EUROPEAN COMMISSION Brussels, 6.6.2018 SWD(2018) 316 final COMMISSION STAFF WORKING DOCUMENT EVALUATION

of the European Fund for Strategic Investments, of the European Investment Advisory Hub, and of the European Investment Project Portal Accompanying the document Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

establishing the InvestEU Programme {COM(2018) 439 final}

{SEC(2018) 293 final}

{SWD(2018) 314 final}



Table of contents Abbreviations 1. Introduction 1.1 Purpose and scope 2 Background to the intervention 2.1 Description of the intervention and its objectives 3 State of play 3.1 European Fund for Strategic Investments 3.2 The EU Guarantee 3.3 European Investment Advisory Hub 3.4 European Investment Project Portal 4 Methodology 5 Analysis and answers to the evaluation questions 5.1 European Fund for Strategic Investments 5.2 The EU Guarantee 5.3 European Investment Advisory Hub 5.4 European Investment Project Portal 6 Conclusions 6.1 European Fund for Strategic Investments

6.2 The EU Guarantee 6.3 European Investment Advisory Hub 6.4 European Investment Project Portal 6.5 Lessons learned Annex 1: Procedural information Annex 2: Stakeholder consultation Annex 3: Methods and analytical models Annex 4: EIB products under EFSI IIW Annex 5: Potential overlaps – DEBT & EQUITY PRODUCTS SUPPORTING LENDING TO SMEs, 2014-2020



List of Figures Figure 1 - The Investment Plan for Europe Figure 2 - The EFSI: the EU Guarantee and the EIB risk bearing capacity Figure 3 - EFSI state of play as of 12 April 2018 Figure 4 - Published projects per Member State as of end March 2018 Figure 5 - Project review analysis Figure 6 - Investment as a % of GDP in EU28

Figure 7 - Share of private finance mobilised in total EFSI investment mobilised and in the estimated annual EU investment gap Figure 8 - EFSI geographical distribution (both windows) Figure 9 - Sectoral distribution of the EFSI support - IIW Figure 10 - SMEW sectoral distribution Figure 11 - EFSI Scoreboard Figure 12 - Impact of EFSI and the wider EIB Group on the EU GDP and employment Figure 13 - Project promoters under IIW on EFSI application and appraisal procedure Figure 14 - Evaluation of time elapsed between approvals and signature, IIW Figure 15 - EU programmes and portfolio of financial instruments Figure 16 - Annual commitments made under EIB’s InnovFin products Figure 17 - Risk profile of the EFSI operations compared to non-EFSI EIB operations Figure 18 - Access to alternative financing Figure 19 - Would the project have gone ahead to the same extent and timescale without EFSI Figure 20 - Comparative advantages of EIB financing under EFSI Figure 21 - EIB Special Activities vs standard EIB operations in 2014-2017 Figure 22 - Proportion of EFSI in EIB’s Special Activities Figure 23 - EIPP - State of play (March 2018) List of Tables

Table 1 - The split of the EU Guarantee and its development over time Table 2 - Targeted surveys conducted and the response rate Table 3 - Investment level forecasts Table 4 - Increase in the number of approved equity type operations under EFSI IIW Table 5 - EFSI 1.0 performance compared to initial expectations Table 6 - EFSI support - state of play per window Table 7 - EFSI multipliers at aggregate & window level by type of product Table 8 - EFSI financing signed and private finance / investment mobilised (end 2017) Table 9 - Forecast number of direct jobs created Table 10 - Summary of monthly IC meetings, March 2016 – January 2018 Table 11 - Types of added value for the EFSI Abbreviations Term or acronym Meaning or definition ASD Advisory Services Department CCS Cultural and Creative Sectors CEE Central Eastern Europe CEF Connecting Europe Facility CGE Computable General Equilibrium COSME Programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises CPR Common Provisions Regulation DI Debt Instrument EaSI EU Programme for Employment and Social Innovation EBRD European Bank for Reconstruction and Development EC European Commission ECA European Court of Auditors ECB European Central Bank ECFIN Directorate General for Economic and Financial Affairs EFG Equity Facility for Growth EFSI European Fund for Strategic Investments EGRF EFSI Guarantee Request Form EIAH European Investment Advisory Hub EIB European Investment Bank EIF European Investment Fund EIPP European Investment Project Portal EL Expected Loss ELTI European Long-Term Investors EPEC European PPP Expertise Centre ERR Economic Rate of Return ESIF European Structural Investment Funds EU European Union EUR Euro FI Financial Instrument FPA Framework Partnership Agreement GDP Gross Domestic Product GIPP Global Infrastructure Project Pipeline IA Impact Assessment IC Investment Committee IIW EFSI’s Infrastructure and Innovation Window IMF International Monetary Fund InnovFin “InnovFin – EU Finance for Innovators” IPE Investment Plan for Europe JRC Joint Research Centre KMI Key Monitoring Indicator KPI Key Performance Indicator LGF Loan Guarantee Facility MDB Multilateral Development Banks MFF Multiannual Financial Framework MLI Multilateral Lending Institutions MS Member States NPB National Promotional Bank NPBI National Promotional Bank or Institution NPI National Promotional Institution OECD Organisation for Economic Cooperation and Development RAC Risk Adjusted Capital RCR Risk Capital Resources R&D Research and Development RDI Research, Development and Innovation S&P Standard & Poor's SACP Stand-Alone Credit Profile SFSB Smart Finance for Smart Buildings SIF Sustainable Infrastructure Foundation SMAF SME Access to Finance Index SMEG SME Guarantee SMEW Small and Medium Enterprise Window SRSS Structural Reform Support Service SWD Staff Working Document TA Technical Assistance TFEU Treaty on the Functioning of the European Union TFP Total Factor Productivity TRL Technology Readiness Level VC Venture Capital 1.Introduction As a response to the economic and financial crisis and its negative impact on the level of investment in the EU, the Commission launched in November 2014 the Investment Plan for Europe ('IPE'). It focuses on removing obstacles to investment and seeks to deliver jobs, growth, and innovation in Europe. The Investment Plan for Europe consists of three mutually reinforcing pillars. The first pillar, the European Fund for Strategic Investments ('EFSI') aims at mobilising at EUR 315 billion of additional public and private investment in infrastructure, innovation, and SME financing by mid-2018. This is to be achieved via an EU budgetary guarantee to the EIB Group that allows them to increase the financing of projects with a higher risk-profile. Given EFSI's success in the first two years of implementation, the Commission proposed to extend the EFSI duration and increase its financial capacity to EUR 500 billion by 2020. The amended EFSI Regulation ('EFSI 2.0') was adopted on 13 December 2017. Source: ICF adapted from EIB

The second pillar of the Investment Plan for Europe helps to ensure that investments reach the real economy by promoting and developing a pipeline of viable investment projects. It consists of the European Investment Advisory Hub (EIAH, the Hub) that provides technical assistance to both private and public project promoters, as well as of the European Investment Project Portal (EIPP, the Portal) that is an online platform connecting EU-based project promoters and investors from the EU and beyond. The third pillar aims at supporting the investment environment by improving regulation at all levels and eliminating barriers to investment. However, it is not in the scope of this evaluation, as the third pillar is not included under the EFSI Regulation. Moreover, the nature of initiatives under pillar three differs significantly from the EFSI, EIAH and EIPP. 1.1Purpose and scope The EFSI 2.0 Regulation provides that the Commission has to submit to the European Parliament and the Council an independent evaluation of the application of the EFSI Regulation before tabling any new proposals for a post-2020 investment support instrument. This Staff Working Document presents the results of an external independent evaluation of the application of the EU Regulation 2015/1017 (the 'EFSI Regulation') and draws on other evaluations (see section 4). This evaluation accompanies an impact assessment as well as a proposal for a Regulation of the European Parliament and of the Council on establishing the InvestEU Programme (referred to as the ‘InvestEU’) for the period 2021-2027. The evaluation performed by an external contractor, ICF Mostra (thereafter 'the independent evaluation'), covers the functioning of the EFSI, the use of the EU Guarantee, the activity of the EIAH and of the EIPP. The conclusions and recommendations of the evaluation will serve to assess the extent to which the EFSI, the EIAH, and the EIPP are achieving their objectives. The conclusions will also inform the future Commission legislative proposals related to establishing the investment support instrument for the period 2021-2027 (InvestEU Programme). The EFSI independent evaluation and the InvestEU Impact Assessment have been prepared in parallel, however early results from this evaluation as well as the results of the previous evaluations informed the preparation of the InvestEU Impact Assessment (see Annex 1 for further details). Unless explicitly specified otherwise, the evaluation covers actions since their launch until 31 December 2017 (EFSI 1.0). Due to its recent adoption, it does not evaluate the effects of the EFSI Regulation as amended on 13 December 2017 (also referred to as EFSI 2.0). To the extent possible, it does however consider the introduced improvements. Given that the EFSI was launched in July 2015, most signed projects supported by the EFSI have not been completed yet. Investment projects are long term in nature and it can take several years between project approval, signature, disbursement and realisation. The EFSI’s impacts can thus only partially be captured after such a short period. The evaluation, however, evaluates impacts to the extent possible and focuses on the likely expected results. The EFSI Regulation requires another independent evaluation at the end of the investment period. This future evaluation should be able to better capture the EFSI’s impacts, as most projects will have been approved and signed by that time. The evaluation focuses on the assessment of the relevance, effectiveness, efficiency, EU added value and coherence of the following: 1.Assessment of the functioning of EFSI. This assessment in particular includes: ·Whether the EFSI consists of a good use of resources of the EU budget, mobilises a sufficient level of private capital, and crowds-in private and public investment. ·Whether maintaining a scheme for supporting investment is useful from a macro-economic, point of view, in particular its contribution to employment and GDP growth. ·Evaluation of the use of the scoreboard referred to in the EFSI Regulation against the criteria of relevance and effectiveness. This in particular includes the consideration of the appropriateness of each pillar and their relative roles in the assessment. ·Whether the projects supported by the EFSI fulfil the additionality requirements as defined in the EFSI Regulation: ooperations which address market failures or sub-optimal investment situations; ooperations which without EFSI could not have been carried out by the EIB, the EIF, or under existing Union financial instruments in the period in which the EU guarantee can be used, or could not have been carried out to the same extent; oprojects supported by the EFSI shall typically have a higher risk profile than projects supported by normal operations. A risk corresponding to EIB special activities, as defined in Article 16 the EIB Statute is a strong indication of additionality. 2.Assess the use of the EU Guarantee. This in particular addresses the question whether the guarantee represents a good use of resources of the EU budget. 3.Assess the European Investment Advisory Hub (EIAH). This includes an assessment of the EIAH's market uptake and complementarity with other existing advisory services.

4.Assess the European Investment Project Portal (EIPP). This includes the assessment of EIPP’s relevance, efficiency, effectiveness, coherence, and EU added value. This Staff Working Document (SWD) and the independent evaluation have been prepared according to the Roadmap published on 21 December 2017. It draws on the final deliverables prepared by ICF Mostra (hereafter ICF) under contract with the European Commission. The report delivered by ICF answers the evaluation questions (see Annex 3) and contains recommendations addressed to the Commission. This SWD however, also draws on previous EFSI evaluations and other relevant studies.

2Background to the intervention 2.1Description of the intervention and its objectives In 2014, after more than six years since the onset of the global financial crisis, the pace of economic recovery in the EU was still slow. Low investment has been one of the main reasons for the weakness of the recovery, as noted in the Commission macroeconomic forecasts from that period. Although there was considerable variation between Member States and sectors, EU investment activity in 2013 was 15 percent or some EUR 430 billion below the pre-crisis peak in real terms. In the hardest-hit Member States, the shortfall ranged from 25 to over 60 percent. The weakness reflected low demand growth, low levels of capacity utilisation, heightened economic and policy uncertainty, and, in some countries, the bursting of construction/ housing bubbles, corporate deleveraging and financing constraints. At that time, the subdued level of investment activity was jeopardising Europe’s long-term growth potential. It led to an erosion of the existing productive capital stock and, worryingly, it meant that Europe was not making the productive investment in human and physical capital that is needed for future competitiveness, growth and employment. This trend undermined the ability of European firms to compete in the global economy and to provide rewarding jobs and a high standard of living. Back in 2014, annual Gross Domestic Product (GDP) growth in the EU was anticipated to be relatively moderate at 1.3%, while growth in the euro area was expected to be 0.8%. Expected GDP growth, which was already relatively slow before the crisis because of low productivity gains, had fallen further due to low investment and high structural unemployment. It was imperative to find ways to break this vicious circle and turn it into a virtuous circle, where investment projects could contribute towards a stronger increase in employment and demand, as well as to a sustained increase in potential growth. The IPE was announced in 2014 as a comprehensive investment support strategy that aimed to contribute to restoring EU competitiveness and help boost growth and investments in the European Union. 2.1.1European Fund for Strategic Investments (EFSI) The EFSI is an initiative implemented by the European Investment Bank ('EIB') and the European Investment Fund ('EIF'), together the EIB Group, with the aim to support investments as well as to increase access to finance for SMEs (up to 250 employees) and mid-cap companies (up to 3 000 employees). The EFSI comprises an EU Guarantee of EUR 26 billion (underpinned by provisioning of budgetary resources of EUR 9.1 billion) offered to the EIB Group from the EU budget, and a capital contribution of EUR 7.5 billion provided by the EIB. Overall, the EFSI targets to mobilise EUR 500 billion of additional investments by end-2020. The objectives of the EFSI are reflected in two windows: the Infrastructure and Innovation Window ('IIW'), which is composed of the IIW Debt and the IIW Equity sub-windows, both implemented by the EIB, and the SME Window ('SMEW'), which is implemented by the EIF. EFSI operations backed by the EU Guarantee are part of the EIB Group operations, are assessed according to EIB Group standard rules and procedures and are approved by the EIB Group governing bodies. An EFSI Investment Committee ('IC') composed of eight independent experts decides on the use of the EU Guarantee on projects proposed by the EIB under the IIW, including those with National Promotional Banks ('NPBs') and National Promotional Institutions ('NPIs'), and the IC is also consulted on SMEW products. 2.1.2The EU Guarantee The EU Guarantee is an irrevocable, unconditional, and first demand guarantee to the EIB, which aims to increase the volume of higher risk projects that can be financed by the EIB Group or support otherwise additional projects. A significant part of the EIB and EIF operations under the IIW and the SMEW is covered by the EU Guarantee, while a part is carried out at the own risk of the EIB Group. The EU maximum guarantee amounts to EUR 16 billion until 6 July 2018 and to EUR 26 billion thereafter. The allocation of the EU Guarantee between the two windows is the following: up to EUR 19.5 billion to the IIW and up to EUR 6.5 billion to the SMEW. In addition, the EIB contributes its own resources of EUR 7.5 billion, resulting in the total EFSI guarantee/risk bearing capacity of EUR 33.5 billion. Source: Commission services

The EU Guarantee Fund The EU Guarantee Fund ("the Guarantee Fund') established under Article 12 of the Regulation constitutes a liquidity cushion from which the EIB is to be paid in the event of a default of a supported EFSI operation, i.e. to honour a call on the EU Guarantee. The liquidity cushion is intended to provide an appropriate safety margin and to avoid exposing the Union budget to sudden guarantee calls, which would entail spending cuts or budget amendments. Therefore, it contributes to the transparency and predictability of the budgetary framework. It is funded from payments from the EU general budget and revenues originating from EFSI-guaranteed operations. The Guarantee Fund has to be maintained at a certain percentage (the “target rate”) of the total amount of the EU-guaranteed obligations. Under EFSI 1.0 the target rate was set at 50%. The target rate was adjusted under EFSI 2.0 and set at 35%. An EFSI Account, managed by the EIB, has been established to collect the EU revenues resulting from EFSI-guaranteed operations and recovered amounts. To the extent of the available balance, it is also used for the payment of calls under the EU Guarantee. 2.1.3European Investment Advisory Hub The EIAH is a joint Commission and EIB initiative that became operational in September 2015 and to which both institutions contribute financially. The EIAH is established within the EIB, which is responsible for its daily management. The Commission is responsible to award annual grants (based on specific grant agreements) to the EIB, representing 75% of the EIAH’s annual budget. The remaining share is provided by the EIB. The EIAH aims at providing targeted support to public and private project promoters for the identification, preparation, development and implementation of investment projects across the EU. The EIAH services are meant to be complementary to those provided by other advisory programmes supported by the EU budget and they can be delivered by the EIB itself, by other public entities such as National Promotional Banks or International Financial Institutions (having entered into an agreement with the EIB) or by external service providers. The EIAH has three main components: ·A single point of entry to a wide range of advisory and technical assistance programmes and initiatives; ·A cooperation platform to leverage, exchange, and disseminate expertise among the EIAH partner institutions and beyond; and ·An instrument to assess and address unmet needs by reinforcing or extending existing advisory services or creating new ones as demand arises. Capacity building is also provided on a number of issues related to investment projects (i.e. tendering process, cost benefit analysis), access to finance, including using financial instruments based on EU funds. Moreover, the EIAH provides advice to support the potential establishment of investment platforms. The EIAH operates in four delivery-oriented work streams: ·First work stream - requests coming from the website. Those requests are generally at an initial stage and need further development to receive more detailed technical assistance from the EIAH. ·Second work stream - requests coming via expert sources such as consultancies, NPBs, individual experts, the EIB and EC staff. These requests have undergone some form of “pre-screening” already and have thus a higher chance of being ready to receive more detailed technical assistance. ·Third work stream - development of local presence. The focus is on developing a network of local partners (e.g. NPBs/NPIs) that would ultimately be able to provide technical assistance on behalf of the EIAH in specific geographical/thematic sectors. ·Fourth stream - market development. This stream includes the preparation of targeted studies aimed at identifying the investment potential in priority sectors and the development of investment platforms. 2.1.4European Investment Project Portal The EIPP is an online platform of investment projects whose role is to increase visibility and promote EU-based projects to potential investors around the world. The lack of transparency represented a barrier to investment in the EU, in particular following the 2008 financial crisis. According to the EFSI Regulation, the main purpose of the EIPP is to ensure investment projects have more visibility to investors, ensuring enhanced transparency around EU investment opportunities.

The Commission thus designed and implemented the EIPP to build a bridge between project promoters and investors. Through the Portal, private and public project promoters can present their projects, hence boosting the visibility of existing EU investment opportunities and providing the investors with the possibility to contact directly the project promoters. To facilitate this, projects are presented in a structured format that enables promoters to disclose as much project information as they deem necessary to attract the investors. The publication on the EIPP is free of charge and a project must fulfil a set of eligibility criteria defined in the Commission Implementing Decision. The EIPP is independent from EFSI financing and the EIAH advisory support or other EU and EIB financial and technical support initiatives and instruments. The publication of an investment project on the EIPP is not a pre-condition for receiving any EU/EIB financing or advisory support. The Portal is available in all official languages of the EU. It provides useful features, such as a card view and a map view of projects, advanced search and filtering criteria, as well as the option for investors to register and subscribe for project updates and newsletters, making it easy for them to find projects according to their own preferences and interests. The EIPP is thus designed to support international investors specify and devise their own forward-looking pipelines of EU investment projects.

3State of play 3.1European Fund for Strategic Investments Less than three years after its introduction, EFSI financing approved amounted to EUR 57.5 billion, representing a total investment mobilised of EUR 287.4 billion across both windows. It is estimated that EFSI investments supported around 3.6 million jobs. Source: EIB This relates to 396 approved operations under the IIW and 411 transactions under the SMEW. The latter will ease access to finance for an estimated number of around 635,000 SMEs and small mid-cap companies. The transactions approved (including multi-country operations) covered 28 EU Member States across all general objectives set out in the EFSI Regulation. Most of the estimated investment mobilised relates to smaller companies (28%), RDI (22%) and energy investments (22%). As of 15 May 2018, EFSI support was expected to mobilise EUR 186.2 billion of investments to projects under the IIW and a further EUR 101.2 billion towards projects under the SMEW bringing the total investment mobilised to EUR 287.4 billion. EFSI operations signed by the end of December 2017 are expected to mobilise around EUR 134 billion of private sector investment, representing 64 per cent of the total EFSI investment mobilised. These investments helped bring high-speed internet access to about 11 million households, improved health care for 1 million people, as well as renewable energy for 4.2 million households. As of 31 December 2017, France, Italy and Spain attracted 17.2, 16.6 and respectively 10.7 per cent of the total amount of signed financing. More generally, EU 15 Member States account for around four fifths of all EFSI financing. However, when compared to corresponding shares in the total EU 28 GDP - EU 15 account for 93 per cent of the total EU 28 output. In other words, the amount of EFSI financing broadly corresponds to the respective size of the Member States’ economies. Detailed discussion on the EFSI’s state of play can be found in section 5.1, especially in parts on Relevance and Effectiveness. 3.2The EU Guarantee Table 1 below presents the changes of the EU Guarantee from EFSI’s launch until May 2018. At the end of 2017, the overall outstanding disbursed exposure covered by the EU Guarantee amounted to nearly EUR 10.1 billion, up from EUR 4.4 billion in 2016. The exposure of the EU budget to possible future payments under the EU Guarantee in terms of signed operations (disbursed and undisbursed) amounted to EUR 13.5 billion. As of end-May 2018, there was one default of an EFSI supported operation and consequently one related call on the EU Guarantee. The EU Guarantee has also been called to cover funding costs that were paid out of existing revenues stemming from IIW operations.

(in billion EUR) EFSI 1.0 EFSI 1.0 adjustment EFSI 2.0 IIW 13.5 13.0 19.5 SME 2.5 3.0 6.5 Total EU Guarantee 16.0 16.0 26.0 EIB risk bearing capacity 5.0 5.0 7.5 Total EFSI guarantee 21.0 21.0 33.5 Source: Commission services 3.3European Investment Advisory Hub The European Investment Advisory Hub was set up in September 2015. The Hub was in a ramp up phase throughout 2015 and 2016 when its capacity and the quality of the demand emerging from project promoters was not yet sufficient to provide for the full support mentioned in its mandate. However, since then, there has been an active management and a sustained effort to balance out the unused budget during the initial phase and the Hub is now operating at full speed. As of end-May 2018, 770 requests were received by the EIAH. Out of these requests, 603 were related to projects (53% from private sector, 44% from public sector and 3% from other sources). Most of the requests were coming from transport (23%), energy (20%), environment and resource efficiency (15%) and SMEs (10%). By type of requests, 6% were for proposed cooperation, 13% for general information, 21% for technical assistance, 24% requests for funding and 32% requests for both funding and technical assistance. The requests are screened by a multi-disciplinary group involving experts from different departments of the EIB. As a result of the screening, 87 requests received or are receiving more detailed technical assistance. The countries with the highest number of requests allocated were Poland (7), Bulgaria (7), Greece (6), Italy (6), Belgium (5), Latvia (5), and Romania (4). Eleven of those specific assignments have been identified as potential EFSI operations. A two-phase market gap analysis on the identification of market needs was carried out by PwC for the EIAH. The first phase conducted in 2016 focused on the general market gap analysis, while the second on the SME sector in 2017. The objective of the study was to assess the current situation concerning project advisory activities for investments and inform about the technical and functional capacity gaps at EU level. The study under the first phase concluded that the lack of supply is not the dominant problem at EU level, and that other issues tend to be more dominant, i.e. availability, access, affordability and awareness. The second phase confirmed these results, in as much as the lack of supply is not the main issue slowing down the uptake of advisory services for SMEs. In both phases, the MS were classified according to their needs for advisory services in general and for SMEs in particular. Co-operation with the EBRD Under the current partnership signed by the EIB and the EBRD in 2017, the EBRD is providing under the EIAH's umbrella their well-established Advice for Small Businesses Support programme to SMEs in Bulgaria, Greece and Romania. Co-operation with the National Promotional Banks and Institutions (NPBIs) As of end-May 2018, the Hub signed Memoranda of Understanding (MoUs) with 23 NPBIs from 18 MS. The MoU types range from a mutual recognition, cooperation arrangements (level of engagement 1 and 2) to the delivery of technical assistance on the behalf of the EIAH by NPBs (level 3). In order to support the delivery by NPBs of technical assistance on the behalf of the EIAH, a call for proposals was launched in December 2017 for the delivery of local investment advisory services by NPBs. 3.4European Investment Project Portal The European Investment Project Portal was launched in June 2016. The relative belated launch of the Portal compared to the other two IPE initiatives was mainly due to a lower than initially expected number of projects received for publication on the Portal. After a slow start-up however the Portal is now fully operational. As of end May 2018, 691 projects had been submitted for publication of which 313 projects were published on the EIPP. Out of the 313 published projects, 90 are in the field of digital economy, 65 in energy, 89 in transport, 96 in social infrastructure, 54 in resource & environment and 30 in financing for SMEs and mid-caps. The total project cost of the projects published was EUR 69 billion. Source: Commission services The published projects cover all MS. However, some countries have published considerably more projects than others have. Greece is the country with the highest number of published projects, namely 63, followed by Italy with 28, Spain and Croatia with 20 each. Countries that have been affected more by the financial crisis seem to be among the most active ones on the EIPP.

Between June 2016 and May 2018 there have been more than 220,000 cumulative visits to the Portal. The weekly numbers varied between around 500 and 2000 visits. The Member States with the highest number of visits in 2018 were Greece with 9%, followed by Italy and Spain with 8% each as well as Belgium with 7%. This suggests that among the countries that visit the website more often are those that have more published projects. Regarding the contacts between investors and project promoters, they amounted to more than 1,300 over the analysed period and almost 80% of the promoters were contacted by investors. The profile of organisations having submitted the project is balanced in favour of private organisations. In total, 583 projects (84%) were received from private organisations and 108 from public project promoters. The company size also varied, most of the organisation that indicated their status being SMEs (508, more than 90%), Mid-Caps (37) and a few large companies (17) based on all the projects submitted for publication.



4Methodology For the evaluation conducted by ICF, the evidence and the data were collected through several complementary sources including desk research, literature review, portfolio analysis, expert review of the EU Guarantee Fund, as well as interviews and six targeted surveys of main stakeholders. This was further complemented by an in depth review of a sample of EFSI, EIAH, and EIPP projects. Based on this and the triangulation of evidence, this evaluation can be considered reliable and valid. The literature review focused on barriers and investment gaps related to sectors receiving the largest part of EFSI support (SMEs and mid-caps, Research & Development (R&D), energy & transport). ■Portfolio data on operations from both windows available on the EIB and EIF websites as well as provided directly by EIB/ EIF (i.e. Operational and Risk Reports, supplemented by additional data provided by EIB upon ICF request) with the cut-off point for 31 December 2017; ■Past assessment and evaluation of EFSI produced by, inter alia, the EIB, the European Court of Auditors and independent consultants; ■Recent EIB and EIF Operational Plans; ■Unpublished/ internal documentation provided by the EIB/ EIF/ ECFIN i.e. relevant parts of the EIB Credit Risk Policy Guideline, PowerPoint presentations from the internal meetings, minutes from the IC meetings, EC-EIB communication framework on EFSI; ■Essential guidelines i.e. documentation on estimation of multipliers, Key Performance Indicators/ Key Monitoring Indicators; ■Documentation related to Rhomolo-EIB model developed by Joint Research Centre of the EC in Sevilla, including model specification and description of main assumptions; ■DG ECFIN internal documentation related to the estimation of the provisioning/target rate; ■EIAH bi-annual technical reports, MoUs signed between the EIAH and NPBs/NPIs, statistics on EIAH requests and their outcome, statistics on the EIPP website visitors and users, as well as projects uploaded, EIAH Framework Partnership Agreement, EIAH Annual Grant Agreements, financials of the EIAH and EIPP; ■Eurostat data on GDP and population to determine the take-up of the EFSI in relative terms at a national level; ■Analysis of investment gap using Eurostat data. Source: ICF Evaluation report Portfolio analysis focused on multipliers and investment targets, sectoral and geographical distributions, share of private investment mobilised as well as analysis of Key Performance and Monitoring Indicators. Comparison of risk rating at portfolio level focused on aggregate information for the whole IIW portfolio as well as risk rating for 60 individual signed operations. In addition, a sample of 60 EFSI projects was reviewed in detail against the evaluation criteria and, in particular, to assess their additionality.

Source: ICF Evaluation report The consultation activities included initial scoping interviews, semi-structured interviews with 71 key stakeholders and 5 targeted surveys.

Survey Number of responses Response rate [in %] Survey of project promoters under IIW 90 45 Survey of financial intermediaries under IIW 20 26 Survey of National Promotional Banks 12 37 Survey of beneficiaries of EIAH assistance 20 17 Survey of project promoters from the EIPP 61 31 Source: ICF Evaluation report. To support this evaluation, a 12-week internet-based general open public consultation (OPC) was conducted. It the subject focus of this OPC was the EU Support for Investment. Although a specific OPC for the EFSI was not launched for this evaluation, the results of the above mentioned OPC were useful to complement the results of the targeted consultation. In particular it brought further insight from the wider society and stakeholders about the relevant policy area. In addition, past evaluations also constituted an important source of information and evidence. This includes in particular: ·a Commission evaluation on the use of the EU Guarantee and the functioning of the EU Guarantee Fund accompanied by an opinion of the Court of Auditors, ·an EIB evaluation on the functioning of the EFSI, and ·an independent external evaluation on the application of the EFSI Regulation. Main findings of these evaluations were summarised in the Commission Communication on the Investment Plan for Europe (COM (2016) 764). The main challenges and limitations that affected the independent evaluation were the following: ·At this stage of implementation and given the long-term nature of investment projects, it is difficult to evaluate final outcomes and impacts to the real economy of these initiatives. This is particularly relevant for the EFSI where several years may elapse between project planning and final implementation, but also for the EIAH and the EIPP. The evaluation however assesses impacts to the extent possible and focuses on the likely expected results. ·Due to the negotiations on the amended EFSI Regulation that was adopted only in December 2017, the timing requirements for the delivery were clear only at a relatively late stage. The available time to conduct this evaluation was thus limited. Consequently, several tasks had to be started in parallel with narrowed scope to develop and test propositions. This presents some limits to the extensiveness of the underlying analysis but not to the robustness of its findings. ·Possible stakeholder fatigue – the contractor undertook the evaluation in parallel to the EFSI evaluation commissioned by the EIB as also required by the EFSI Regulation. In addition, the ECA has been performing and EFSI audit during the same period. Consequently, several stakeholders reported a “responded fatigue” during the data collection phase. There is a risk that this affected stakeholders’ willingness to respond to surveys and interviews and potentially in the quantity of provided feedback. ·Challenges in the assessment of 'additionality' – the contractors faced several conceptual and methodological challenges in testing additionality at project level. At a conceptual level, the evaluators identified different interpretations of the concept – one linked to market failures and a broader one linked to policy objectives. Market failure theory justifies public intervention only if it is geared towards fixing market failures and, as such, the ‘acid test’ for determining additionality with reference to market failure is whether the market could have financed the project in the absence of the intervention on reasonable terms and within the same timeframe as the intervention. On the other hand, the notion of sub-optimal investment with reference to policy objectives does not require the existence of a market failure as a pre-condition for demonstrating additionality. In line with the previous evaluation of EFSI, the independent evaluation assessed additionality on the basis of the (narrower) market failure theory, following the results of the surveys targeting IIW project promoters, financial intermediaries (involved in IIW intermediated operations) and NPBs, which all posed similar questions. The results of these surveys should however, be treated with caution due to the inherent risk of response bias (i.e. the respondent’s tendency to potentially over-state or even under-state additionality to justify public intervention) and the uncertainties associated with hypothetical questions relating to possible counterfactual outcomes. ·The review of the sample of 60 projects that received financing under IIW has some limitations. While 60 operations out of a total of 279 represent 21.5% of the total portfolio, this is not a statistically fully representative sample. Due to timing, resources, logistical limitations, and availability of data, a sample reflecting the main characteristics of the IIW portfolio was used. Even if not fully representative, this review provided valuable additional evidence, particularly when considered in combination with other collected information. ·The survey of financial intermediaries under SMEW was not conducted. This was in light of the available data from earlier surveys/research and also because of survey fatigue. This was mitigated by: –“analysis of the robustness of arguments about the ‘front-loading’ and ‘top-up’ of existing mandates as a main means of achieving the additionality under SMEW; –interviews with financial intermediaries under SMEW; –comparison of the characteristics (risk profile, target beneficiaries, geographic coverage) of the EFSI mandates and portfolios; –analysis of the use of new risk-sharing positions since EFSI; and,

–analysis of the use of new collaborations since EFSI.” ·The assessment of the EFSI’s impact of on the real economy has been mainly based on the available EIB/JRC modelling exercise (Rhomolo-EIB model). All modelling typically relies on assumptions and results have to be interpreted with care. To mitigate for these limitations, the evaluation method, as further described in Annex 3, was combined with evidence from previous EFSI evaluations and other sources. Therefore, the reliability and validity of this evaluation can be regarded as strong. 5Analysis and answers to the evaluation questions 5.1European Fund for Strategic Investments 5.1.1Relevance The assessment of the EFSI’s relevance has been positive and concluded that the EFSI has been a relevant instrument to address investment gaps and market needs, as well as to respond to the needs of project promoters, financial intermediaries and private investors. The extent to which the EFSI has addressed investment gaps and needs The EFSI has been created as a demand driven instrument to address the substantial decline of the overall investment as a share of the EU GDP compared to the pre-crisis 1996-2007 level. The evaluation found the existence of substantial and unquestionable investment needs back in 2014 and early 2015. In the aftermath of the financial crisis, the share of investment in the GDP had declined considerably below the pre-crisis 1996-2007 average for EU 28 Member States (see Figure 6 ). Investment levels have not yet recovered to their pre-crisis level and have remained well below historical trends. Source: ECFIN calculations based on data from the AMECO database The EIB 2014 and 2016 Competitiveness report pointed to a continued decline in infrastructure investment, with both decreases of government and private investment since 2011. The update report published in 2016 estimated the total annual investment gap in energy (EUR 100 billion), R&D (EUR 130 billion), environment and resource efficiency (EUR 90 billion), ICT (EUR 60 billion), R&D (EUR 130 billion), and the transport sector (EUR 80 billion). The evaluation concludes that volumes of investment mobilised under the EFSI are relevant and sufficient in scale to make a significant contribution to the investment needs identified at the commencement of the initiative. To respond to the changing investment environment, EFSI 2.0 has already refocused its support by introducing some policy-oriented measures. In particular, a 40% target under the Infrastructure and Innovation Window to support projects that contribute to climate action. Moreover, additionality criteria have been enhanced to better target sub-optimal investment situations. Evidence suggests that there is still a need for a demand-driven support like the EFSI. The Spring 2018 ECFIN economic forecast concludes: ·Public investment is expected to grow faster than GDP, though it still has to catch up a lot to reach its previous share of output. ·At the end of 2019, despite its improvements since 2012, potential output growth is estimated to remain below the rates recorded before the crisis. This is mainly because of a still subdued contribution from capital accumulation, despite the recent increase in the ratio between investment and potential output. ·Investment (gross fixed capital formation), which had frequently been identified as the weakest link in the post-crisis recovery, is showing signs of a broad-based pick-up (see table below).

·In 2018, investment growth is expected to pick up to 4.2% in both the euro area and the EU, before slowing in 2019 to 3.4% in the euro area and to 3.2% in the EU. The year 2018 is forecast to be the first year since 2007 in which investment increases in all EU Member States. The continued strength of investment implies strong growth contributions and increases in capital deepening which further support cyclical improvements in labour productivity. While these forecasts show an improved macroeconomic picture, the investment levels have still not reached the historical average of 21.28% of GDP as observed between 1996 and 2007. This implies an investment gap of around 157 billion in 2017 (see Table 4 ). Even with the expected growth, investment is forecasted to still remain below the pre-crisis average (20.44% in 2018 and 20.71% in 2019 as opposed to 21.3%). Consequently, even 11 years after the start of the financial crisis, the investment will not have recovered to its pre-crisis levels. (in EUR billion) 2017 2018 forecast 2019 forecast EU GDP 15.327,16 15.935,75 16.544,88 Investment level 3.075,90 3.257,82 3.426,03 Investment gap compared to 1996-2004 investment level average (21.1%) 157,37 103,83 64,11 Investment gap compared to 1996-2007 investment level average (21.3%) 185,39 132,97 94,36 Investment level 20,07% 20,44% 20,71% Source: AMECO (May 2018 data, current prices) and Commission services calculations This Commission assessment is broadly in line with the estimates of the investment gap prepared by the independent evaluation (see Figure 7 ). Furthermore, the EIB has estimated a large investment gap (i.e. EUR 270 billion) in transport, energy and resource management infrastructure until 2020. Source: ICF based on data sourced from year-end EFSI operational reports for 2015, 2016 and 2017. Investment gap calculated by ICF in relation to historical trends. All these data sources lead to conclude that demand-driven EFSI investment support is thus still relevant in the current improved economic environment. Downsizing or discontinuing the support would risk derailing this current positive trend and would risk increasing again the investment gap. It should be emphasized that the estimates do not include potential sub-optimal investment situations and investment needed to reach EU policy objectives like climate action, sustainability, R&D investment, social investments. An extensive analysis of expected future investment needs and gaps in these areas is included in the InvestEU Impact Assessment, where the Commission has estimated investment needs in several key policy areas over the 2020-2030 period. Moreover, the independent evaluation also concluded that, while the conditions have improved, especially for access to finance by SMEs, there are still considerable investment gaps. In particular, the independent evaluation concluded that “Although the overall picture has improved at a macro level, both in terms of the scale of the financing gap and financing conditions (especially for SMEs), there remain substantial and pressing investment needs. For example, infrastructure investment in 2016 was still 20 per cent below pre-crisis levels. And while SMEs, en masse, may have seen improvements in terms of available finance, available evidence suggests that access to finance remains problematic for a substantial share of the SME population, in particular in some countries, and for start-up and early stage growth innovative SMEs even in those Member States with the most developed financial markets. Ongoing EU investment support therefore remains relevant and necessary.” This conclusion is also consistent with the preliminary results of the Commission’s Impact Assessment on the InvestEU. To conclude, current evidence suggests that a market-based instrument like the EFSI is still relevant and needed in the coming years. The improvements adopted by EFSI 2.0 should already respond to the improving market environment (focus on climate action and strengthened additionality criteria). Furthermore, given the expected development of investment needs after 2020, the InvestEU Fund proposes a more policy-focused investment approach. Geographical and sectoral distribution The EFSI has no specific sector or geographic allocation targets and investment is demand-driven. Nevertheless, the EFSI investment guidelines require that ‘excessive sectoral and geographical concentration is avoided’ and the EFSI Strategic Orientation sets indicative limits under IIW. The evaluation found that the EFSI has been relevant to address financing market needs and gaps across all EU Member States. The EU 15 Member States account for a big share of EFSI financing - around four fifths under both windows. The 2016 independent evaluation also found that: “[w]hile sector coverage is generally not seen as an issue by the stakeholders consulted, there is a serious concern on the geographical spread.”

Source: ICF based on EIB 2017 EFSI Operational Report and Eurostat data However, while in absolute terms the largest EU countries take the lion’s share and EU15 accounts for four fifths of the EFSI support, relative to each country’s share in the total EU output, the geographical distribution is much more balanced. In fact, the EU15 stands for 93 per cent of the total EU 28 GDP. This and previous evaluations found that there are a number of factors behind the perceived lower uptake of the EFSI in some of the ‘New’ Member States (EU13): ·The EFSI is a demand driven instrument and its support distribution depends on market demand and absorption capacity in a given country; ·The geographical distribution closely reflects the actual size of the EU13 economies relative to overall EU 28 GDP; ·The size of typical EFSI projects may exceed the typical size of viable projects in smaller countries; and ·The need of strong capacity building and technical assistance measures to facilitate the origination, preparation and implementation of projects, a point that has been also addressed in EFSI 2.0 through the refocusing of the Advisory Hub. Some Member States might have access to alternative financing, such as other EU programmes that may be perceived as more favourable (i.e. because of the availability of grants). The EFSI support was able to address market needs and investment gaps in all main sectors. Overall, projects in the RDI sector received around one third of total financing signed under the EFSI, followed by the energy sector and support for smaller companies (see Figure 9 and Figure 10 ). Source: ICF based on EIB EFSI 2017 Operational Report Under the IIW, the energy sector received the biggest share of support, 33% in terms of signed operations (exceeding the indicative 30% sector concentration limit specified in the EFSI Strategic Orientation ) and 28% in terms of investment mobilised (see Figure 9 ). This is a substantial improvement compared to mid-2016 when 46% of signed operations related to the energy sector. Under the SME window, the RDI sector received the highest share of support, 70% in terms of signed operations (to note that there are no indicative limits on EFSI SMEW support per sector) and 37% in terms of investment mobilised (see Figure 9). Source: ICF based on EIB EFSI 2017 Operational Report EFSI’s response to the need of project promoters, financial intermediaries, and private investors Overall, the evaluation found that EFSI responded well to the needs of various stakeholders. The changes brought about by EFSI in terms of the availability of new products and enhancement of existing ones have been assessed as very substantial.

The EIB introduced six new products under EFSI and further six have been enhanced (see Annex 4). Examples include: ·Corporate Hybrid Bonds, focused on low-risk utilities; ·Infrastructure Aggregation Platform; ·ABS Mezzanine, to support lower rated beneficiaries; ·Captive Funds and Investment Platforms which target NPBIs. Furthermore, there has also been a substantial increase in the number of quasi-equity products under EFSI (see Table 4 ) Time External multiplier Number of equity operations Number of equity operations with multiplier ≥ 15 Percentage of equity operations with a multiplier ≥ 15 End-2016 22.93 22 11 70% End-2017 14 70 17 40% Source: ICF based on EIB EFSI 2017 Operational Report Since 2016, there have also been some new additions to the EIF’s products’ portfolio including: venture debt, uncapped guarantees for riskier (subordinated) loans to innovative SMEs and small mid-caps; uncapped guarantees for the EU Programme for Employment and Social Innovation (EaSI); as well as Investment Platforms. In addition, the increased risk bearing capacity through the EFSI (EU) Guarantee enabled the EIB Group to reach new market areas, new client types and develop new ways of engaging with existing clients (see section 5.1.2 for further analysis). Relevance of the Scoreboard The scoreboard is a framework for presenting the results of the appraisal of operations under the EFSI IIW. The scoreboard ( Figure 11 ) is comprised of four pillars, each of which deals with a particular criterion. The EFSI Regulation provides that ‘the scoreboard […] shall be used by the Investment Committee with a view to ensuring an independent and transparent assessment of the possible use of the EU guarantee’. The evaluation found that the scoreboard constitutes a good framework for decision-making. The design of the scoreboard and the evaluation criteria were also found as appropriate. Source: ICF, adapted from EIB (2016) 5.1.2Effectiveness Achievement of objectives and targets The evaluation found that based on approved operations it is likely that the EFSI will come very close to the target of 315 EUR billion of investment mobilised by end-June 2018. Based on approved financing as of 31 December 2017, the EFSI mobilised EUR 256.3 billion of investment, which increased to EUR 287.4 by 15 May 2018.

Expectations at the launch of EFSI initiative As of 31 Dec 2017 Investment mobilised target Signed EUR 315 billion* EUR 207.3 billion Approved EUR 256.3 billion Investment multiplier 1:15 1:13½ Job creation From 1 million to 1.3 million new jobs ·683,075 jobs expected to be created of which 114,593 permanent and 568,482 temporary jobs ·3,603,541 jobs supported ·Rhomolo-EIB estimate: 690,000 new and induced jobs by 2020 Number of SMEs, small mid-caps and mid-caps supported under EFSI n/a 549,500 expected to be supported of which 135,785 have already received financing *Target date: mid-2018 Source: Commission services As of end 2017, EFSI support thus mobilised investment amounting to 81% of the target of EUR 315 billion set for mid-2018 for approved operations. As of May 2018 and based on approved operations, the EFSI achieved 91.2% of its target of expected investment mobilised. In general, it is expected that by mid-2018 the investment to be mobilised based on approved operations will come very close to the initial target of EUR 315 billion. (in billion EUR) 31 December 2017 15 May 2018 Signed Approved Signed Approved EFSI IIW – financing 27.4 39.3 29.2 43.3 EFSI IIW - investment mobilised 131.4 166.7 137.9 186.2 EFSI SMEW - financing 10.0 12 12.4 14.2 EFSI SMEW-investment mobilised 75.9 89.5 86.7 101.2 Total EFSI financing 37.4 51.3 41.6 57.5 Total EFSI investment mobilised 207.3 256.3 224.6 287.4 Source: EIB In terms of signed operations, the investment mobilised amounted to EUR 207.3 billion at end 2017 and EUR 224 billion at 15 May 2018. The performance under SMEW has been stronger than under IIW compared to initial targets. In addition, the evaluation found that the level of multipliers is broadly in line with the initial expectation for the EFSI. As of 31 December 2017, the EFSI multiplier for both windows was 13.5. This is currently lower than expected but close to the anticipated multiplier of 15 (see table below as well as Table 5 ). It is important to acknowledge that there is a potential trade-off between reaching the investment target set by the Regulation and the need to select higher risk projects and ensure additionality. From the Commission perspective, ensuring added value, additionality and impact of the EFSI support should be prioritised compared to the volumes of investment mobilised. Type Multiplier Aggregate Hybrid Debt Type 15.2 Equity Type 11.4 Standard Debt Type 15.2 Aggregate 13.5 IIW Hybrid Debt Type 15.2 Equity Type 13.9 Debt Type 11.7 Aggregate 12.7 SMEW Equity 8.6 Debt 26.6 Aggregate 15.2 Source: EIB, 2017 Year-end Operational Report Mobilisation of private capital and crowding-in of private investors A key objective of the EFSI is to maximise where possible private sector investment. The evaluation found that at the end of December 2017, the EFSI support was expected to mobilise almost EUR 134 billion of private sector investment, which represents 64 per cent of the total EFSI investment mobilised. It is worth noting that equity instruments under the IIW have been particularly successful in attracting private capital – mobilising over 12 euros of private financing for every euro of EFSI financing. The calculation methodology of investment mobilised is in line with the Financial Regulation provisions and with the general practice used for centrally managed financial instruments. The independent evaluation however, recommended caution with interpreting these results as a strict causality effect could not be determined. It warned that the entire volume of private financing mobilised can not necessarily be attributed to the EFSI. A portion of this financing mobilised would have possibly been committed to projects by private investors anyway, even if most likely at different terms (different rate, maturity). A similar opinion was expressed by the ECA. The discussion on additionality in section 5.1.4.1 demonstrates that some project promoters had access to alternative sources. Their replies however suggest that this alternative financing may have been offered at less favourable terms (lower maturities, higher interest rates, less security requirements) and that the EFSI involvement had a significant signalling effect. The independent evaluation concludes that there is always a risk that market intervention can crowd out market investors and although there is some evidence under the IIW of a potential crowding out effect, further research would be needed to establish this with more certainty and to determine the nature and scale of any potential crowding out. While the survey, the interviews and the project reviews carried out by the external consultants pointed to the possibility that EFSI may have crowded out private sector investors in some cases, the emphasis put by respondents on signalling effect suggests that the EFSI involvement helped project promoters attract other private investors. In particular, 53% of those project promoters that claimed to have access to other sources of financing stated that the signalling effect is one of EFSI's main benefit. In addition, the respondents also stressed the longer maturity, lower interest rates, and lower or no security requirements ( Figure 20 ) offered with the EFSI support. This suggests that some project promoters who might have had access to alternative financing still benefited from the EFSI support in terms of the signalling effect, longer maturities and lover interest rates. (EUR bn) EFSI financing signed Private finance mobilised Investment mobilised Private sector share of investment mobilised Private finance mobilised per euro of EFSI financing Investment mobilised per euro of EFSI financing IIW Debt 24,133 42,296 81,678 52% 1.8 3.4 Equity 3,279 39,851 49,719 80% 12.2 15.2 Total 27,412 82,148 131,397 63% 3.0 4.8 SMEW Debt 5,973 33,562 48,508 69% 5.6 8.1 Equity 4,026 17,814 27,432 65% 4.4 6.8 Total 9,998 51,375 75,940 68% 5.1 7.6 EFSI total Debt 30,106 75,858 130,186 58% 2.5 4.3 Equity 7,304 57,665 77,151 75% 7.9 10.6 Total 37,411 133,523 207,337 64% 3.6 5.5 Source: ICF based on EIB EFSI 2017 Operational Report

Contribution of NPBIs and Investment Platforms to the EFSI Objectives The increased risk bearing capacity through the EFSI enabled the EIB and the EIF to reach new market areas, new client types and develop new ways of engaging with existing clients. There are indications that there is a need for financing of projects of a smaller size as opposed to large projects under the IIW. In particular, the 2016 independent evaluation concluded that: “there are indications that there is a need for financing of projects of a smaller size as opposed to large projects under the IIW”. The ICF independent evaluation found that the EFSI made significant progress, notably through equity-type products, both for new delivery models and collaboration with NPBIs. In particular: ·More than 80 per cent of the clients benefitting from EFSI IIW are new EIB counterparts. ·70-80 per cent of the deals under SMEW have been signed with new counterparts. ·Cooperation with NPBIs has been strongly enhanced under the EFSI. The share of operations co-financed with NPBIs was established as a key monitoring indicator for the EFSI and is included in the operational reporting required from the EIB Group. At the end of 2017, 141 operations signed under EFSI involved NPBIs, amounting to EUR 7.4 billion of EFSI financing. NPBIs have made an important contribution to the delivery of the EFSI policy objectives, as their local presence and knowledge has facilitated transaction origination and enabled smaller deal sizes, which is one recognised means to benefit real economy and financed-constrained beneficiaries. Cooperation and coordination with NPBIs is also an essential element of improving the EU added value of the EFSI and ensures complementarity by reducing overlaps between national schemes and EU level intervention. ·More widely, the new delivery models (e.g. investment platforms, risk sharing models) and collaborations have contributed to financing smaller projects and facilitating local outreach. However, this has led to only a limited contribution to geographical diversification of the EFSI portfolio. The EIB has also developed new forms of cooperation – moved from partial to full delegation models for risk- sharing. The EFSI has allowed some new instruments to be developed in collaboration with EU programmes and instruments. Examples include: ·The planned financial close of the CEF Broadband Fund which is a layered fund in which the first loss piece will be covered by the CEF equity instrument; the mezzanine tranche by the EFSI, and the more senior tranche by other investors (including NPBs, EIB own financing and private investors); and ·EFSI contribution to the Pan-European VC funds-of-funds (up to EUR 100 million), together with Horizon 2020's InnovFin Equity scheme (up to EUR 200 million) and COSME EFG (up to EUR 100 million). EFSI Investment platforms are co-investment arrangements structured with a view to catalysing investments in a set of projects (as opposed to individual projects). Investment platforms are a means to aggregate investment projects, reduce transaction and information costs and provide for more efficient risk allocation between various investors. Investment platforms are particularly suited to addressing the difficulties encountered by smaller projects or less developed regions by: ·pooling smaller or local investment projects, which would by themselves be too small to benefit, and ·making bundled projects accessible to new investor groups, for example pension funds or institutional investors, that are less familiar with the EU market. Investment platforms can be special purpose vehicles, managed accounts, contract-based co-financing or risk sharing arrangements or arrangements established by any other means by which entities channel a financial contribution in order to finance a number of investment projects. As of December 2017, 35 investment platforms had been approved, and out of which three with EFSI support under the SMEW. These platforms represent nearly EUR 4 billion of EFSI financing and more than EUR 29 billion of expected investments mobilised. A majority of investment platforms to date have been set up for energy and environmental projects, smaller infrastructure projects, affordable and social housing, as well as financing of SMEs and innovative midcaps. They generally are single-country investment platforms with a thematic focus. The first platforms approved and signed were in Italy, France and Spain, but further diversification can be seen with examples in Finland, Greece, Poland, Germany and the Netherlands. A couple of examples, such as the CEF Broadband Fund, will cover the whole EU. The majority of these investment platforms involve NPBIs. Source: ICF EFSI’s contribution to jobs and growth At the end of 2017, signed EFSI operations stood at EUR 37.4 billion, which is expected to mobilise EUR 207 billion of investment. Actual disbursements stood at EUR 10.1 billion under IIW and EUR 10 billion under SMEW. Therefore, given the nature of investment projects, considerable amount of the envelope of IIW remains undisbursed. It is thus early to capture the full impact of the EFSI on employment and the economic growth. The 2016 independent evaluation concluded that the "contribution to growth and jobs is currently insufficiently measured and monitored, while these are key ultimate objectives for the longer term.” However, since then the ICF evaluation underlined considerable efforts by the European Commission and the EIB Group to estimate the potential impact on jobs and growths. Direct jobs created or sustained is one of the six Key Monitoring Indicators against which the performance of the EFSI is regularly monitored by the Commission. As of end-2017, the EFSI created nearly 115,000 of permanent jobs and over 0.5 million of temporary ones and supported over 3.5 million of jobs. Permanent employment Temporary employment Jobs supported IIW 114,593 568,482 2,090,117 SMEW : : 1,513,424

Source: ICF based on EIB EFSI 2017 Operational Report According to European Commission estimations at the outset of the Investment Plan, the Plan had the potential to add EUR 330 to EUR 410 billion to the EU's GDP and create 1 to 1.3 million new jobs in the coming three years. These estimates were based on the expected impact of EFSI and the potential contribution of additional financial instruments under shared management, which are not within the scope of this evaluation. Therefore, we assume that EFSI was expected to contribute to the creation of 1 million jobs. After less than three years of implementation, and half a year before the end of the target period, the forecast number of new jobs created stands at 68% of the estimated impact. Therefore, it is likely that at the end of the target period, the initial expectations in terms of direct jobs created will not be fully met. However, the EIB estimates include only direct jobs created. The reported numbers do not capture the indirect and induced effects of the EFSI on employment nor its impact on economic growth. To address these and to provide a plausible estimate, the Economic Department of the EIB, in collaboration with the Joint Research Centre (JRC) has undertaken a modelling exercise (using Rhomolo-EIB model). The EIB reported, based on the Rhomolo-EIB model, that EFSI operations approved since inception up to 31 December 2016 mobilised EUR 161 billion of investment, and will have added 0.67 per cent to EU GDP and generate 690,000 new jobs by 2020, compared to the baseline scenario (see Figure 12 ). While the Rhomolo EIB model captures also the induced effect on jobs, the current estimate of 690,000 new jobs by 2020 includes only operations signed by end-2016. In addition, the EFSI supported more than 3.5 million jobs. Overall, it is reasonable to expect that the total direct and induced jobs created by the EFSI operations to be approved by mid-2018 will come close to 1 million or slightly above. Source: EIB, 2018. Assessing the macroeconomic impact of the EIB Group, version from April 2018 The evaluation found some scope of improvement in particular in terms of the transparency behind key assumptions of the Rhomolo-EIB model. Nevertheless, it noted the usefulness of this challenging and complex exercise. Effectiveness of the scoreboard The 2016 independent evaluation recommended to “better weigh the different assessment criteria in the scoreboard and to set minimum thresholds for each of the four criteria according to their importance”. This evaluation found the scoreboard to be a relevant (see section 5.1.1) and an effective decision-making framework for the Investment Committee (IC). However, some stakeholders expressed a view that more clarity on how the EIB derives particular rankings is still needed. EFSI 2.0 introduced a requirement for the Steering Board to establish a minimum score for each pillar in the scoreboard with a view to enhancing the assessment of projects. Moreover, the Steering Board may allow the IC to examine a project whose score is below the minimum score under certain conditions. The interviewed IC members sensed that the minimum threshold of 4 out of the total of 13 points for the 4th Pillar could have been higher in order to reduce the volume-driven incentives. However, there is also an argument that this relatively low threshold may present more opportunities for the IC to exercise its independent mandate. The interviewed IC members also raised the point that currently the EIB project documentation does not include information on the actual effort made by a project promoter to identify alternative sources of financing and to the terms likely to be offered by alternative sources. It is to be noted however, that such information is not required by the EFSI Regulation neither concerning the eligibility nor the additionality criteria. Past EFSI evaluations, including the ECA’s Report on the Extension of EFSI, argued for more transparency, i.e. publication of the scoreboards for the EFSI operations after they are signed. Consequently the EFSI 2.0 envisages the publication of the scoreboard after the signature of the project as well as a publication of the rationale of the IC decisions (from March 2018 onwards). 5.1.3Efficiency EFSI governance The EFSI governance includes a Steering Board, an Investment Committee (IC) and a Managing Director. The potential use of the EU guarantee is examined and evaluated by the Investment Committee. The latter is composed of a Managing Director and eight independent experts with experience in one or more key EFSI-related sectors. For the IIW projects, the Investment Committee decides on the application of the EU guarantee on the basis on a four-pillar examination (the scoreboard). The EU guarantee to the SMEW products is decided by the EFSI Steering Board and the Managing Director after consultation of the Investment Committee. This and the past EFSI evaluations found that that the current EFSI governance structure works well. However, the 2016 ECA report called for more transparency and some streamlining. In particular it noted that: “[…]complex interrelations between the Commission and the EIB, and their respective appointees within the EFSI decision-making process, make it difficult to establish for accountability purposes who is ultimately responsible to the EU budgetary and legislative authorities for the performance and risk management of EFSI as well as to identify potential conflicts of interest between EFSI and non-EFSI roles and responsibilities.”

It was found that the IC is important for the legitimacy and credibility of EFSI’s governance. Table 10 below summarises information from monthly IC meetings that took place between March 2016 and January 2018. Total number of EFSI application assessed Number of applications where IC decision was unanimous Number of applications where IC decision was by majority Number of applications with no information on the proportion of votes Number of applications rejected Number of Conflict of Interests reported 294 129 20 143 4 13 Source: Copy of minutes provided by the EIB Interviewed IC members pointed to the absence of feedback from the EIB on the status of projects that have been approved and are being implemented. This could be regarded as a potentially missed opportunity for the IC members to learn from their decisions. According to the EIB, the EFSI Secretariat gives IC members after each Board updated information on projects and provides regular reports on the EFSI implementation and on specific matters such as SMEs, funds, and programme loans. This points at important progresses made on information-sharing between EIB services and the IC. Application and appraisal process The surveys of project promoters found that only 15 per cent considered the application procedure difficult, that share increases to 24 per cent for the appraisal procedure. Source: Survey of IIW project promoters, N=89 Project promoters sometimes perceived the administrative requirements and paper work as excessive. The efficiency of the appraisal process is seen as dependent on the dedication and pragmatism of the EIB staff, which were often acknowledged as excellent. Figure 14 shows the improvement of the average time that elapses between the approval of the project and its signature for the current IIW portfolio. The average time (in weeks) between approval and signature of a project has been falling over time, despite an increase in the volume of projects being submitted. This may be also a consequence of some efficiency gains following the inception of the EFSI (e.g. use of delegated approvals) and of the increase in the number of EIB staff. For the SMEW, comparable data shows that deals implemented by the EIF indicate a very stable pattern. The average duration (in weeks) between the approval and signature of SMEW projects was 12.5, 13.5 and 11.5 weeks in 2015, 2016 and 2017 respectively. Source: ICF based on the EIB data of 264 signed operations, as of 31st December 2017 5.1.4Coherence 5.1.4.1Coherence with other EU Programmes The EY independent evaluation noted that “[s]takeholders indicated that there is competition with other EU funds such as certain financial instruments under CEF and H2020 or financial instruments and grants under ESIF.” It recommended to “[f]urther develop and facilitate complementarity and synergy, and avoid overlaps, with other financing sources”. Similar remarks were included in the 2016 EIB evaluation and by other studies.

EFSI was created after several other EU financial instruments under the 2014-2020 MFF had already been in place. Figure 14 maps the main current financial instruments and the EFSI. Some initial overlaps have been resolved through prompt action by re-focusing existing instruments towards new market segments (e.g. projects outside the EU or new thematic products in the case of InnovFin’s EIB debt products) and/or developing a deal allocation policy formalising the preferential use of the EFSI (e.g. CEF DI, COSME EGF). Under the IIW, observed overlaps between the EFSI and the financial instruments concern mainly InnovFin debt products and CEF debt instrument. This in turn led to some ‘cannibalising’ of these existing instruments by the EFSI. Source: ICF The effect of these overlaps is illustrated in the declining trends of commitments made under EIB’s InnovFin (see Figure 16 ). In particular, the InnovFin Large Projects had very similar eligibility criteria to the EFSI IIW debt financing and the InnovFin Mid-Cap Guarantee had an equivalent product offering as the EFSI’s Risk Sharing. Source: ICF based on Art. 140.8 reports: EC (2017) Commission Staff Working Document SWD(2017), EC (2016) Commission Staff Working Document SWD(2016) 335 and EC (2015) Commission Staff Working Document SWD(2015) 206 final. Note: covers InnovFin Large Projects, InnovFin MidCap Growth Finance and InnovFin MidCap Guarantee These issues have to some extent been addressed by refocusing InnovFin’s deployment in light of this new context. New InnovFin facilities were subsequently designed minimising the overlap with the EFSI. They targeted at research organisation, public entities, or target regions which are currently undeserved by InnovFin operations, in particular in Associated Countries and less innovative EU countries). There were also some identified overlaps with CEF financial instruments. The mid-term evaluation of CEF highlighted that most operations eligible under the CEF debt instrument (DI) are also eligible under the EFSI. Several important energy and transport projects initially envisaged to be supported by the CEF DI were eventually financed under the EFSI. This was later addressed through specific guidance by the CEF DI Steering Committee to set out a deal allocation policy. Moreover, the budget allocated to the CEF DI was significantly reduced compared to the initially programmed allocation. Under the SMEW, the EFSI has been coherent with existing financial instruments. This is due to the fact that the EFSI has been used first to frontload and then top-up the existing financial instruments and has not created new ones. However, for future investment programmes to be designed under the next MFF, it is not desirable to have an EU instrument topping up another one as a default solution. This may lead to inefficiencies, limited transparency, and create confusion for final beneficiaries and financial intermediaries. The EFSI allowed the financial instruments, especially COSME LGF and InnovFin SME Guarantee (SMEG), to overcome budget constraints and to be rolled out more quickly. However, while this is not subject to this evaluation, several additional overlaps have been identified between centrally managed financial instruments themselves. For example, in the area of SME financing, the current MFF has at least 14 different instruments focusing on SMEs under internal, centrally managed EU financial instruments and the EFSI (see Annex 5). In conclusion, initially the EFSI support and centrally managed financial instruments led to significant overlaps over a number of areas. Moreover, other evaluations found further overlaps between certain centrally managed financial instruments. During the current programming period, some of these overlaps have already been addressed through refocusing certain instruments and/or developing a deal allocation policy formalising the preferential use of the EFSI. For future programmes, the independent evaluation recommended to strengthen ex-ante assessments and ongoing analysis of market failures and needs at a sectoral level to avoid any overlaps between products and to minimise any potential crowding out effects. Shared management (Decentralised) programmes The European Structural and Investment Funds' (ESIF) financial instruments and the centrally managed financial instruments financed under the EFSI SMEW typically serve a similar purpose, increasing access to finance for SMEs. As a result, they may target similar beneficiaries. In this context, overlaps may occur between guarantee facilities under the ESIF financial instruments (FIs) and COSME LGF. The recent mid-term evaluation of COSME highlighted competition issues between ESIF FIs and COSME LGF. As ESIF instruments involve MS resources and are often provided below market terms, they are seen as being associated with more burdensome and longer compliance procedures with the State Aid rules. The EFSI support does not constitute State Aid and EU centrally managed financial instruments are considered consistent with State Aid rules. Financial intermediaries might thus have a preference for EU level financial instruments (topped up with EFSI), with potential implications for the planned spending under ESIF. This problem has already been recognised but is still an area where design arrangements still need to be developed building on existing 2016 guidelines. This evaluation has also identified the scope for increasing synergies between the ESIF and the EFSI via combination of support. The number of operations combining the EFSI with ESIF resources however remains relatively limited with 26 such operations being signed under the IIW by end-2017. At the project level, combining ESIF grants with the EFSI support should typically be intended for riskier revenue generating projects that present a funding gap and cannot secure ‘purely commercial’ financing terms. While combining different forms of EU support is possible under EU rules, there are still several obstacles to a more systematic combination when appropriate. One difficulty for pursuing combinations of ESIF resources and the EFSI support is related to the fact that the EFSI was established when the other instruments and their legal frameworks were already in place, for example with differences as regards timing for investments and eligibility criteria, application procedures, and reporting requirements. As regards the combination of ESIF FIs and the EFSI, the new Omnibus Regulation should facilitate such combinations by introducing simplified rules. For the future programmes it is necessary to better exploit synergies between the centrally managed instruments and instruments under shared management as well as to ensure and further eliminate any undue obstacles for their combination. 5.1.4.2Internal coherence of EFSI Regulation

The EFSI, the EIAH and the EIPP are independent initiatives with a similar aim to support investment levels in the EU, each in a different way. The evaluation found that the EFSI, the EIAH and the EIPP are coherent in their distinct ways of supporting investment projects development and mobilisation of financing in the EU. Coherence between these activities has improved since their launch. However, there is scope for further improvement in order to fully exploit potential synergies. First, complementarity between the EFSI and the EIAH was initially hindered by the demand-driven nature of the two activities whereby financial and advisory support was requested by different projects. EFSI 2.0 foresees however a closer link between the EIAH and the EFSI as the EIAH is explicitly requested to contribute to the sectorial and geographical diversification of the EFSI portfolio. As a result, the EIB loan officers are currently putting a particular emphasis on directing project promoters to the Hub when they perceive that advisory support is needed to improve and speed up the development of the project. The complementarity between the EIPP and the EIAH is lacking mainly due to EIPP projects being too early in their development stage and not necessarily requiring advisory support. Moreover, there is scope to better exploit the cooperation between the EIPP and the EIB Group (and the financial intermediaries supported by them) in order to increase the number of viable investors looking at the EIPP projects. 5.1.5EU Added value This section analyses the evaluation results concerning the EU added value as well as the additionality criteria as defined by the EFSI Regulation. It also analyses ways to potentially improve the additionality criteria for future programmes. 5.1.5.1EU Added Value The sources and nature of the EU added value varies for different interventions. It may result from delivering legal and market certainty, coordination gains, economies of scale, multiplier effects, complementarities, demonstration and catalytic effects, contribution to cross-border activities, capacity building and European integration at different levels. The Commission report on Examples of EU added value recommends that the EU added value test is performed on the basis of the following three criteria: ·Effectiveness: where EU action is the only way to get results to create missing links, avoid fragmentation, and realise the potential of a border-free Europe; ·Efficiency: where the EU offers better value for money, because externalities can be addressed, resources or expertise can be pooled, an action can be better coordinated; and ·Synergy: where EU action is necessary to complement, stimulate, and leverage action to reduce disparities, raise standards, and create synergies. Types of added value Judgement Financial (subsidiarity) + Increasing collaboration with NPBIs + Mobilisation of investments - Some potential crowding out of private investors for large debt projects under the IIW or regional / national promotional structures under the SMEW (to be further investigated and addressed for the future programmes) Policy added value + Shift in the debate from austerity to investment - Lacking some policy dimension given the market-driven nature of the instrument (e.g. sectoral policies, climate, territorial cohesion). Cross border dimension + Contribution to development of internal market for venture capital + Pan-EU investment platforms - Only one cross-border project financed under IIW Signalling effect + Strong European seal of approval Demonstration effect, market development, critical mass + Increasing access to higher risk finance + Adaptation of product mix Knowledge sharing, standard setting and harmonisation + Recognised role in diffusion of best practices + Increasing role with development of new collaborations Source: Adopted based on ICF evaluation report Financial added value (subsidiarity) Under the IIW, and as also reported by the previous EFSI evaluation and some external studies, there were some indications of potential crowding out effects, including of NPBIs especially for larger projects in the debt segment. However, these do not present conclusive evidence about the existence and the extent of this potential crowding out. The share of operations co-financed with NPBIs, as of end-2017, amounts to 20 per cent by amount and 23 per cent in terms of number of operations. NPBIs from both EU15 and EU13 are involved in this co-financing. In this context, there were several calls for the EFSI to involve more systematically NPBIs or take more subordinated positions in co-investments with NPBIs (which will be possible only within the boundaries set by the EFSI’s risk profile). Some stakeholders also proposed a complaint mechanism to address potential crowding out cases. Under the SMEW, instruments are typically implemented through implementing partners and NPBIs are frequently part of the financing chain. The general view from stakeholders is that EU level financial instruments add to national resources in key areas where Member States resources alone would not be capable of addressing financing gaps. Participating financial intermediaries generally highlight that the EU support is key for them to go ahead with their plans.

Certain areas for improvements were however raised by the independent evaluation. One such idea was that in the case an NPBI is already running a similar programme (open to all financial players), the EU could focus on counter-guarantees of that scheme (instead of providing direct guarantees to some financial players). Certain EU level associations and COSME LGF intermediaries repeatedly report that acting otherwise could lead to a crowding out of the national promotional instruments and structures. Benefits of this approach are claimed to include: ensuring a higher leverage effect and lower risk volume for the EU, covering the whole market and creating higher additionality from the support provided (through working with NPBIs which, because of their intrinsic promotional mission, perform better than private players when it comes to targeting those in need according to a recent ECA report). Policy added value One main source of EU added value for the EFSI was mobilisation of financing to address market failures and sub-optimal investment situations at macro and sectoral level (see sections 5.1.1 and 5.1.2). In relation to this, the EFSI also shifted debate from austerity to investment[ support measures]. However, since the EFSI is a market-driven instrument, one issue that has been raised in this respect has been a lack of support of the EFSI funded projects for the EU’s long-term climate goals. This is already addressed by EFSI 2.0 (Article 9) with a target of a minimum 40 per cent of the EFSI infrastructure and innovation projects to contribute to climate action in line with the Paris Agreement (set as a target). Under EFSI 2.0, investment guidelines also explicitly limit support to motorways in specific cases. In view of the improved economic situation, any future EU investment support schemes might need a better and more targeted policy focus. Cross-border dimension Only a very limited number of supported projects concerned cross-border investments involving one or more Member States. This is expected to further improve under EFSI 2.0 which adds in the definition of additionality (Article 5) that projects consisting of physical infrastructure, including e-infrastructure, linking two or more Member States or of the extension of such infrastructure or services linked to such infrastructure from one Member State to one or more Member States are strong indications of additionality. However, the EFSI has been successful in supporting funds and platforms that target projects in two or more Member States. While the sub-projects supported under these funds are usually implemented only in one Member State, this supports the creation of a European market for investments in different sectors. Another possibility for the EFSI to address the cross-border dimension is to further encourage the set-up of pan-EU investment platforms (as of April 2018, there are six examples of EFSI investment platforms with coverage of more than two EU MS, including the Connecting Europe Facility Broadband Fund and the Marguerite Fund II) and EFSI investment platforms involving collaboration among NPBIs from different Member States (two cases so far). In addition, the role of the EFSI in overcoming market fragmentation in areas such as venture capital investment is well recognised and is one of the added value of EU level equity instruments. For instance, the EFSI contributed to the Pan-European VC funds-of-funds (up to EUR 100 million), together with Horizon 2020's InnovFin Equity scheme (up to EUR 200 million) and COSME EFG (up to EUR 100 million). Signalling effect EU level instruments implemented by the EIB and EIF are considered as a “stamp of approval” and thus help attract other investors. In total, 69% of the IIW project promoters (as well as interviewees) who responded to the ICF survey agreed that this signalling effect to other potential investors about the attractiveness of the project was a substantial or a very substantial comparative advantage. In addition, there was also evidence that the EFSI contributed to attracting new types of investors. Demonstration effect, market development and critical mass The EFSI also plays a role in demonstrating the viability or attractiveness of certain asset classes or sectors. For instance, InnovFin SMEG intermediaries recently confirm increasing loan volumes and new riskier market segments being covered. In addition, via investment platforms, the EFSI can help pull in together smaller size projects that otherwise would have been too small for investors. Respondents to ICF's NPB survey confirmed that they saw the investment platforms as a flexible tool that allows funding sectors/ beneficiaries that would otherwise not have access to similar levels or terms of financing. With the recent launch of new products including social incubators, payment-by-result schemes, the EFSI is also expected to raise the profile of the social and education sectors. In the survey addressed to NPBs, several respondents – particularly NPBs from new Member States and crisis affected countries – claimed that the EFSI had made a significant contribution to increasing access to higher risk finance in their countries. Knowledge sharing, capacity building, standard setting and harmonisation The role in the dissemination of best practices and promotion of harmonisation and standards at industry level of the EIB, and especially of the EIF in relation to the venture capital and securitisation market, is widely recognized. This aspect is also supported by new forms of collaboration with the NPBs. 5.1.5.2Additionality Article 5.1 of the EFSI 1.0 Regulation defines additionality as: ·Operations which address market failures or sub-optimal investment situations and which could not have been carried out in the period during which the EU Guarantee can be used, or not to the same extent, by the EIB, the EIF or under existing EU financial instruments without EFSI support. ·EFSI financing shall be considered to provide additionality to a project if they carry a risk corresponding to the EIB's “Special Activity” (i.e. loan grade of D- or below) and, where it is not special activity, the project has to demonstrate additionality otherwise.

The original definition of additionality focused on the capacity of EFSI to support the EIB in undertaking riskier activities compared to its own standards. Whether the observed increase in the EIB's EFSI Special Activities is a sufficient indication of additionality has been covered extensively by the previous EFSI evaluations. The independent evaluation of the EFSI concluded in 2016 noted that notwithstanding the fact that all EFSI operations were EIB Special Activities, in some cases stakeholders perceived them not to provide for a higher risk compared to what the commercial market could offer. In particular, the evaluation concluded: ”[w]hile the design of EFSI was and remains relevant, concerns are expressed regarding additionality [and] possible crowding[…].” In the same context, the EIB evaluation completed in 2016 pointed to the need for a clearer definition of additionality in relation to Special Activities in order to ensure higher consistency in project selection while mitigating potential reputational risks to the EFSI. Similarly, the 2016 independent evaluation as well as the ECA opinion on the EFSI stressed that the fulfilment of the additionality criterion should go beyond “ticking the box” of EIB Special Activities, and that the underlying assessment for additionality should be made more transparent. In response to the points identified above, the definition of additionality was enhanced in the EFSI 2.0 Regulation, to complement the original requirement considering whether the operations would have been carried out also in the absence of the EFSI by the EIB or EIF to the same extent. In this context, the risk corresponding to EIB Special Activities is no more a sufficient criterion to demonstrate additionality but it only provides a strong indication alongside other relevant criteria in the current context of low interest rates and ample liquidity, such as higher risk coverage including through subordination, exposure to specific risks (e.g. unproven technology and higher-risk counterparts) as well as investments in new cross-border infrastructures. Moreover, the EFSI 2.0 Regulation requires, as an eligibility criteria, that supported projects must address market failures or sub-optimal investment situations. Neither the initial EFSI Regulation nor its extension (EFSI 2.0) defines the concepts and the criteria related to “market failures” and “sub-optimal investment situation”. The independent evaluation focused on the additionality criteria provided by the EFSI 1.0 Regulation (which was the applicable Regulation during the period under evaluation) to which it added considerations relative to additionality that derive from the market failure theory. Figure 17 shows that the loan grading of an EFSI operation ranges between D+ and E3+. The weighted-average grading of a standard EIB operation is C. This demonstrates that EFSI operations have a higher risk profile as compared to non-EFSI operations. As per data at December 2017, seven debt operations under the IIW (totalling EUR 850 million of EFSI financing signed) were not classified as Special Activities in line with the Regulation. Source: ICF, based on data provided by the EIB. The above figure shows the weighted-average loan grading equivalent of the EFSI and non-EFSI operations by type of counterpart. Data as of 31 December 2017. There are no hybrid non-EFSI operations. To supplement the evidence collected via surveys and interviews, the independent evaluation also conducted in-depth reviews of 60 IIW projects to review mainly the market failure rationale for these projects. In the judgement of ICF experts, the market failure rationale for EFSI investment was frequently (circa 60 per cent of all IC documentation reviewed) not well established in the project documentation presented to the Investment Committee. This was particularly the case for infrastructure and utility projects. In addition, for several SME and mid cap financing projects reviewed, the existence of market failure was assumed and an analysis of specific characteristics of businesses affected by market failures was absent. The experts expected to see more detailed information and evidence from the EIB on market failures affecting individual projects. Moreover, the independent evaluation considered that it would be helpful if the EIB could provide information on whether the project promoter had approached the market for financing and the outcome of their efforts. It would also be important to better document the efforts made by the EIB to maximise, where possible, the mobilisation of private capital. The independent evaluation found that SME operations respected both of the main criteria for additionality: ·Front-loading – In 2014, there was unmet demand for SME financing as limited volumes were available under existing mandates (such as COSME and InnovFin guarantee products) due to the EU’s annual budget allocations. With the EFSI, the EIF was able to front-load these mandates which enabled them to increase the annual budget for 2015 as well as the annual budgets for the years 2016 to 2020. ·Top-up (doing more) – It was initially planned that the EFSI (EU) guarantee would be reduced every year from annual budgetary appropriation under COSME and InnovFin. Due to high demand, the EFSI (EU) guarantee was not released and instead it was used to top-up the mandates. Before the launch of the EFSI, the annual volume of financing available via COSME and InnovFin was around EUR 100 million and EUR 150 million respectively. Front-loading enabled the EIF to add EUR 500 million to COSME and EUR 750 million to InnovFin in 2015. Thus, the additional finance reached the real economy more quickly. Due to topping up, COSME was increased from EUR 0.9 billion to EUR 1.45 billion whereas the InnovFin guarantee product was increased by EUR 880 million. As the SMEW helped increase the volume of financing of existing EU financial instruments, other additionality aspects were assessed by relevant evaluations of these respective instruments. 5.1.5.3Broader analysis of additionality The independent evaluation and other sources consistently found that the EFSI has respected the additionality criteria as defined in the EFSI Regulation. However, some stakeholders argue that these criteria are broad and that some projects supported under the EFSI may potentially have been able to secure private sources of financing without the EIB Group support under the EFSI. With the adoption of EFSI 2.0, the co-legislators already addressed some of these requests and strengthened the additionality criteria. The independent evaluation thus also analysed the question of additionality from a broader perspective beyond the legal definition in the EFSI Regulation. It tested whether the EFSI is addressing market failures and sub-optimal investment situation and whether it could potentially be crowding out private investors (would the project go ahead without EFSI involvement under the same conditions and in the same timeframe). The EFSI Regulation does not provide a definition of what constitutes a market failure or a sub-optimal investment situation. Detailed descriptions of these two concepts were included, for example, in a manual on