evaluations and review processes. (11)The contribution of the InvestEU Fund to the achievement of the climate target will be tracked through a Union climate tracking system to be developed by the Commission in cooperation with potential implementing partners, appropriately using the criteria established by [Regulation on the establishment of a framework to facilitate sustainable investment] for determining whether an economic activity is environmentally sustainable. The InvestEU Programme should also contribute to the implementation of other dimensions of the SDGs. (12)According to the 2018 Global Risks Report issued by the World Economic Forum, half of the ten most critical risks threatening the global economy relate to the environment. Such risks include the pollution of air, soil, inland waters and oceans, extreme weather events, biodiversity losses and failures of climate-change mitigation and adaptation. Environmental principles are strongly embedded in the Treaties and many of the Union's policies. Therefore, the mainstreaming of environmental objectives should be promoted in operations related to the InvestEU Fund. Environmental protection and the prevention and management of related risks should be integrated in the preparation and implementation of investments. The Union should also track its biodiversity-related and air pollution control-related expenditures in order to fulfil the reporting obligations under the Convention on Biological Diversity and under Directive (EU) 2016/2284 of the European Parliament and of the Council. Investment allocated to environmentally sustainability objectives should therefore be tracked using common methodologies that are consistent with methodologies developed under other Union programmes that apply to climate, biodiversity and air pollution management in order to allow the assessment of the individual and combined impact of investments on the key components of natural capital, including air, water, land and biodiversity.

(13)Investment projects that receive substantial Union support, in particular in the area of infrastructure, should be screened by the implementing partner to determine whether they have an environmental, climate or social impact. Investment projects that have such an impact should be subject to sustainability proofing in accordance with guidance that should be developed by the Commission in close cooperation with potential implementing partners under the InvestEU Programme. This guidance should appropriately use the criteria established by [Regulation on establishment of a framework to facilitate sustainable investment] for determining whether an economic activity is environmentally sustainable and consistent with the guidance developed for other programmes of the Union. Consistent with the principle of proportionality, such guidance should include adequate provisions for avoiding undue administrative burdens, and projects below a certain size as to be defined in the guidance should be excluded from the sustainability proofing. Where the implementing partner concludes that no sustainability proofing is to be carried out, it should provide a justification to the Investment Committee established for the InvestEU Fund. Operations that are inconsistent with the achievement of the climate objectives should not be eligible for support under this Regulation. (14)Low infrastructure investment rates in the Union during the financial crisis and again during the Covid-19 crisis undermined the Union's ability to boost sustainable growth, competitiveness and convergence. It also creates risk of consolidating imbalances and impacts regions’ development long-term. Sizeable investments in Union infrastructure, in particular with regard to interconnection and energy efficiency and to creating a Single European Transport Area, are essential to meeting the Union's sustainability targets, including the Union’s commitments towards the SDGs, and the 2030 energy and climate targets. Accordingly, support from the InvestEU Fund should target investments into transport, energy, including energy efficiency and renewable energy sources and other safe and sustainable low-emission energy sources, environmental infrastructure, infrastructure related to climate action, maritime infrastructure and digital infrastructure. The InvestEU Programme should prioritise areas that are under-invested, and in which additional investment is required. To maximise the impact and added value of Union financing support, it is appropriate to promote a streamlined investment process that enables visibility of the project pipeline and maximises synergies across relevant Union programmes in areas such as transport, energy and digitisation. Bearing in mind threats to safety and security, investment projects receiving Union support should include measures for infrastructure resilience, including infrastructure maintenance and safety, and should take into account principles for the protection of citizens in public spaces. This should be complementary to the efforts made by other Union funds that provide support for security components of investments in public spaces, transport, energy and other critical infrastructure, such as the European Regional Development Fund. (15)Where appropriate, the InvestEU Programme should contribute to the objectives of Directive (EU) 2018/2001 of the European Parliament and of the Council and the Governance Regulation, as well as promote energy efficiency in investment decisions. (16)Genuine multimodality is an opportunity to create an efficient and environmentally friendly transport network that uses the maximum potential of all means of transport and generates synergy between them. The InvestEU Programme should support investments in multimodal transport hubs, which - in spite of their significant economic potential and business cases - carry a significant risk for private investors. The InvestEU Programme should also contribute to the development and deployment of Intelligent Transport Systems (ITS). The InvestEU Programme should help to boost efforts to design and apply technologies that help to improve the safety of vehicles and road infrastructure. (17)The InvestEU Programme should contribute to Union policies concerning seas and oceans through the development of projects and enterprises in the area of the blue economy, and the Sustainable Blue Economy Finance Principles. This may include interventions in the area of maritime entrepreneurship and industry, an innovative and competitive maritime industry, as well as renewable marine energy and circular economy. (18)Although the level of overall investment in the Union was increasing before the Covid-19 crisis, investment in higher-risk activities such as research and innovation was still inadequate and is now expected to have suffered a significant hit with the crisis. The resulting underinvestment in research and innovation is damaging to the industrial and economic competitiveness of the Union and the quality of life of its citizens. The InvestEU Fund should provide appropriate financial products to cover different stages of the innovation cycle and a wide range of stakeholders, in particular to allow the upscaling of and deployment of solutions at a commercial scale in the Union in order to make such solutions competitive on world markets and to promote Union excellence in sustainable technologies at a global level, in synergy with Horizon Europe, including the European Innovation Council. In that regard, the experience gained from the financial instruments, such as InnovFin – EU Finance for Innovators, deployed under Horizon 2020 to facilitate and accelerate access to finance for innovative businesses should serve as a strong basis to deliver this targeted support. (19)Tourism is an important area for the Union economy and the sector, which experienced a particularly severe contraction as a result of COVID-19 pandemic. The InvestEU Programme should contribute to strengthening its long-term competitiveness by supporting operations promoting sustainable, innovative and digital tourism. (20)A significant effort is urgently needed to invest in and boost the digital transformation and to distribute the benefits of it to all Union citizens and businesses. The strong policy framework of the Digital Single Market Strategy should now be matched by investment of a similar ambition, including in artificial intelligence in line with the Digital Europe programme. (21)SMEs represent over 99 % of businesses in the Union and their economic value is significant and crucial. However, they face difficulties when accessing finance because of their perceived high risk and lack of sufficient collateral. Additional challenges arise from the need for SMEs and social economy enterprises to stay competitive by engaging in digitisation, internationalisation, transformation in a logic of circular economy, innovation activities and skilling up their workforce. Moreover, SMEs and social economy enterprises have access to a more limited set of financing sources than larger enterprises, because they typically do not issue bonds, and have only limited access to stock exchanges and large institutional investors. Innovative solutions such as the acquisition of a business or ownership stake in a business by employees are also increasingly common for SMEs and social economy enterprises. The difficulty in accessing finance is even greater for those SMEs whose activities focus on intangible assets. SMEs in the Union rely heavily on banks and on debt financing in the form of bank overdrafts, bank loans or leasing. Supporting SMEs that face the above challenges by making it easier for them to gain access to finance and by providing more diversified sources of funding is necessary to increase the ability of SMEs to finance their creation, growth, innovation and sustainable development, ensure their competitiveness and withstand economic shocks to make the economy and the financial system more resilient during economic downturns and to maintain SMEs’ ability to create jobs and social well-being. This Regulation is also complementary to the initiatives already undertaken in the context of the Capital Markets Union. The InvestEU Fund should therefore build on successful Union programmes such as the Programme for the Competitiveness of enterprises and SMEs (COSME) and should provide working capital and investment throughout the life cycle of a company, should provide financing for leasing transactions and should provide an opportunity to focus on specific, more targeted financial products. It should also maximise firepower of public/private fund vehicles, such as the SME IPO (Initial Public Offering) Fund, seeking to support SMEs through channelling both more private and public equity in particular in strategic companies. (22)As set out in the Commission's Reflection paper on the social dimension of Europe of 26 April 2017, the Communication on European Pillar of Social Rights, the Union framework for the UN Convention on the Rights of Persons with Disabilities and the Communication on ‘Strong Social Europe for Just Transitions’ of 14 January 2020, building a more inclusive and fair Union is a key priority for the Union to tackle inequality and foster social inclusion policies in Europe. Inequality of opportunities affects in particular access to education, training, culture, employment, health and social services. Investment in the social, skills and human capital-related economy, as well as in the integration of vulnerable populations in the society, can enhance economic opportunities, especially if coordinated at Union level. The InvestEU Fund should be used to support investment in education and training, including the re-skilling and upskilling of workers, inter alia in regions depending on a carbon intensive economy and affected by the structural transition to a low-carbon economy. It should be used to support projects that generate positive social impacts and enhance social inclusion by helping to increase employment across all regions, in particular among the unskilled and long-term unemployed, and to improve the situation with regard to gender equality, equal opportunities, non-discrimination, accessibility, intergenerational solidarity, the health and social services sector, social housing, homelessness, digital inclusiveness, community development, the role and place of young people in society as well as vulnerable people, including third country nationals. The InvestEU Programme should also support European culture and creativity that has a social goal. (23)To counter the negative effects of profound transformations of societies in the Union and of the labour market in the coming decade, it is necessary to invest in human capital, social infrastructure, microfinance, ethical and social enterprise finance and new social economy business models, including social impact investment and social outcomes contracting. The InvestEU Programme should strengthen nascent social market eco-system to increase the supply of and access to finance to micro- and social enterprises and social solidarity institutions, in order to meet the demand of those who need it the most. The report of the High-Level Task Force on Investing in Social Infrastructure in Europe of January 2018 entitled "Boosting Investment in Social Infrastructure in Europe" has identified a total investment gap of at least EUR 1.5 trillion in social infrastructure and services for the period between 2018 and 2030, including education, training, health and housing. This calls for support, including at the Union level. Therefore, the collective power of public, commercial and philanthropic capital, as well as support from foundations and from alternative types of finance providers such as ethical, social and sustainable actors, should be harnessed to support the development of the social market value chain and a more resilient Union. (24)In the economic crisis caused by the Covid-19 pandemic, market allocation of resources is not fully efficient and perceived risk impairs private investment flow significantly. Under such circumstances, the key feature of the InvestEU Fund of de-risking economically viable projects to crowd in private finance is particularly valuable and should be reinforced, inter alia in order to counteract the risk of an asymmetric recovery. The InvestEU Programme should be able to provide crucial support to companies in the recovery phase and at the same time ensure a strong focus of investors on the Union’s medium- and long-term policy priorities such as the European Green Deal, the European Green Deal Investment Plan, the Strategy on shaping Europe’s digital future and the Strong Social Europe for Just Transitions. It should significantly increase the risk-taking capacity of the European Investment Bank (EIB) Group and national promotional banks and institutions and other implementing partners in support of economic recovery. (25)The Covid-19 pandemic is a major shock to the global and Union economy. The contraction in EU GDP is expected to be far deeper than during the financial crisis in 2009 and adverse social effects will be inevitable. The outbreak of the pandemic has shown the need for strategic vulnerabilities to be addressed in order to improve the Union’s emergency response as well as the resilience of the entire economy. Only a resilient, inclusive and integrated European economy can preserve the Single Market and the level playing field also to the benefit of the hardest-hit Member States. (26)The InvestEU Fund should operate through five policy windows that mirror the key Union policy priorities, namely: sustainable infrastructure; research, innovation and digitisation; SMEs; social investment and skills; and strategic European investment. (27)Although the SME policy window should primarily focus on benefitting SMEs, small mid-cap companies should also be eligible under this policy window. Mid-cap companies should also be eligible for support under the other four policy windows. (28)The primary focus of the strategic European investment window should be on support to those final recipients established in a Member State and operating in the Union whose activities are of strategic importance to the Union in particular in view of the green and digital transitions and of enhanced resilience in areas of (i) critical healthcare provision, manufacturing and stockpiling of pharmaceuticals, medical devices and medical supplies, strengthening of health crisis response capacity and of the civil protection system, (ii) critical infrastructure, whether physical or virtual; (iii) provision of goods and services instrumental to the operation and maintenance of such infrastructure, (iv) key enabling, transformative, green and digital technologies and game-changing innovations where the investment is strategically important for the Union’s industrial future, including artificial intelligence, blockchain, software, robotics, semiconductors, microprocessors, edge cloud technologies, high-performance computing, cybersecurity, quantum technologies, photonics, industrial biotechnology, renewable energy technologies, energy storage technologies including batteries, sustainable transport technologies, clean hydrogen and fuel cell applications, decarbonisation technologies for industry, carbon capture and storage, circular economy technologies biomedicine, nanotechnologies, pharmaceuticals and advanced materials; (v) manufacturing facilities for mass production of Information Communication and Technology components and devices in the EU; (vi) supply and stockpiling of critical inputs to public actors, businesses or consumers in the Union; (vii) critical technologies and inputs for the security of the Union and its Member States, such as defence and space sectors and cybersecurity, and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009. The final recipients should have their registered office in a Member State and they should be active in the Union in the sense that they have substantial activities in terms of staff, manufacturing, research and development or other business activities in the Union. Projects which contribute to diversification of strategic supply chains in the Single Market through operations in multiple locations across the EU should be able to benefit. (29)The strategic European investment window should also target suppliers established and operating in the Union whose activities are of strategic importance to the Union and that would need long term investment or are covered by the Foreign Direct Investment Screening mechanism. In addition, important projects of common European interest should in particular be able to benefit from the strategic European investment window. (30)The InvestEU should also provide support to financing to generate investment to the benefit of just transition regions. (31)Each policy window should be composed of two co