Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the European Fund for Sustainable Development (EFSD) and establishing the EFSD Guarantee and the EFSD Guarantee Fund
Date: 2016-09-14
Institutions: Directorate-General for International Cooperation and Development, European Commission
Subjects: ACP countries, Africa, eligibility criteria, fund (EU), regional investment, sustainable development

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   EUROPEAN COMMISSION  Brussels, 14.9.2016  COM(2016) 586 final 2016/0281 (COD)   Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the European Fund for Sustainable Development (EFSD) and establishing the EFSD Guarantee and the EFSD Guarantee Fund  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

On  7  June  2016,  the  Commission  adopted  a  Communication  on  establishing  a  new 
Partnership  Framework  with  third  countries  under  the  European  Agenda  for  Migration.1 
Alongside  a  variety  of  measures  proposed  to  address  the  most  urgent  needs  of  refugees  as 
well as supporting host communities, the Commission calls for a long term strategy by which 
the EU will promote the sustainable development goals of the 2030 Agenda and thus continue 
to address root causes of migration.  

This is also in line with the EU Global Strategy for Foreign and Security Policy with embeds 
challenges  such  as  migration  in  the  overall  EU  foreign  policy,  ensuring  coherence  and 
synergies with European Development and Neighbourhood policies and European economic 
diplomacy. 

The European Council of 28 June 2016 invited the Commission to present a proposal for an 
ambitious External Investment Plan (EIP) by September 2016. The EIP will be based on three 
pillars working hand in hand: a new investment fund (pillar 1); technical assistance (pillar 2), 
to help local authorities and companies to develop a higher number of sustainable projects and 
attract  investors;  and  finally  a  range  of  dedicated  thematic,  national  and  regional  EU 
development cooperation programmes combined with structured political dialogue targeted at 
improving the investment climate and overall policy environment in the countries concerned 
(pillar  3).  Pillar  3  of  the  EIP  is  the  link  between  the  European  Fund  for  Sustainable 
Development  (EFSD)  and  the  broad  partnership  between  the  EU  and  its  partner  countries. 
This  partnership  materialises  in  political  and  in  policy  dialogue  that  the  Commission 
undertakes through EU delegations and political contacts. 

Pillar  1  will  be  implemented  through  the  EFSD.  The  EFSD  will  have  the  key  objective  of 
providing  an  integrated  financial  package  to  finance  investments  starting  in  the  regions  of 
Africa and the Neighbourhood 2.  

The EFSD will be composed of regional investment platforms, which will combine financing 
from  existing  blending  facilities3  and  the  EFSD  Guarantee.  It  will  operate  as  a  "one-stop 
shop" to receive financing proposals from financial institutions and public or private investors 
and deliver a wide range of financial support to eligible investments. 

The  key  objective  of  the  EFSD  is  to  provide  an  integrated  financial  package  to  finance 
investments starting in regions of Africa for countries that are signatories to the Partnership 
Agreement  between  the  members  of  the  African,  Caribbean  and  Pacific  (ACP)  Group  of 
States of the one part, and the European Community and its Member States, of the other part, 
signed in Cotonou on 23 June 2000 ('Cotonou Agreement')4 and the Neighbourhood, thereby 
creating  growth  and  employment  opportunities,  maximising  additionality,  delivering 
innovative products and crowding-in private sector funds. The EFSD is expected to mobilise 

1  COM(2016) 385 
2  As defined for Africa by the Cotonou Agreement (OJ L 287, 04.11.2010), and for the EU Neighbourhood by 
Regulation (EU) No 232/2014 of the European Parliament and of the Council of 11 March 2014 establishing 
a European Neighbourhood Instrument (OJ L 77, 15.3.2014, p. 27). 

3  For  Africa,  see  Commission  Decision  (2015)5210  and  for  the  Neighbourhood  Commission  Implementing 

Decision (2016)3436. 

4  OJ L 317, 15.12.2000 as last amended by OJ L 287, 4.11.2010. 

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up to EUR 44 000 000 000 investments with funds from the general budget of the Union and 
other sources of EUR 3 350 000 000 until 2020.  

• 

Consistency with existing policy provisions in the policy area 

Within the framework of the principles and objectives of the Union's external action, of the 
, the European Consensus on Development6 and of 
revised European Neighbourhood Policy5
the  Agenda  for  Change7  and  subsequent  modifications  and  additions  thereto,  a  primary 
objective of cooperation under this Regulation should be the reduction and, in the long term, 
the  eradication  of  poverty  in  line  with  Article  208  of  the  Treaty  on  the  Functioning  of  the 
European Union (TFEU), thus addressing root causes  of migration. In addition, cooperation 
under this Regulation should also contribute to: fostering sustainable and inclusive economic, 
social  and environmental development,  consolidating and supporting democracy,  the rule of 
law,  good  governance,  human  rights,  gender  equality  and  the  relevant  principles  of 
international  law;  implementing  a  rights-based  approach  (RBA)  encompassing  all  human 
rights  in  line  with  its  guiding  principles  (transparency,  participation,  non-discrimination, 
accountability) and implementing the Gender Action Plan8. 

The EFSD aims at supporting investments starting in regions of Africa for countries that are 
signatories  to  the  Cotonou  Agreement-  and  the  Neighbourhood  as  a  means  to  achieve  the 
Sustainable  Development  Goals,  thus  tackling  root  causes  of  migration  and  offering 
sustainable  reintegration  to  returned  migrants  in  their  countries  of  origin.  It  is  therefore 
consistent  with  the  Union's  instruments  for  financing  external  actions  and  with  existing 
investment facilities. 

Through  its  emphasis  on  private  sector  involvement  the  EFSD  will  also  promote  the 
objectives  described  in  the  Communication  'A  Stronger  Role  of  the  Private  Sector  in 
Achieving Inclusive and Sustainable Growth in Developing Countries'.9 

• 

Consistency with other Union policies 

The  EIP  is  part  of  the  EU  new  Partnership  Framework  with  third  countries  under  the 
European Agenda for Migration.  
The  Plan  is  aligned  with  the  reviewed  European  Neighbourhood  Policy  (ENP)10  which 
focuses  on  supporting  economic  development  in  partner  countries,  to  progressively  achieve 
stabilisation and transition from emergency to structural response.  It is also aligned with the 
Addis Ababa Action Agenda on Financing for Development.  

The EFSD is coherent with the EU policies in the area of climate change as it will contribute 
to  the  implementation  of  the  Paris  Agreement  on  Climate  Change  (COP  21)11  including  its 
international climate finance commitments. As explained in the Commission Communication 
The  Road  from  Paris:  assessing  the  implications  of  the  Paris  Agreement12,  the  Paris 
Agreement  is  an  opportunity  for  economic  transformation,  jobs  and  growth.  It  is  a  central 
element in  achieving broader sustainable development goals, as  well as the EU priorities of 
investment, competitiveness, circular economy, research, innovation and energy transition.  

JOIN(2015) 50 final 

5 
6  OJ(2006/C 46/01) 
7  COM(2011) 637 final 
8  SWD(2015) 182 final 
9  COM(2014) 263 final 
10  JOIN(2015) 50 final 
11  COM(2015) 81 final/2 
12  COM(2016) 110 

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2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Since the EFSD aims at enhancing investments both in developing and other third countries, 
the legal basis for the cooperation activities is thus Article 209(1) (for developing countries) 
and 212(2) (for other third countries) of the Treaty on the Functioning of the European Union. 

• 

Subsidiarity (for non-exclusive competence) and proportionality 

In  accordance  with  the  principles  of  subsidiarity  and  proportionality  set  out  in  Article  5 
TFEU, the objectives of the proposed action cannot be sufficiently achieved by the Member 
States  and  can  therefore  be  better  achieved  by  the  EU.  Action  at  Union  level  can  better 
achieve  the  objectives  pursued,  by  reason  of  its  scale  and  effects.  More  specifically,  the 
intervention  at  EU  level  will  catalyse  private  investment  from  the  whole  EU  and  third 
countries, making best use of the European Institutions and their expertise and knowledge for 
that  purpose.  The  set-up  of  the  Strategic  Board  will  ensure  consistency  and  coherence 
between  multiple  programmes  and  initiatives  at  European  level.  The  multiplying  effect  and 
the  impact  on  the  ground  will  thus  be  much  higher  than  what  could  be  achieved  by  an 
investment programme from a single Member State or a group of Member States. 

• 

Choice of the instrument 

It  is  suggested  to  set  up  the  EFSD  and  establishing  the  EFSD  Guarantee  Fund  through  the 
adoption of a Regulation of the European Parliament and the Council in ordinary legislative 
procedure. The establishment of a guarantee bearing a contingent liability for the Union has to 
be done by the legislator. The Commission is proposing in parallel a revision of  Regulation 
(EU, Euratom) No 966/2012 of the European Parliament and the Council.  

3. 

• 

STAKEHOLDER CONSULTATIONS AND COLLECTION OF EXPERTISE  

Stakeholder consultations 

Informal  exploratory  consultations  have  taken  place  with  the  European  Investment  Bank 
(EIB),  Member  States'  Financial  Institutions,  the  European  Bank  for  Reconstruction  and 
Development (EBRD) and the World Bank Group. The EU Platform for Blending in External 
Cooperation  (EUBEC)  was  also  consulted  as  well  as  the  private  sector  and  civil  society 
organisations.  

• 

Collection and use of expertise 

The  Commission  has  established  extensive  experience  with  similar  instruments,  such  as  the 
European  Fund  for  Strategic  Investment  (EFSI)13  for  EU  internal  policies  and  several 
financial  instruments  and  structured  grants  supported  by  the  EU  blending  facilities  for  EU 
external  policies14.  The  objective  has  been  to  mobilise  additional  investment,  in  particular 
from private investors, through the provision of partial guarantees or risk cushions on a first-
loss  or  pari  passu  basis  to  financial  institutions,  typically  the  public  financial  institutions 
currently  present  in  EU  Blending  in  external  action,  which  themselves  provide  support 
(through loans, guarantees, equity or similar products).  

13  Regulation (EU) 2015/1017 of the European Parliament and Council of 25 June 2015 on the European Fund 
for Strategic Investment Advisory Hub and the European Investment project Portal and amending regulations 
(EU)No1291/2013  and  (EU)  no1316/2013-  the  European  Fund  for  Strategic  Investments,  OJ  L 
169/1,1.7.2015 

14  For  Africa,  see  Commission  Decision  (2015)5210  and  for  the  Neighbourhood.  Commission  Decision 

(2016)3436 for the Neighbourhood 

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• 

Fundamental rights 

Projects  benefitting  from  guarantees  under  the  EFSD  will  be  examined  for  their  impact  on 
fundamental  rights.  Within  the  framework  of  the  principles  and  objectives  of  the  Union's 
external action, of the revised European Neighbourhood Policy15, of the European Consensus 
on  Development16  and  of  the  Agenda  for  Change17  and  subsequent  modifications  and 
additions thereto: (a) the primary objective of cooperation under this Regulation shall be the 
reduction  and,  in  the  long  term,  the  eradication  of  poverty,  addressing  root  causes  of 
migration;  (b)  cooperation  under  this  Regulation  will  also  contribute  to:  (i)  fostering 
sustainable and inclusive economic, social and environmental development, (ii) consolidating 
and supporting democracy, the rule of law, good governance, human rights, gender equality 
and  the  relevant  principles  of  international  law,  (iii) implementing  a  rights-based  approach 
(RBA)  encompassing  all  human  rights  in  line  with  its  guiding  principles  (transparency, 
participation, non-discrimination, accountability), iv) implementing the Gender Action Plan18. 
The  achievement  of  those  objectives  shall  be  measured  using  relevant  indicators,  including 
human  development  indicators,  in  particular  sustainable  development  goals  and  other 
indicators agreed at international level by the Union and its Member States (e.g. UN Guiding 
Principles on Business and Human Rights).  

4. 

BUDGETARY IMPLICATIONS 

The  Union  will  make  available  a  total  of  EUR  750  000  000  for  the  EFSD  Guarantee  until 
2020  stemming  both  from  the  Union's  general  budget  and  the  11th  European  Development 
Fund (EDF)19. Further financing could be foreseen. The Commission intends to propose the 
mobilisation  of  the  contingency  margin  to  provide  EUR  250  000  000.  Other  contributions 
from  the  Union  budget  would  be  made  by  the  use  of  redeployments  or  refocusing  of 
programmed  funds.  Further  financing  could  also  include  other  contributions  by  other 
contributors, such as Member States. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  EFSD  will  be  managed  by  the  Commission  and  implemented  through  regional 
investment  platforms,  which  will  combine  financing  from  existing  blending  facilities  for 
Africa and for the Neighbourhood and the granting of the EFSD Guarantee. 

• 

Detailed explanation of the specific provisions of the proposal 

The EFSD shall consist of the  regional investment platforms, which will combine financing 
from existing blending facilities for Africa and for the Neighbourhood and the granting of the 
EFSD Guarantee. 

Regional investment platforms will be focused to pursue the achievement of the sustainable 
development goals and better address root causes of migration.  

15  JOIN(2015) 50 final 
16  (2006/C 46/01) 
17  COM(2011) 637 final 
18  SWD(2015) 182 final 
19  OJ L 210/1, 6.8.2013 

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For  the  purposes  of  the  EFSD  initiative  the  Africa  Investment  Facility20  and  the 
Neighbourhood Investment Facility21 will have their objectives refocused and will be renamed 
to become the new respective regional investment platforms relying on the existing structures. 
This will be done by Commission Decision. 

The  regional  investment  platforms  will  have  identical  structures  as  the  existing  blending 
facilities.  

The Commission will be advised by a Strategic Board and two Operational Boards, one for 
each  Regional  Investment  Platform.  The  Commission  will  manage  the  EFSD  Secretariat, 
which will ensure the performance of all tasks and functions needed to fulfil the objectives of 
the  EIP.  The  Strategic  Board,  co-chaired  by  representatives  of  the  Commission  and  of  the 
High Representative  of the Union for  Foreign Affairs and Security Policy and composed of 
the  Member  States  and  the  EIB,  will  give  strategic  guidance  and  help  the  Commission  set 
overall investment goals as regards the use of the EFSD Guarantee, ensuring coordination and 
coherence  between  the  Regional  Investment  Platforms  and  with  the  External  Lending 
Mandate, the Resilience Initiative and the ACP Investment Facility managed by the EIB. The 
EIB  will  actively  contribute  through  advisory  functions  to  the  Commission  as  regards  the 
operational management of the guarantee. 

A  sound  technical  assessment  and  due  diligence  as  well  as  a  swift  implementation  of 
individual projects will be ensured. The bankability and risk of the projects will be assessed 
by the eligible counterparts and verified by independent experts to ensure the credibility vis-à-
vis the private sector, before the investment proposals are approved by the Commission. The 
detailed  practical  modalities  of  how  to  implement  the  guarantee  will  be  decided  for  each 
investment window.  

The creation of additional investment platforms can be considered in the future. 

The EFSD  Guarantee is one of the components of the EFSD. The EFSD  Guarantee aims to 
constitute  guarantee  capacity  for  credit  enhancement  that  will  ultimately  benefit  the  final 
investments and allow risk sharing with other investors, notably private actors. It will leverage 
additional financing, in particular from the private sector, by addressing the key factors that 
enable crowding-in private investment.  

The  EFSD  Guarantee  Fund  will  provide  the  liquidity  in  case  the  EFSD  guarantee  is  called 
upon to cover for losses occurred under the guarantee agreements. The EFSD Guarantee Fund 
will  be  endowed  by  the  EU  budget  and  the  EDF  as  well  as  possibly  other  contributors  and 
used to absorb potential losses incurred by eligible counterparts such as international financial 
institutions, development banks and private sector investors.  

20  COM(2015) 5210  
21  COM(2016) 3436  

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2016/0281 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the European Fund for Sustainable Development (EFSD) and establishing the EFSD 
Guarantee and the EFSD Guarantee Fund 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 209(1) and 212(2) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

The  Union's  ambitious  External  Investment  Plan  (EIP)  is  needed  to  support 
investments starting in Africa and the Union's Neighbourhood as a means to promote 
the sustainable development goals of the United Nations 2030 Agenda for Sustainable 
Development  ('the  2030  Agenda')  as  well  as  the  commitments  under  the  recently 
revised  European  Neighbourhood  Policy  thus  addressing  root  causes  of  migration.  It 
should  also  contribute  to  the  implementation  of  the  Paris  Agreement  on  Climate 
Change (COP 21). 

The  EIP  should  incorporate  the  Union  commitment  under  the  Addis  Ababa  Action 
Agenda  on  Financing  for  Development.  It  should  also  allow  European  investors  and 
private companies, including small and medium-sized enterprises, to participate more 
effectively to sustainable development in partner countries.  

This is in line with the Union Global Strategy for Foreign and Security Policy which 
embeds challenges such as migration and resilience in the overall EU foreign policy, 
ensuring  coherence  and  synergies  with  European  development  and  Neighbourhood 
policies. 

The EIP should provide an integrated financial package to finance investments starting 
in  regions  of  Africa  for  countries  that  are  signatories  to  the  Partnership  Agreement 
between the members of the African, Caribbean and Pacific Group of States of the one 
part, and the European Community and its member States, of the other part, signed in 
Cotonou on 23 June 200022 and the Neighbourhood countries, thereby creating growth 
and  employment  opportunities,  maximising  additionality,  delivering  innovative 
products, and crowding-in private sector funds. 

(5) 

The  European  Fund  for  Sustainable  Development  (EFSD)  should  be  composed  of 
regional  investment  platforms,  which  will  combine  financing  from  existing  blending 
facilities  and  the  EFSD  Guarantee.  The  existing  blending  facilities  for  Africa  are 

22  OJ L 317, 15.12.2000 as last amended by OJ L 287, 4.11.2010 

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created  by  Commission  Decision  C(2015)5210  and  by  Commission  Implementing 
Decision  C(2016)3436  for  the  Neighbourhood.  Each  regional  investment  platform 
should  have  an  operational  board  that  supports  the  Commission  in  defining  regional 
and  sectorial  investment  goals,  regional,  sectorial  and  thematic  investment  windows, 
formulates  opinions  on  the  blending  operations  and  discusses  the  use  of  the  EFSD 
Guarantee in line with the investment windows to be defined. 

(6) 

(7) 

Furthermore,  the  EFSD  should  operate  as  'one-stop-shop'  to  receive  financing 
proposals from financial institutions and public or private investors and deliver a wide 
range  of  financial  support  to  eligible  investments.  The  EFSD  Guarantee  should  be 
backed  by  the  EFSD  Guarantee  Fund.  The  EFSD  should  deploy  innovative 
instruments to support investments and involve the private sector.  

Coordination and coherence of the EFSD with the European Investment Bank's (EIB) 
external  lending  mandate  as  set  out  in  Decision  [to  be  adopted],  including  the  EIB 
resilience initiative, as well as with the ACP Investment Facility23 should be ensured 
through the Strategic Board of the EFSD.  

(8)  Moreover,  the  Strategic  Board  should  support  the  Commission  in  setting  strategic 
guidance  and  overall  investment  goals.  The  Strategic  Board  should  also  support 
coordination  and  coherence  between  the  regional  platforms.  This  should  ensure 
complementarity  of  the  various  instruments  in  external  action.  The  Strategic  Board 
should be co-chaired by the Commission and the High Representative of the Union for 
Foreign Affairs and Security Policy to ensure consistency and coherence with  Union 
external policy objectives and partnership frameworks with third countries. 

(9) 

(10) 

The  EFSD  Guarantee  should  be  granted  to  eligible  counterparts  for  financing  and 
investment operations or guarantee instruments for an initial investment period up to 
31 December 2020.  

In order to provide for flexibility, increase the attractiveness for the private sector and 
maximise  the  impact  of  the  investments  it  is  appropriate  to  provide  for  a  derogation 
from  Article  58(1)(c)(vii)  of  Regulation  (EU)  No  966/2012  of  the  European 
Parliament  and  the  Council24  by  which  the  eligible  counterparts  who  are  bodies 
governed  by  private  law  could  also  be  bodies  which  are  not  entrusted  with  the 
implementation of a public-private partnership and could also be bodies governed by 
the private law of a partner country.  

(11)  The Commission should conclude guarantee agreements with the eligible counterparts 
setting  out  the  specific  provisions  under  which  the  EFSD  Guarantee  is  granted  to 
them.  These  guarantee  agreements  should  provide  the  legal  basis  for  adequate  risk 
sharing, thus providing incentives for the eligible counterparts to provide financing, as 
well as the mechanisms and procedures for potential calls on the EFSD Guarantee. 

(12)  The Union should make available a guarantee of EUR 1 500 000 000 to establish the 
EFSD  Guarantee.  Member  States  and  other  contributors  are  invited  to  contribute 
further to support the EFSD Guarantee Fund in the form of cash (Member States and 
other  contributors)  or  guarantees  (Member  States)  in  order  to  increase  the  liquidity 
cushion  and  thus  allow  the  increase  of  the  total  volume  of  EFSD  Guarantee.  The 

23  Annex II to the Cotonou Agreement 
24  Regulation (EU, Euratom) No 966/2012 of the European Parliament and the Council of 25 October 2012 on 
the  financial  rules  applicable  to  the  general  budget  of  the  Union  and  repealing  Council  Regulation  (EC, 
Euratom) No 1605/2002 (OJ L 298, 26.10.2012, p. 1). 

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Union should make available a guarantee of EUR 1 500 000 000 to establish the EFSD 
Guarantee. Member States, public financial institutions and other contributors should 
be invited to provide additional funding to the EFSD Guarantee Fund under conditions 
that should be established in an agreement to be concluded between the Commission 
on behalf of the Union and all the contributors.  

(13)  The EFSD Guarantee Fund should be established as a liquidity cushion in the event of 
a call on the EFSD Guarantee. To reach a level that adequately reflects EU financial 
liabilities  in  relation  to  the  EFSD  Guarantee,  the  Union  should  make  available 
EUR 750 000 000.  

(14) 

In  order  to  increase  the  impact  of  the  EFSD  Guarantee  in  view  of  the  needs  in  the 
regions  concerned,  Member  States  should  have  the  possibility  of  providing 
contributions  in  the  form  of  a  guarantee  or  cash.  Those  contributions  could  be 
earmarked by region, sector or investment window.  

(15)  As  the  funds  of  the  EDF  are  to  be  used  for  the  countries  eligible  under  the  11th 
European  Development  Fund  (EDF)25,  it  requires  the  allocation  of  a  minimum  of 
EUR 400 000 000  of  EFSD  Guarantee  coverage  for  investments  throughout  the 
implementation  period  of  the  EFSD  Guarantee.  The  EFSD  Guarantee  should  only 
become  available  when  EUR 400 000 000  of  11th  EDF  funds  have  been  allocated  to 
the EFSD Guarantee Fund.  

(16)  The Commission should report annually to the European Parliament and the Council 
on  the  financing  and  investment  operations  covered  by  the  EFSD  Guarantee  with  a 
view to ensuring  accountability to the European citizens. The report should be made 
public in order to allow relevant stakeholders, including civil society, to express their 
views.  The  Commission  should  also  report  annually  to  the European  Parliament  and 
the  Council  on  the  management  of  the  EFSD  Guarantee  Fund  so  that  accountability 
and transparency are ensured.  

(17) 

(18) 

In order to take into account lessons learned and allow for further evolvement of the 
EFSD, the functioning of the EFSD and the use of the EFSD Guarantee Fund should 
be  evaluated  by  the  Commission.  The  application  of  this  Regulation  should  be 
evaluated  independently  in  order  to  assess  the  level  of  conformity  of  the 
implementation  with  the  legal  basis,  but  also  to  establish  the  applicability  and 
practicability of the Regulation in the achievement of its objectives.  

In  order  to  protect  the  financial  interests  of  the  Union,  with  a  view  to  establishing 
whether  there  has  been  fraud,  corruption,  money  laundering  or  any  other  illegal 
activity affecting the financial interests of the Union in connection with any financing 
and investment operations covered by this Regulation, the European Anti-Fraud Office 
(OLAF)  is  entitled  to  carry  out  investigations  in  accordance  with  Regulation  (EU, 
Euratom)  No  883/2013  of  the  European  Parliament  and  of  the  Council26,  Council 

25  Internal Agreement between the Representatives of the Governments of the Member States of the European 
Union, meeting within the Council, on the financing of European Union aid under the multiannual financial 
framework for the period 2014 to 2020, in accordance with the ACP-EU Partnership Agreement and on the 
allocation of financial assistance for the Overseas Countries and Territories to which Part Four of the Treaty 
on the Functioning of the European Union applies (OJ L 210, 6.8.2013, p. 1). 

26  Regulation  (EU,  Euratom)  No  883/2013  of  the  European  Parliament  and  of  the  Council  of  11  September 
2013  concerning  investigations  conducted  by  the  European  Anti-Fraud  Office  (OLAF)  and  repealing 
Regulation  (EC)  No  1073/1999  of  the  European  Parliament  and  of  the  Council  and  Council  Regulation 
(Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1). 

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(19) 

(20) 

Regulation  (Euratom,  EC)  No  2185/9627  and  Council  Regulation  (EC,  Euratom)  No 
2988/95.28 

In  order  to  contribute  to  the  international  fight  against  tax  fraud,  tax  evasion  and 
money-laundering,  the  eligible  counterparts  should  not  support  any  activities  carried 
out  for  illegal  purposes  and  should  not  participate  in  any  financing  or  investment 
operation through a vehicle located in a non-cooperative jurisdiction. 

In order to fulfil the political commitments of the EU on renewable energy and climate 
change a minimum share of 20% for the funding allocated under the EFSD should be 
devoted to financing and investment operations relevant for these sectors. 

HAVE ADOPTED THIS REGULATION: 

CHAPTER I 

INTRODUCTORY PROVISIONS 

Article 1 
Subject matter 

1. This Regulation establishes the European Fund for Sustainable Development (EFSD), the 
EFSD Guarantee and the EFSD Guarantee Fund.  

2. For the purposes of paragraph 1, this Regulation provides for the Commission on behalf of 
the  Union  to  conclude  guarantee  agreements  with  the  eligible  counterparts  as  defined  in 
Article 10.  

Article 2 
Definitions 

For the purposes of this Regulation, the following definitions apply: 

(1)  'regional  investment  platforms'  means  blending  facilities  in  line  with  Article  4  (1)  e)  of 
Regulation (EU) No 236/2014 of the European Parliament and the Council29 and with Article 
40  of  Council  Regulation  (EU)  2015/32330  for  the  contribution  from  the  11th  European 
Development  Fund  (EDF) combined with  the granting  of the  EFSD  Guarantee as set out  in 
Article 6.  

(2)  'investment  window'  means  a  targeted  area  for  support  by  the  EFSD  Guarantee  to 
portfolios  of  investments  in  specific  regions,  countries  or  sectors  and  implemented  via  the 
regional investment platforms;  

27  Council  Regulation  (Euratom,  EC)  No  2185/96  of  11  November  1996  concerning  on-the-spot  checks  and 
inspections carried out by the Commission in order to protect the European Communities' financial interests 
against fraud and other irregularities (OJ L 292, 15.11.1996, p. 2). 

28  Council  Regulation  (EC,  Euratom)  No  2988/95  of  18  December  1995  on  the  protection  of  the  European 

Communities financial interests (OJ L 312, 23.12.1995, p. 1). 

29  Regulation (EU) No 236/2014 of the European Parliament and the Council of 11 March 2014 laying down 
common rules and procedures for the implementation of the Union's instruments for financing external action 
(OJ L 77, 15.03.2014, p. 95). 

30  Council  Regulation  (EU)  2015/323  of  2  March  2015  on  the  financial  regulation  applicable  to  the  11th 

European Development Fund (OJ L 58, 03.03.2015, p.17). 

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(3)  'contributor'  means  a  Member  State,  an  international  financial  institution  or  a  public 
institution of a Member State, a public agency or other entities contributing in cash grants or 
in guarantees to the EFSD Guarantee Fund;  

(4)  'partner  countries'  means  countries  that  are  signatories  to  the  Partnership  Agreement 
between the members of the African, Caribbean and Pacific Group of States of the one part, 
and the European Community and its member States, of the other part, signed in Cotonou on 
23 June 2000  31, countries that are listed in Annex I to Regulation (EU) No 232/2014 of the 
European Parliament and of the Council32 as well as countries that are eligible for geographic 
cooperation  under  Regulation  (EU)  No  233/2014  of  the  European  Parliament  and  of  the 
Council 33. 

(5) 'additionality' means the principle ensuring that the EFSD Guarantee support may not be 
aimed at replacing the support of a Member State, private funding or another Union financial 
intervention, as well as that it is aimed at addressing market failures and avoiding crowding 
out other public or private investments. 

CHAPTER II 

EUROPEAN FUND FOR SUSTAINABLE DEVELOPMENT 

Article 3 
Purpose  

1. The purpose of the EFSD as an integrated financial package shall be to support through the 
supply of financing capacity in the form of grants, guarantees and other financial instruments 
to eligible counterparts investments and increased access to financing starting in African and 
Neighbourhood partner countries.  

2. The EFSD shall contribute to the achievement of the Sustainable Development Goals of the 
2030  Agenda  with  a  particular  focus  on  sustainable  growth,  job  creation,  socio-economic 
sectors and on the support to micro, small and medium sized enterprises, thus addressing root 
causes of migration and contributing to sustainable reintegration of returned migrants in their 
countries  of  origin  while  maximising  additionality,  delivering  innovative  products  and 
crowding in private sector funds.  

Article 4 
Structure of the EFSD 

1.  The  EFSD  shall  be  composed  of  regional  investment  platforms,  which  will  combine 
financing from existing blending facilities and the EFSD Guarantee.  

2. The management of the EFSD shall be ensured by the Commission.  

31  OJ L 317, 15.12.2000 as last amended by OJ L 287, 4.11.2010 
32  Regulation (EU) No 232/2014 of the European Parliament and of the Council of 11 March 2014 establishing 

a European Neighbourhood Instrument (OJ L 77, 15.3.2014, p. 27). 

33  Regulation (EU) No 233/2014 of the European Parliament and of the Council of 11 March 2014 establishing 
a financing instrument for development cooperation for the period 2014-2020 (OJ L 77, 15.3.2014, p. 44). 

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Article 5 
Strategic board of the EFSD 

1. In the management of the EFSD the Commission shall be assisted by a strategic board.  

It shall provide strategic guidance and support the Commission in setting overall investment 
goals as regards the use of the EFSD Guarantee. The strategic board shall also support overall 
coordination and coherence between the regional investment platforms and with the external 
lending mandate operations managed by the EIB, including the EIB resilience initiative. 

2.  The  strategic  board  shall  be  composed  of  representatives  of  the  Commission  and  of  the 
High  Representative  of  the  Union  for  Foreign  Affairs  and  Security  Policy  (High 
Representative),  of  the  Member  States  and  of  the  EIB.  The  Commission  may  invite  other 
contributors to become members of the strategic board having regard where appropriate to the 
view  of  the  board.  Partner  Countries  and  relevant  regional  organisations,  the  eligible 
counterparts  and  the  European  Parliament  may  be  given  observer  status,  where  appropriate. 
The strategic board shall be co-chaired by the Commission and the High Representative. 

CHAPTER III 

EFSD GUARANTEE AND EFSD GUARANTEE FUND 

Article 6 
The EFSD Guarantee 

1. The Union shall provide an irrevocable and unconditional guarantee on first demand to the 
eligible  counterpart  for  the  financing  and  investment  operations  covered  by  this  Regulation 
starting in the African and Neighbourhood partner countries.  

2.  The  EFSD  Guarantee  shall  be  granted  as  a  guarantee  on  first  demand  in  respect  of  the 
instruments referred to in Article 9 and in compliance with the eligibility criteria referred to in 
Article 8.  

Article 7 
Requirements for the use of the EFSD Guarantee 

1.  The  granting  of  the  EFSD  Guarantee  shall  be  subject  to  the  conclusion  of  the  respective 
EFSD guarantee agreement between the Commission on behalf of the Union and the eligible 
counterpart.  

2. The initial investment period during which the EFSD guarantee agreements for supporting 
financing and investment operations can be concluded with the eligible counterparts shall last 
until 31 December 2020. 

3.  The  maximum  period  allowed  for  eligible  counterparts  to  conclude  agreements  with 
financial  intermediaries  or  final  beneficiaries  shall  be  four  years  after  the  conclusion  of  the 
relevant guarantee agreement. 

Article 8 
Eligibility criteria for the use of the EFSD Guarantee 

1. The financing and investment operations eligible for support through the EFSD Guarantee 
shall  be  consistent  and  aligned  with  Union  policies,  in  particular  development  and 
neighbourhood policies of the Union, the partner countries' strategies and policies and aim at 
supporting the following general objectives:  

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(a) 

(b) 

(c) 

(d) 

contribute 
to  economic  and  social  development,  with  particular  focus  on 
sustainability and job creation (in particular for youth and women), thus addressing 
root  causes  of  migration  and  contributing  to  sustainable  reintegration  of  returned 
migrants in their countries of origin; 

target  socio-economic  sectors,  in  particular  infrastructure  including  sustainable 
energy,  water, 
technologies, 
environment,  sustainable  use  of  natural  resources  and  blue  growth,  social 
infrastructure, human capital, in order to improve the socio-economic environment;  

communications 

information 

transport, 

and 

provide  finance  in  favour  of  micro-,  small-  and  medium-sized  enterprises  with  a 
particular focus on private sector development; 

provide  financial  instruments  aimed  at  addressing  the  bottlenecks  to  private 
investments, including first loss guarantees to portfolios guarantees to private sector 
projects  such  as  loan  guarantees  for  small  and  medium-sized  enterprises  and 
guarantees for specific risks for infrastructure projects and other risk capital;  

(e) 

maximise private sector leverage by addressing bottlenecks to investment. 

2.  The  EFSD  Guarantee  shall  support  financing  and  investment  operations  which  in 
particular: 

(a) 

(b) 

(c) 

(d) 

provide additionality; 

ensure  alignment  of  interest  by  providing  adequate  risk  sharing  by  the  respective 
eligible counterpart and other prospective partners; 

are economically and financially viable, taking also into account the possible support 
from, and co-financing by, private and public partners to the project;  

are technically viable and are sustainable from an environmental and social point of 
view; and 

(e) 

maximise the mobilisation of private sector capital. 

3.  On  a  case  by  case  basis  the  Commission  may  allow  combined  financing  from  different 
Union instruments. 
4. The Commission may define investment windows for specific regions or partner countries 
or  for  both,  for  specific  sectors,  for  specific  projects  or  for  specific  categories  of  final 
beneficiaries or for both to be funded by instruments referred to in Article 9 to be covered by 
the  EFSD  Guarantee  up  to  a  fixed  amount.  All  requests  for  financial  support  within 
investment windows shall be made to the Commission.  

Article 9 
Eligible instruments for the EFSD Guarantee 

1. The EFSD Guarantee shall be used to cover the risks for the following instruments: 

(a) 

(b) 

(c) 

(d) 

(e) 

loans; 

guarantees; 

counter-guarantees; 

capital market instruments; 

any  other  form  of  funding  or  credit  enhancement,  equity  or  quasi-equity 
participations. 

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2.  The  instruments  listed  in  paragraph  1  may  be  provided  by  eligible  counterparts  or 
contributors  including  private  investors  under  an  investment  window  or  individual  project 
administered  by  an  eligible  counterpart  for the benefit  of  partner  countries  including  fragile 
and conflict-affected countries and these partner countries' institutions including their public 
national and private local banks and financial institutions as well as private sector entities of 
the partner countries.  

Article 10  
Eligibility and selection of counterparts  

1. The eligible counterparts for the purposes of the EFSD Guarantee shall be:  

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

the European Investment Bank and the European Investment Fund;  

public law bodies; 

international organisations and their agencies; 

bodies governed by private law with a public service mission to the extent that they 
provide adequate financial guarantees; 

bodies  governed  by  the  private  law  of  a  Member  State  that  provide  adequate 
financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) No 
966/2012  

bodies  governed  by  the  private  law  of  a  partner  country  that  provide  adequate 
financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) No 
966/2012. 

2. Eligible counterparts shall comply with the rules and conditions provided for in Article 60 
of Regulation (EU, Euratom) No 966/2012.  

3. The Commission shall select the eligible counterparts pursuant to Article 61 of Regulation 
(EU, Euratom) No 966/2012. 

Article 11 
Coverage and terms of the EFSD guarantee agreements 

1. The EFSD Guarantee shall not, at any time, exceed EUR 1 500 000 000 without prejudice 
to paragraph 2.  

2. Member States may contribute to the EFSD Guarantee Fund in the form of guarantees or 
cash. Subject to Commission approval, other contributors may contribute, in the form of cash. 

The amount of the Guarantee exceeding the amount indicated in paragraph 1 shall be granted 
on behalf of the Union. 

Aggregate  net  payments  from  the  general  budget  of  the  Union  under  the  EFSD  Guarantee 
shall  not  exceed  EUR 1 500 000 000.  Payments  for  guarantee  calls  shall  be  made,  where 
necessary, by the contributing Member States or other contributors on pari passu basis with 
the Union, without prejudice to paragraph 4.  

A  contribution  agreement  shall  be  concluded  between  the  Commission,  on  behalf  of  the 
Union,  and  the  contributor,  which  shall  contain,  in  particular,  provisions  concerning  the 
payment conditions. 

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3.  The  EFSD  Guarantee  shall  only  become  available  when  a  contribution  in  cash  of 
EUR 400 000 000 from the 11th European Development Fund (EDF)34 to the general budget 
of the Union has been confirmed.  

The Member States may contribute to the EFSD Guarantee in the form of guarantees or cash.  

The  Commission  shall  inform  the  European  Parliament  and  the  Council  about  the 
contributions confirmed. 

4.  The  contributions  made  by  the  Member  States  in  the  form  of  a  guarantee  may  only  be 
called for payments of guarantee calls after the funding from the general budget of the Union 
increased by any other cash contributions has been used on payments of guarantee calls. 

At the request of the Member States, the contributions made by them may be earmarked for 
the initiation of projects in specific regions, countries, sectors or investment windows. 

Any contribution may be used to cover guarantee calls regardless of earmarking. 

5. At least EUR 400 000 000 of EFSD Guarantee coverage shall be allocated for investments 
in the partner countries eligible under the 11th EDF throughout the implementation period of 
the EFSD Guarantee.  

Article 12 
Implementation of the EFSD guarantee agreements 

1. The Commission on behalf of the Union shall conclude EFSD guarantee agreements with 
the eligible counterparts selected pursuant to Article 10 and paragraph 4, on the granting of 
the EFSD Guarantee, which shall be unconditional, irrevocable, at first demand, in favour of 
the selected eligible counterpart. 

2.  One  or  more  guarantee  agreements  shall  be  concluded  for  each  investment  window 
between  the  Commission  and  the  eligible  counterpart  or  eligible  counterparts  selected.  In 
order to address specific needs, the EFSD Guarantee may be granted for individual financing 
or  investment  operations.  Agreements  can  be  concluded  with  a  consortium  of  two  or  more 
eligible counterparts. 

3. The guarantee agreements shall contain, in particular, provisions concerning the following: 

(a) 

(b) 

(c) 

detailed rules on the provision of the EFSD Guarantee, including its arrangements on 
the coverage and its defined coverage of portfolios and of projects of specific types 
of instruments;  

the remuneration of the guarantee;  

requirements for the use of the EFSD Guarantee, including payment conditions, such 
as  specific time  frames, interest to be paid on due amounts, expenses and recovery 
costs and possibly necessary liquidity arrangements;  

(d) 

provisions and procedures regarding the recovery of claims;  

34  Internal Agreement between the Representatives of the Governments of the Member States of the European 
Union, meeting within the Council, on the financing of European Union aid under the multiannual financial 
framework for the period 2014 to 2020, in accordance with the ACP-EU Partnership Agreement and on the 
allocation of financial assistance for the Overseas Countries and Territories to which Part Four of the Treaty 
on the Functioning of the European Union applies, OJ L 210, 6.8.2013, p. 1.  

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(e) 

provisions regarding the monitoring, reporting and evaluation obligations pursuant to 
Articles 15 and 16. 

4.  The  Commission  shall  decide  whether  to  conclude  guarantee  agreements  with  eligible 
counterparts taking due account of: 

(a) 

(b) 

(c) 

the objectives of the investment window; 

the experience and the operational and financial capacity of the counterpart; 

the  amount  of  own  resources  that  the  counterpart  is  ready  to  mobilise  for  the 
investment window. 

5.  The  approval  of  financing  and  investment  operations  shall  be  made  by  the  eligible 
counterpart following its own rules and procedures and in compliance with the terms of the 
guarantee agreement. 

6. The EFSD Guarantee may cover: 

(a) 

(b) 

(c) 

(d) 

for  debt  instruments  the  principal  and  all  interests  and  amounts  due  to  the  selected 
eligible  counterpart,  but  not  received  by  it  in  accordance  with  the  terms  of  the 
financing operations after an event of default has occurred;  

for equity investments the amounts invested and their associated financing costs;  

for other financing and investment operations referred to in Article 8(2) the amounts 
used and their associated funding costs;  

all  relevant  expenses  and  recovery  costs  related  to  an  event  of  default,  unless 
deducted from recovery proceeds.  

7.  The  guarantee  agreements  shall  lay  down  detailed  rules  on  the  cover,  requirements, 
eligibility, eligible counterparts, and procedures. 

Article 13 
The EFSD Guarantee Fund 

1.  The  EFSD  Guarantee  Fund  shall  constitute  a  liquidity  cushion  from  which  the  eligible 
counterparts  shall  be  paid  in  the  event  of  a  call  on  the  EFSD  Guarantee  pursuant  to  the 
relevant EFSD guarantee agreement.  

2. The EFSD Guarantee Fund shall be endowed by:  

(a) 

(b) 

(c) 

(d) 

(e) 

contributions from the general budget of the Union and other sources;  

possible contributions from Member States and other contributors;  

returns on invested resources of EFSD Guarantee Fund ;  

amounts  recovered  from  defaulting  debtors  in  accordance  with  the  recovery 
provisions laid down in the guarantee agreements;  

revenues  and  any  other  payments  received  by  the  Union  in  accordance  with  the 
guarantee agreements. 

3. Revenues of the EFSD Guarantee Fund as provided for in points (c) and (e) of paragraph 2 
shall constitute internal assigned revenue in accordance with Article 21(4) of Regulation (EU, 
Euratom) No 966/2012. 

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4.  The  resources  of  the  EFSD  Guarantee  Fund  referred  to  in  paragraph  2  shall  be  directly 
managed by the Commission and invested in accordance with the principle of sound financial 
management and shall follow appropriate prudential rules. 

5.  Endowments  to  the EFSD  Guarantee  Fund shall  be  used  to  reach  an  appropriate  level  of 
provisioning to cover the total EFSD Guarantee obligations. The provisioning rate shall be at 
50% of the total EFSD Guarantee obligations covered by the general budget of the Union.  

6.  Following  an  assessment  of  the  adequacy  of  the  level  of  the  EFSD  Guarantee  Fund  in 
accordance with the report provided for under Article 15(3), the following payments shall be 
made: 

(a) 

(b) 

any surplus shall be paid to the general budget of the Union;  

any  replenishment  of  the  EFSD  Guarantee  Fund  shall  be  paid  in  annual  tranches 
during a maximum period of 3 years starting from year n+1. 

7. From 1 January 2021, if, as a result of calls on the EFSD Guarantee, the level of resources 
in the Guarantee Fund falls below 50% of the provisioning rate referred to in paragraph 5, the 
Commission shall submit a report on exceptional measures that may be required to replenish 
the EFSD Guarantee Fund.  

8. After a call on the EFSD Guarantee, endowments to the EFSD Guarantee Fund provided 
for  in  points  (c),  (d)  and  (e)  of  paragraph  2  exceeding  the  resources  necessary  to  reach  the 
provisioning rate at the level referred to in paragraph 5 shall be used within the limits of the 
initial investment period provided for in Article 7(2) to restore the EFSD Guarantee up to its 
initial amount.  

Article 14 
Funding of the EFSD Guarantee Fund from the general budget of the Union  

A contribution of EUR 350 000 000 shall be provided by the general budget of the Union.  

CHAPTER IV 

REPORTING, ACCOUNTING AND EVALUATION 

Article 15  
Reporting and accounting 

1.  The  Commission  shall  submit  an  annual  report  to  the  European  Parliament  and  to  the 
Council  on  the  financing  and  investment  operation  covered  by  the  EFSD  Guarantee.  This 
report shall be made public. It shall include the following elements: 

(a) 

(b) 

(c) 

an assessment of the financing and  investment operations  in operation  and covered 
by  the  EFSD  Guarantee,  sector,  country  and  regional  levels  and  their  compliance 
with this Regulation; 

an  assessment  of  the  added  value,  the  mobilisation  of  private  sector  resources,  the 
estimated  and  actual  outputs  and  the  outcomes  and  impact  of  the  financing  and 
investment  operations  covered  by  the  EFSD  Guarantee  on  an  aggregated  basis, 
including the impact on employment creation; 

an  assessment  of  the  compliance  with  the  requirements  concerning  the  use  of  the 
EFSD  Guarantee  and  key  performance  indicators  established  for  each  proposal 
submitted; 

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(d) 

(e) 

(f) 

(g) 

(h) 

an assessment of the leverage effect achieved by the operations covered by the EFSD 
Guarantee; 

the financial amount transferred to beneficiaries and an assessment of financing and 
investment operations by each counterpart on an aggregated basis; 

an  assessment  of  the  added  value  of  financing  and  investment  operations  of  the 
eligible counterparts, and of the aggregate risk associated with those operations; 

detailed  information  on  calls  on  the  EFSD  Guarantee,  losses,  returns,  amounts 
recovered and any other payments received; 

the  financial  reports  on  financing  and  investment  operations  of  the  eligible 
counterparts covered by this Regulation audited by an independent external auditor. 

2. For the purposes of the Commission's accounting, its reporting of the risks covered by the 
EFSD Guarantee and its management of the EFSD Guarantee Fund, the eligible counterparts 
with  whom  a  guarantee  agreement  has  been  concluded  shall  provide  the  Commission  and 
Court of Auditors annually with the financial reports on financing and investment operations 
covered  by  this  Regulation  audited  by  an  independent  external  auditor,  containing,  among 
other, information on: 

(a) 

(b) 

the  risk  assessment  of  financing  and  investment  operations  of  the  eligible 
counterparts  including  information  on the  Union  liabilities measured in  compliance 
with  the  accounting  rules  of  the  Union  set  by  the  accounting  officer  of  the 
Commission  based  on  the  internationally  accepted  accounting  standards  for  the 
public sector; 

the outstanding financial obligation for the Union arising from the EFSD Guarantee 
provided  towards  the  eligible  counterparts  and  their  financing  and  investment 
operations. 
operations, 

individual 

broken 

down 

by 

The  Counterparts  shall  upon  request  provide  to  the  Commission  any  additional 
information  necessary  to  fulfil  the  Commission's  obligations  in  relation  to  this 
Regulation. 

3. By 31 March of each year, the Commission shall submit to the European Parliament, to the 
Council  and  to  the  Court  of  Auditors,  in  the  context  of  the  financial  statements  of  the 
Commission,  the  required  information  on  the  situation  of  the  EFSD  Guarantee  Fund.  In 
addition, it shall, by 31 May of each year, submit to the European Parliament, to the Council 
and  to  the  Court  of  Auditors  an  annual  report  on  the  management  of  the  EFSD  Guarantee 
Fund  in  the  previous  calendar  year,  including  an  assessment  of  the  adequacy  of  the 
provisioning and the level of the Guarantee Fund and of the need for its replenishment.  

The  annual  report  shall  contain  the  presentation  of  the  financial  position  of  the  EFSD 
Guarantee  Fund  at  the  end  of  the  previous  calendar  year,  the  financial  flows  during  the 
previous calendar year as well as the significant transactions and any relevant information on 
the  financial  accounts.  The  report  shall  also  include  information  about  the  financial 
management, the performance, and the risk of the guarantee fund at the end of the previous 
calendar year. 

Article 16 
Evaluation and review 

1. By 31 December 2020, the Commission  shall evaluate the functioning of the EFSD. The 
Commission  shall  submit  its  evaluation  report  to  the  European  Parliament  and  the  Council, 

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containing an independent evaluation of the application of this Regulation. This report shall 
be submitted without delay by the Commission in the event that the approved financing and 
investment operations absorb in full the amount of the EFSD Guarantee available before 30 
June 2020. 

2. By 31 December 2020 and every three years thereafter, the Commission shall evaluate the 
use of the EFSD Guarantee Fund. The Commission shall submit its evaluation  report to the 
European  Parliament  and  the  Council.  That  evaluation  report  shall  be  accompanied  by  an 
opinion of the Court of Auditors. 

CHAPTER V 

GENERAL PROVISIONS 

Article 17 
Transparency and public disclosure of information 

In  accordance  with  its  transparency  policies  and  general  Union  principles  on  access  to 
documents  and  information,  the  eligible  counterparts  shall  make  publicly  available  on  their 
websites information relating to all financing and investment operations covered by the EFSD 
Guarantee  under  this  Regulation,  relating  in  particular  to  the  manner  in  which  those 
operations contribute to the requirements of this Regulation. 

Article 18 
Auditing by the Court of Auditors 

1. The external audit of the activities undertaken in accordance with this Regulation shall be 
carried  out  by  the  Court  of  Auditors  in  accordance  with  Article  287  of  the  Treaty  on  the 
Functioning of the European Union (TFEU). 

2. For the purpose of paragraph 1 of this Article, the Court of Auditors shall, at its request and 
in accordance with Article 287(3) TFEU, be granted access to any document or information 
necessary to carry out its task. 

Article 19 
Anti-fraud measures 

1. The Commission or the eligible counterparts shall notify the European Anti-Fraud Office 
(OLAF)  promptly  and  provide  it  with  the  necessary  information  when,  at  any  stage  of  the 
preparation, implementation or closure of financing and investment operations covered by this 
Regulation,  they  have  grounds  for  suspecting  fraud,  corruption,  money  laundering  or  any 
other illegal activity that may affect the financial interests of the Union. 

2.  OLAF  may  carry  out  investigations,  including  on-the-spot  checks  and  inspections,  in 
accordance  with  the  provisions  and  procedures  laid  down  in  Regulation  (EU,  Euratom)  No 
883/2013 of the European Parliament and of the Council, Council Regulation (Euratom, EC) 
No  2185/96  and  Council  Regulation  (EC,  Euratom)  No  2988/95  in  order  to  protect  the 
financial  interests  of  the  Union,  with  a  view  to  establishing  whether  there  has  been  fraud, 
corruption, money laundering or any other illegal activity affecting the financial interests of 
the  Union  in  connection  with  any  financing  and  investment  operations  covered  by  this 
Regulation. OLAF may transmit any information obtained in the course of its investigations 
to the competent authorities of the Member States concerned. 

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Where  such  illegal  activities  are  proven,  the  eligible  counterparts  shall  undertake  recovery 
efforts with respect to its financing and investment operations covered by this Regulation that 
are concerned by such activities. 

Article 20 
Excluded activities and non-cooperative jurisdictions 

1. In their financing and investment operations, the eligible counterparts shall not support any 
activities  carried  out  for  illegal  purposes,  including  money  laundering,  terrorist  financing, 
organised  crime,  tax  fraud  and  tax  evasion,  corruption,  and  fraud  affecting  the  financial 
interests  of  the  Union.  The  eligible  counterparts  shall  not  participate  in  any  financing  or 
investment  operation  through  a  vehicle  located  in  a  non-cooperative  jurisdiction,  in 
accordance with its policy towards weakly regulated or non-cooperative jurisdictions based on 
policies of the Union, the Organisation for Economic Co-operation and Development or the 
Financial Action Task Force. 

2.  In  its  financing  and  investment  operations,  the  eligible  counterpart  shall  apply  the 
principles  and  standards  set  out  in  Union  law  on  the  prevention  of  the  use  of  the  financial 
system  for  the  purpose  of  money  laundering  and  terrorist  financing  and  in  particular 
Regulation  (EU)  2015/847  of  the  European  Parliament  and  of  the  Council35  and  Directive 
(EU)  2015/849  of  the  European  Parliament  and  of  the  Council36  .  The  eligible  counterparts 
shall  make  both  direct  funding  and  funding  via  intermediaries  under  this  Regulation 
contingent  upon  the  disclosure  of  beneficial  ownership  information  in  accordance  with 
Directive (EU) 2015/849. 

CHAPTER VI 

FINAL PROVISIONS 

Article 21 
Entry into force  

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

35  Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information 
accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (OJ L 141, 5.6.2015, p. 1). 
36  Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of 
the  use  of  the  financial  system  for  the  purposes  of  money  laundering  or  terrorist  financing,  amending 
Regulation  (EU)  No  648/2012  of  the  European  Parliament  and  of  the  Council,  and  repealing  Directive 
2005/60/EC  of  the  European  Parliament  and  of  the  Council  and  Commission  Directive  2006/70/EC  (OJ  L 
141, 5.6.2015, p. 73). 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1.  Title of the proposal/initiative  

1.2.  Policy area(s) concerned in the ABM/ABB structure 

1.3.  Nature of the proposal/initiative  

1.4.  Objective(s)  

1.5.  Grounds for the proposal/initiative  

1.6.  Duration and financial impact  

1.7.  Management mode(s) planned  

2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

2.2.  Management and control system  

2.3.  Measures to prevent fraud and irregularities  

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

3.2.  Estimated impact on expenditure  

3.2.1. Summary of estimated impact on expenditure  

3.2.2. Estimated impact on operational appropriations  

3.2.3. Estimated impact on appropriations of an administrative nature 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions  

3.3.  Estimated impact on revenue

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LEGISLATIVE FINANCIAL STATEMENT 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

Title of the proposal/initiative  

Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  the 
European Fund for Sustainable Development (EFSD)  
Policy area(s) concerned in the ABM/ABB structure37  

1. 

1.1. 

1.2. 

01 03  

ABB Activity: International economic and financial affairs 

1.3. 

Nature of the proposal/initiative  

 The proposal/initiative relates to a new action  

  The  proposal/initiative 
project/preparatory action38  

relates 

to  a  new  action 

following  a  pilot 

 The proposal/initiative relates to the extension of an existing action  

 The proposal/initiative relates to an action redirected towards a new action  

The EFSD will be composed of Regional Investment Platforms combining the existing 
blending facilities in external action and the new EFSG Guarantee. 

1.4. 

Objective(s) 

1.4.1.  The  Commission's  multiannual 

strategic  objective(s) 

targeted  by 

the 

proposal/initiative  

To support investments in regions outside the EU as a means to address root causes 
of migration. 

1.4.2. 

Specific objective(s) and ABM/ABB activity(ies) concerned  

Specific objective  

Provide an integrated package of measures to finance investments in regions outside 
the  EU,  thereby  creating  growth  and  employment  opportunities,  maximising 
additionality, delivering innovative products and crowding-in private sector funds. 

ABM/ABB activity(ies) concerned 

01 03 International economic and financial affairs 

1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

The  European  Fund  for  Sustainable  Development  (EFSD)  will  include  a  new 
Guarantee  providing  a  range  of  innovative  instruments  to  crowd-in  private  sector, 
such as guarantees covering specific risks in infrastructure projects. 

A  multiplier  effect  should  be  generated  by  means  of  the  provision  of  the  EU 
guarantee.  Like  the  European  Fund  for  Strategic  Investments  (EFSI)  and  several 

37  ABM: activity-based management; ABB: activity-based budgeting. 
38  As referred to in Article 54(2)(a) or (b) of the Financial Regulation. 

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financial instruments supported by the EU blending facilities since 2007, the EFSD 
Guarantee  Fund  aims  to  mobilise  additional  investments,  in  particular  from  private 
investors.  It  does  so  by  providing  partial  guarantees,  either  on  a  first-loss  or  pari 
passu  basis,  to  intermediary  financial  institutions  (typically  IFIs),  which  in  turn 
provide  support  (via  loans,  guarantees,  equity  or  similar  products)  to  downstream 
beneficiaries. There are thus two layers of leverage between the EU budget guarantee 
provided  and  the  total  investment  mobilised.  At  the  first  level,  the  EU  guarantee 
enables the intermediary IFI to provide an amount of additional financing ("internal 
leverage").  At  the  second  level  ("external  leverage"),  the  IFI  financing  mobilises 
additional investment at the project stage. 

Thereby the global initiative including the blending activities should help to mobilise 
total investments of up to EUR 44 billion until 2020.  

1.4.4. 

Indicators of results and impact  

Specify the indicators for monitoring implementation of the proposal/initiative. 

A common and minimum set of indicators that reflect project outputs and intended 
outcomes has been defined for blending operations. These indicators can be used for 
monitoring  implementation  of  the  European  Fund  for  Sustainable  Development 
(EFSD) Guarantee. 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term  

The  European  Fund  for  Sustainable  Development  (EFSD)  provides  the  means  for 
implementing  the  policy  objectives  of  the  External  Investment  Plan  (pillar  1)  as 
outlined  in  the  Commission  Communication  of  7  June  2016  on  establishing  a  new 
Partnership  with  third  countries  under  the  European  Agenda  on  Migration.  The 
EFSD  will  have  the  key  objective  of  providing  an  integrated  financial  package  to 
finance investments in regions outside the EU. This involves mobilising both public 
and private investments in Africa as well as the Neighbourhood. 

1.5.2.  Added value of EU involvement 

The  European  Fund  for  Sustainable  Development  (EFSD)  aims  at  promoting 
innovative and additional  types of support, notably  through the new Guarantee and 
credit  enhancement.  The  new  Guarantee  coverage  will  encompass  innovative 
instruments  notably  aimed  at  addressing  bottlenecks  to  private  investment,  that  are 
not  yet  addressed  by  the  market  itself,  such  as  first-loss  guarantees  to  portfolios  of 
guarantees to private sector projects, risk capital, SME loan guarantees or guarantees 
covering specific risks in infrastructure projects.  

The operations financed or guaranteed through the instruments of the European Fund 
for Sustainable Development (EFSD) represent a highly visible and effective tool in 
support of the Union's external action. The EFSD provides the necessary EU political 
and  financial  backing  for  the  Eligible  Counterpart  financing  in  countries  and  to 
investment projects which otherwise would not be able to comply due to high risk. 

1.5.3.  Lessons learned from similar experiences in the past 

The  Commission  has  gained  valuable  experience  with  innovative  financing 
instruments.  

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Since  first  introduced  at  the  beginning  of  the  Multiannual  Financial  Framework 
2007-2013,  blending  gradually  evolved  into  an  important  tool  of  EU  external 
cooperation, complementing other methods of implementation. EU regional blending 
facilities have been set up in all regions of EU external cooperation. By the end of 
2015,  the  support  approved  under  the  facilities  from  the  EU  budget  and  EDF 
resources has reached a sum of around EUR 2.7 billion, generating around EUR 50 
billion total investments.  

to 

the  Neighbourhood 

Investment  Platform 

The  predecessor 
the 
Neighbourhood  Investment  Facility  (NIF),  has  a  successful  track  record  to  show: 
allocations to the NIF from the EU Budget have reached since 2007 a total of EUR 
1.432 billion. Additionally, Member States have contributed to  the NIF Trust Fund 
with more than EUR 80 million. This has enabled the implementation of 112 projects 
with NIF support. The NIF contribution has succeeded in mobilising approximately 
EUR 13.83 billion of financing from European and International Finance Institutions 
since 2008 and a total investment amount of about EUR 28.10 billion, i.e. a leverage 
of about 20 times in investment for every euro provided by the Facility.  

(NIP), 

In  Africa,  the  EU-Africa  Infrastructure  Trust  Fund  (AITF)  was  set  up  in  2007  and 
has provided since then support to projects for a total of more than EUR 500 million 
mainly in energy, transport and water sector. In 2015, the Africa Investment facility 
(AfIF) was created via Commission Decision C (2015)521039. 

Over  the  period  2007-2013,  two  facilities  were  subject  to  a  mid-term  evaluation 
(MTE), the EU-AITF in  2012 and the Neighbourhood  Investment Facility (NIF)  in 
2013. Both concluded that these are valuable and effective instruments in supporting 
their  respective  objectives:  European  Neighbourhood  Partnership  (ENP)  objectives 
and the development of infrastructure in Africa. In particular, project identification, 
relevance and design were considered positive, and both instruments achieved their 
goal  of  leveraging  significant  financial  resources.  The  MTE  also  pointed  to  the 
significant  contribution  brought  to  the  development  of  partnerships  and  increased 
coordination  and  cooperation  among  finance  institutions  as  well  as  with  the 
Commission.  A  number  of  recommendations  were  made,  notably  in  terms  of 
improvements  to  the  decision  making  structure  and  in  particular  on  the  role  of  EU 
Delegations  and  partner  countries,  further  exploring  the  involvement  of  private 
sector,  as  well  as  the  use  of  specific  financial  instruments  such  as  risk  mitigation 
instruments, and finally the implementation of a result measurement framework. 

These findings have been used, with other reports, by the EU Platform for blending 
in  external  cooperation  (EUBEC),  set  up  in  December  2012,  to  make  concrete 
recommendations for further increasing the effectiveness of aid delivered by the EU 
through  blending.  The  European  Court  of  Auditors  published  a  special  report  on 
blending in October 2014. The conclusions were very much in line with the above: 
blending the regional investment facility grants with loans from financial institutions 
to  support  EU  external  policies  was  found  generally  effective  and  projects  were 
relevant. The recommendations covered the following aspects: to ensure documented 
assessment of the additionality resulting from the EU grant, to ensure the maturity of 
projects  submitted  to  the  executive  boards,  to  produce  guidelines  on  EU  Blending 
operations,  to  ensure  more  proactive  role  of  the  EU  Delegations,  to  simplify  the 

39  C(2015)  5210  final,  29.7.2015,  Commission  Decision  on  the  individual  measure  "Creation  of  the  Africa 

Investment Facility" under the 11th European Development Fund 

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decision making process, to improve Commission's monitoring of the projects and to 
ensure appropriate visibility for EU funding.  

Almost  all  of  these  recommendations  have  already  been  dealt  with  by  the  EUBEC 
with the development of a harmonised and improved project application form and its 
guidelines as well as the development of a results measurement framework including 
standard indicators.  

Additionally, following the requirement of Article 140 of Regulation (EU, Euratom) 
No  966/2012  of  the  European  Parliament  and  of  the  Council  on  the  financial  rules 
applicable to the general budget of the Union and repealing Council Regulation (EC, 
Euratom)  No  1605/2002,  applicable  by  virtue  of  Article  17  and  Articles  40  of 
Council Regulation (EU) 2015/323, an ex-ante evaluation of the AfIF was carried out 
in 2014 on how the planned facility complies with the requirements of the Financial 
Regulation  (FR)  for  the  financial  instruments.  The  recommendations  of  this 
evaluation have been taken into account in the management of the AfIF and will be 
relevant for the EU Africa Investment Platform.  

The  results  of  the  ex-ante  evaluation  demonstrated  that  the  nature,  magnitude  and 
focus  of  the  challenges  faced  by  Africa  (e.g.  urbanisation,  degrading  access  to 
essential  service,  food  insecurity,  poverty,  impacts  of  climate  change),  the  current 
EU  and  partner  countries  cooperation  objectives  (i.e.  sustainable  and  inclusive 
development  and  growth,  continental  integration,  poverty  eradication,  climate 
change) and the need to mobilise additional financial resources require a new flexible 
framework  of  financing.  Taking  those  results  into  account  and  with  the  additional 
objective  of  addressing  root  causes  of  migration,  the  Africa  Investment  Platform 
(AIP) can provide a value added in sectors which represent key challenges in Africa. 
Through  a  wide  range  of  forms  of  assistance  to  be  adjusted  to  the  country  risks, 
specific  project  and  sectors,  AIP  will  contribute  to  inclusive  growth  and  the 
achievement  of  the  Sustainable  Development  Goals,  thus  tackling  some  of  the  root 
causes of migration.  

The  current  portfolio  and  pipeline  used  in  the  AfIF  provides  for  projects  that 
contribute  to  the  objective  of  addressing  roots  causes  of  migration.  Whereas  job 
creation  is  the  main  focus  of  projects  supporting  the  financial  sector  and  Micro, 
Small  and  Medium  Enterprises  (MSMEs)  through  local  banks  or  dedicated  trust 
funds  or  projects  supporting  agriculture,  finance,  and  rural  development,  including 
rural  roads  and  electrification,  employment  opportunities  may  also  be  the  result  of 
particular infrastructure projects in the (renewable) energy sector or wider transport 
sector  including  not  only  rural  roads,  but  also  road  and  port  construction  and 
rehabilitation.  Job  creation  and  poverty  reduction  have  been  mentioned  as  an 
outcome of some energy projects listed in the AITF annual report.  

A screening of the AITF portfolio and the AfIF pipeline indicate that these blending 
mechanisms  contribute  to  the  objective  of  addressing  root  causes  of  migration, 
leveraging finance from the partner finance institutions involved. A screening of the 
150  projects  in  the  current  AfIF  pipeline  reveals  that  possibly  up  to  30%  of  the 
projects  could  be  relevant  to  contribute  to  tackling  root  causes  of  migration.  Some 
projects target job creation and support of MSMEs as the main objectives, while the 
majority  of  the  projects  targets  socio-economic  development  and  resilience  and  in 
some instances also job creation and poverty reduction as a secondary effect. Out of 
the 23 specific countries listed as eligible under the EFSD, 18 countries are covered 

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by  the  current  AfIF  pipeline  for  the  Sahel/Lake  Chad  and  for  the  Horn  of  Africa 
regions. 

The  2015  Review  of  the  European  Neighbourhood  Policy  reiterated  that  economic 
and social development should be at the heart of the EU's contribution to stabilising 
the  neighbourhood  and  building  partnerships.  The  EU  should  step  up  cooperation 
with  the  International  Financial  Institutions,  relevant  international  organisations  on 
private  sector  development,  and  initiatives  that  promote  inclusive  growth  and 
employment  and  improve  living  conditions.  In  addition  actions  to  strengthen 
partnerships  with  the  private  sector  should  be  promoted,  and  the  use  of  innovative 
approaches  such  as  blending  grants  and  loans  as  an  important  way  of  leveraging 
additional resources and increasing the impact of EU aid should be boosted. It also 
stresses the need to focus efforts on the development of skills, on competences and 
creation of opportunities particularly for young men and women. 

A  new  evaluation  of  the  blending  facilities  is  currently  undergoing  and  the  final 
report should be available before the end of 2016. 

1.5.4.  Compatibility and possible synergy with other appropriate instruments 

As outlined in the Communication of 7 June 2016 on establishing a new Partnership 
with  third  countries  under  the  European  Agenda  on  Migration,  the  Commission  is 
proposing an ambitious External Investment Plan that would  address root causes of 
migration.  

It  is  proposed  to  establish  a  new  strategic  framework  with  a  new  governance 
structure,  including  a  one-stop-shop  approach  that  deploys  a  range  of  innovative 
financing instruments to crowd-in private sector to adress root causes of migration by 
boosting investments starting in the regions of in Africa and the EU Neighbourhood. 
It will build on the existing architecture of EU financing instruments and resources.  

The EFSD will have the key objective of providing an integrated financial package to 
finance  investments  in  regions  outside  the  EU,  thereby  creating  growth  and 
employment opportunities, maximising additionality, delivering innovative products 
and crowding-in private sector funds. With funds from the EDF and the EU budget 
of EUR 3.35 billion until 2020 (of which EUR 0.75 billion are initially intended for 
the EFSD Guarantee Fund), the EFSD is expected to mobilise up to EUR 44 billion 
in investments.  

Out of the EUR 3.35 billion, EUR 2.6 billion will be provided by refocusing existing 
blending instruments. The present proposal for a Regulation implies the mobilisation 
for the EFSD Guarantee Fund of EUR 350 million from the EU budget and EUR 400 
million from the EDF. The core of the new investment plan is the EFSD, which will 
provide an overall framework based on three pillars: a new investment fund (pillar 
1); technical assistance (pillar 2), to help local authorities and companies develop a 
higher number of sustainable projects and attract investors; and a range of dedicated 
thematic, national and regional EU development cooperation programmes combined 
with structured political dialogue targeted at improving the investment climate and 
overall policy environment in the countries concerned (pillar 3).  

These three pillars shall be complementary and provide a wide coordinated approach. 

The  EFSD  will  include  the  refocused  existing  blending  facilities  and  a  new 
Guarantee  providing  a  range  of  innovative  instruments  to  crowd-in  private  sector, 
such  as  guarantees  covering  specific  risks  in  infrastructure  projects.  The  Regional 

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Investment  Platforms  will  combine  existing  blending  instruments,  will  operate  as 
"one-stop shop" to receive financing proposals from IFIs, public or private investors, 
and will deliver a wide range of financial support to eligible investments.  

By  enabling  joint  European  operations  (combining  bilateral  and  EU  grant  funding 
with  eligible  finance  institutions  loan  operations),  the  AIP  will  generate  greater 
coherence  and  better  coordination  between  the  donors,  in  line  with  the  Paris 
Declaration principles and in compliance with the EU Financial Regulation. Member 
States'  resources  will  reinforce  the  EU  effort  by  strengthening  the  European 
dimension of external cooperation and enhancing EU visibility. 

1.6. 

Duration and financial impact  

 Proposal/initiative of limited duration  

–   Proposal/initiative initially in effect from 2017 to 2020  

–  Financial  impact  from  2017  to  2020  with  reference  to  the  signature  of 

Agreements with the eligible counterparts.    
The  maximum  duration  of  the  EFSD  Guarantee  agreements  under  which  a 
contract  between  an  Eligible  Counterpart  and  the  beneficiary  or  financial 
intermediary can be signed shall be four years.  

 Proposal/initiative of unlimited duration 

–  Indicative implementation start-up period:  

–  followed by full-scale operation. 
1.7.  Management mode(s) planned40  

X  Direct  management  by  the  Commission  (for  the  management  of  the  EFSD 
Guarantee Fund) 

–  X by its departments, including by its staff in the Union delegations;  

–   by the executive agencies  

 Shared management with the Member States  

  Indirect  management  by  entrusting  budget  implementation  tasks  to  (for  the 
Facilities backed by the EFSD guarantee):  

–  X international organisations and their agencies; 

–  X the EIB and the European Investment Fund; 

–  X public law bodies; 

–  X  bodies  governed  by  the  private  law  of  a  Member  State  that  provide  adequate 
financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) 
No 966/2012; 

–  X bodies governed by the private law of a partner country that provide adequate 
financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) 
No 966/2012; 

40  Details of management modes and references to the Financial Regulation may be found on the BudgWeb 

site: https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

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–  X bodies governed by private law with a public service mission to the extent that 

they provide adequate financial guarantees; 

–    persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP 

pursuant to Title V of the TEU, and identified in the relevant basic act. 

– 

If more than one management mode is indicated, please provide details in the 'Comments' section. 

Comments  

The provision to and management of the EFSD Guarantee Fund will be implemented directly 
by the Commission, whereas the instruments covered by the Guarantee will be implemented 
in indirect management. 

2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

The Commission shall submit an annual report to the European Parliament and to the 
Council on the financing and investment operation covered by the EFSD Guarantee. 
This report shall be made public. It shall include the following elements: 

(a)   an  assessment  of  the  financing  and  investment  operations  in  operation  and 
covered  by  the  EFSD  Guarantee,  sector,  country  and  regional  levels  and  their 
compliance  with  this  Regulation,  in  particular  with  the  criterion  of  addressing  root 
causes  of  migration  and  supporting  socio-economic  development  in  view  of  the 
sustainable  development  goals  together  with  an  assessment  of  the  allocation  of  the 
financing towards the general objectives set out in Article 3; 

(b) an assessment of the added value, the mobilisation of private sector resources, the 
estimated  and  actual  outputs  and  the  outcomes  and  impact  of  the  financing  and 
investment  operations  covered  by  the  EFSD  Guarantee  on  an  aggregated  basis, 
including the impact on employment creation; 

(c)   an  assessment  of  the  extent  to  which  operations  covered  by  this  Regulation 
contribute to the achievement of the general objectives set out in Article 3; 

an assessment of the compliance with the requirements concerning the use of 
(d)  
the  EFSD  Guarantee  and  key  performance  indicators  established  for  each  proposal 
submitted; 

an assessment of the leverage effect achieved by the operations covered by the 

(e)  
EFSD Guarantee; 

the  financial  amount  transferred  to  beneficiaries  and  an  assessment  financing 

(f)  
and investment operations by each counterpart on an aggregated basis; 

an assessment of the added value of financing and investment operations of the 

(g)  
Eligible Counterparts, and of the aggregate risk associated with those operations; 

(h)   detailed information on calls on the EFSD Guarantee, losses, returns, amounts 
recovered and any other payments received; 

the  financial  reports  on  financing  and  investment  operations  of  the  Eligible 

(i)  
Counterparts covered by this Regulation audited by an independent external auditor. 

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2. For the purposes of the Commission's accounting, its reporting of the risks covered 
by  the  EFSD  Guarantee  and  its  management  of  the  EFSD  Guarantee  Fund,  the 
Eligible  Counterparts  with  whom  a  guarantee  agreement  has  been  signed  shall 
provide the Commission and Court of Auditors annually with the financial reports on 
financing  and  investment  operations  covered  by  this  Regulation  audited  by  an 
independent external auditor, containing, among other, information on: 

(a)  
the  risk  assessment  of  financing  and  investment  operations  of  the  Eligible 
Counterparts covered by this Regulation including information on the EU liabilities 
measured in compliance with the accounting rules of the Union set by the accounting 
officer  of  the  Commission  based  on  the  internationally  accepted  accounting 
standards for the public sector; 

the  outstanding  financial  obligation  for  the  Union  arising  from  the  EFSD 
(b)  
Guarantee  provided  towards  the  Eligible  Counterparts  and  their  financing  and 
investment  operations  covered  by  this  Regulation,  broken  down  by  individual 
operations. 

The  Counterparts  shall  upon  request  provide  to  the  Commission  any  additional 
information  necessary  to  fulfil  the  Commission's  obligations  in  relation  to  this 
Regulation. 

3.  By  31  March  of  each  year,  the  Commission  shall  submit  to  the  European 
Parliament,  to  the  Council  and  to  the  Court  of  Auditors,  in  the  context  of  the 
financial statements of the Commission, the required information on the situation of 
the EFSD Guarantee Fund. In addition, it shall, by 31 May of each year, submit to 
the  European  Parliament,  to  the  Council  and  to  the  Court  of  Auditors  an  annual 
report  on  the  management  of  the  EFSD  Guarantee  Fund  in  the  previous  calendar 
year, including an assessment of the adequacy of the provisioning and the level of the 
guarantee fund and of the need for its replenishment. The annual report shall contain 
the presentation of the financial position of the EFSD Guarantee Fund at the end of 
the previous calendar year, the financial flows during the previous calendar year as 
well  as  the  significant  transactions  and  any  relevant  information  on  the  financial 
accounts. The report shall also include information about the financial management, 
the  performance,  and  the  risk  of  the  guarantee  fund  at  the  end  of  the  previous 
calendar year. 

4.  By  31  December  2019,  the  Commission  shall  evaluate  the  functioning  of  the 
EFSD.  The  Commission  shall  submit  its  evaluation  report  to  the  European 
Parliament and the Council.  

5. By 30 June 2020 and every three years thereafter, the Commission shall evaluate 
the  use  of  the  EFSD  Guarantee  Fund.  The  Commission  shall  submit  its  evaluation 
report  to  the  European  Parliament  and  the  Council.  That  evaluation  report  shall  be 
accompanied by an opinion of the Court of Auditors. 

6. By 30 June 2020, the Commission shall submit to the European Parliament and the 
Council  a  report  containing  an  independent  evaluation  of  the  application  of  this 
Regulation. This  report shall be submitted without  delay by the Commission  in  the 
event  that  the  approved  financing  and  investment  operations  absorb  in  full  the 
amount of the EFSD Guarantee available before 30 June 2020. 

EN 

29 

   EN 

 
 
2.2.  Management and control systems  

2.2.1.  Risk(s) identified  

The risk for the EU budget is linked to the budget guarantee provided by the Union 
to  the  Eligible  Counterpart  for  its  operations  in  third  countries.  The  guarantee 
provides  a  comprehensive  cover  (to  a  cap  specified  below)  for  all  payments  not 
received by the Eligible Counterpart.  

The EU guarantee is restricted to EUR 1 500 000 000. 

The  budget  entry  ("p.m.")  reflecting  the  budget  guarantee  for  the  Eligible 
Counterpart  loans  to  third  countries  would  be  activated  only  in  the  case  of  an 
effective call  on the guarantee by the Eligible Counterpart which cannot be wholly 
covered  by  the  Guarantee  Fund  (funded  with  at  least  EUR  750  000  000).  The 
provisioning  rate  of  50%  is  based  on  the  past  experience  with  guarantee  schemes 
managed by the eligible counterparts, including also first loss structures. There was 
never a call for more than 50% of the funding provided. The higher provisioning rate 
e.g. compared to some internal instruments is due to the riskier investment climate in 
partner countries which needs to be taken into account. 

2.2.2. 

Information concerning the internal control system set up 

The  Commission  is  responsible  for  managing  the  EU  Guarantee.  The  financing 
operations  in  the  context  of  the  present  regulation  are  carried  out  according  to  the 
Eligible  Counterpart  standard  rules  of  procedure  and  sound  banking  practice.  The 
Eligible  Counterpart  and  the  Commission  enter  into  an  agreement  laying  down  the 
detailed  provisions  and  procedures  relating  to  the  implementation  of  the  present 
regulation. See also section above "Monitoring and reporting rules". 

2.2.3.  Estimate of the costs and benefits of the controls and assessment of the expected level 

of risk of error  

N.A. 

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures. 

1.  The  COM  shall  notify  OLAF  promptly  and  provide  it  with  the  necessary 
information  when,  at  any  stage  of  the  preparation,  implementation  or  closure  of 
financing  and  investment  operations  covered  by  this  Regulation,  it  has  grounds  for 
suspecting fraud, corruption, money laundering or any other illegal activity that may 
affect the financial interests of the Union. 

2. OLAF may carry out investigations, including on-the-spot checks and inspections, 
in  accordance  with  the  provisions  and  procedures  laid  down  in  Regulation  (EU, 
Euratom) No 883/2013 of the European Parliament and of the Council (15), Council 
Regulation (Euratom, EC) No 2185/96 (16) and Council Regulation (EC, Euratom) 
No 2988/95 (17) in order to protect the financial interests of the Union, with a view 
to  establishing  whether  there  has  been  fraud,  corruption,  money  laundering  or  any 
other illegal activity affecting the financial interests of the Union in connection with 
any  financing  and  investment  operations  covered  by  this  Regulation.  OLAF  may 
transmit any information obtained in the course of its investigations to the competent 
authorities of the Member States concerned. 

EN 

30 

   EN 

 
 
Where  such  illegal  activities  are  proven,  the  Eligible  Counterparts  shall  undertake 
recovery efforts with  respect  to  its financing  and investment  operations covered  by 
this Regulation that are concerned by such activities.  

3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  New budget lines requested  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of 
expenditure 

Contribution  

Number  
04 Heading EU in the World 

Diff./Non-
diff. 

from 
EFTA 
countries 

from 
candidate 
countries 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

01  03  07  European  Union  guarantee  for  the 
European  Fund  for  Sustainable  Development 
(EFSD) 

Non-diff.  

NO 

NO 

NO 

NO 

01 03 08 Provisioning of the EFSD Guarantee 
Fund 

Non-diff. 

YES 

YES 

YES 

YES 

Heading of 
multiannual 
financial 
framework 

4 

4 

EN 

31 

   EN 

 
 
3.2. 

Estimated impact on expenditure  

3.2.1. 

Summary of estimated impact on expenditure  

Heading of multiannual financial  
framework  

Number  Heading 4 EU in the World 

EUR million (to three decimal places) 

Year 
201741 

Year 
2018 

Year 
2019 

Year 
2020 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

DG: XX 

 Operational appropriations  

01  03  07  European  Union  Guarantee  for 
the  European  Fund 
for  Sustainable 
Development  

Commitment
s 

(1) 

Payments 

(2) 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

01  03  08  Provisioning  of  the  EFSD 
Guarantee Fund  

Commitment
s 

(1a) 

275.000  25.000 

25.000 

25.000 

Payments 

(2a) 

275.000  25.000 

25.000 

25.000 

Appropriations  of  an  administrative  nature  financed  from  the 
envelope of specific programmes42  

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

- 

TOTAL appropriations 

Commitments 

(3) 

=1+1a 
+3 

0 

0 

0 

0 

0 

0 

0 

275.000  25.000 

25.000 

25.000 

pm 

pm 

350.000 

350.000 

0 

350.000 

41  Year N is the year in which implementation of the proposal/initiative starts. 
42  Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former 'BA' lines), indirect research, direct 

research. 

EN 

32 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
for DG XX  

 TOTAL operational appropriations  

Payments 

Commitments 

Payments 

  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

=2+2a 

+3 

(4) 

(5) 

(6) 

275.000  25.000 

25.000 

25.000 

pm 

pm 

pm 

350.000 

TOTAL appropriations  
under HEADING <4> 
of the multiannual financial framework 

Commitments 

=4+ 6 

275.000 

25.000 

25.000 

25.000 

Payments 

=5+ 6 

275.000 

25.000 

25.000 

25.00 

pm 

pm 

pm 

pm 

pm 

pm 

350.000 

350.000 

If more than one heading is affected by the proposal / initiative: 

 TOTAL operational appropriations  

Commitments 

Payments 

  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

(4) 

(5) 

(6) 

TOTAL appropriations  
under HEADINGS 1 to 4 
of the multiannual financial framework 
(Reference amount) 

Commitments 

=4+ 6 

Payments 

=5+ 6 

EN 

33 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heading of multiannual financial  
framework  

5 

'Administrative expenditure'  

Year 
2017 

Year 
2018 

Year 
2019 

Year 
2020 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6)  

TOTAL 

EUR million (to three decimal places) 

DGs: XX 

 Human resources  

3.264 
(0.134*16+ 
0.07*16) 

3.264 

3.264 

3.264 

 Other administrative expenditure  

0.5 

0.5 

0.5 

0.5 

TOTAL DG XX 

Appropriations  

3.764 

3.764 

3.764 

3.764 

13.056 

2.000 

15.056 

TOTAL appropriations 
under HEADING 5 
of the multiannual financial framework  

(Total  commitments  = 
Total payments) 

3.764 

3.764 

3.764 

3.764 

15.05643 

Year 
2017 

Year 
2018 

Year 
2019 

Year 
2020 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR million (to three decimal places) 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial framework  

Commitments 

278.764 

28.764 

28.764 

28.746 

Payments 

278.764 

28.764 

28.764 

28.764 

365.056 

365.056 

43  One Contractual Agent will be financed by the European External Action Service (EEAS) budget to support policy liaison functions. 

EN 

34 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on operational appropriations  

–   The proposal/initiative does not require the use of operational appropriations  

–  X  The proposal/initiative requires the use of operational appropriations, as explained below: 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

OUTPUTS 

Commitment appropriations in EUR million (to three decimal places) 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

o
N

Cost  N

o

Cost 

o
N

Cost 

o
N

Cost  N

o

Cost  N

o

Cost  N

o

Cost 

Total 
No 

Total 
cost 

275.00
0 

25.000 

25.000 

25.000 

350.000 

Indicate 
objectives and 
outputs  

 

Type44 

Avera
ge 
cost 

SPECIFIC OBJECTIVE  

- Output 

- Output 

- Output 

Subtotal for specific objective No 1 

TOTAL COST 

275.00
0 

25.000 

25.000 

25.000 

350.000 

44  Outputs are products and services to be supplied (e.g. number of student exchanges financed, number of km of roads built, etc.). 

EN 

35 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.  Estimated impact on appropriations of an administrative nature 

3.2.3.1.  Summary  

–   The  proposal/initiative  does  not  require  the  use  of  appropriations  of  an 

administrative nature  

–  X  The proposal/initiative  requires the use  of appropriations of an  administrative 

nature, as explained below: 

–  Administrative expenditure. EUR million (to three decimal places) 

Year 
2017 45 

Year 
2018 

Year 
2019 

Year 
2020 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

HEADING 5 
of the multiannual 
financial framework 

Human resources  

3.264 

3.264 

3.264 

3.264 

0.5 

0.5 

0.5 

0.5 

3.764 

3.764 

3.764 

3.764 

Other administrative 
expenditure  

Subtotal HEADING 5 
of the multiannual 
financial framework  

Outside HEADING 546 
of the multiannual 
financial framework  

Human resources  

Other expenditure  
of an administrative 
nature 

Subtotal  
outside HEADING 5 
of the multiannual 
financial framework  

13.056 

2.000 

15.056 

TOTAL 

3.764 

3.764 

3.764 

3.764 

15.056 

The  appropriations  required  for  human  resources  and  other  expenditure  of  an  administrative  nature  will  be  met  by 
appropriations  from  the  managing  DG,  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the 
managing DG under the annual allocation procedure and in the light of budgetary constraints. 

45  Year N is the year in which implementation of the proposal/initiative starts. 
46  Technical  and/or  administrative  assistance  and  expenditure  in  support  of  the  implementation  of 

EU programmes and/or actions (former 'BA' lines), indirect research, direct research. 

EN 

36 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.2.  Estimated requirements of human resources 

–   The proposal/initiative does not require the use of human resources.  

–  x  The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Estimate to be expressed in full time equivalent units 

Year 
2017 

Year 
2018 

Year 2019 

Year 
2020 

Enter as many years as 
necessary to show the 
duration of the impact 
(see point 1.6) 

 Establishment plan posts (officials and temporary staff) 

XX 01 01 01 (Headquarters and Commission's 
Representation Offices) 

16 

16 

16 

16 

XX 01 01 02 (Delegations) 

XX 01 05 01 (Indirect research) 

10 01 05 01 (Direct research) 

 External staff (in Full Time Equivalent unit: FTE)47 

 XX 01 02 01 (AC, END, INT from the 'global 
envelope' in Headquarters48) 

XX 01 02 02 (AC, AL, END, INT and JED in the 
delegations) 

XX 01 04 yy 49 

- at Headquarters 

- in Delegations  

XX 01 05 02 (AC, END, INT - Indirect research) 

10 01 05 02 (AC, END, INT - Direct research) 

Other budget lines (specify) 

TOTAL 

16 

16 

16 

16 

32 

32 

32 

32 

XX is the policy area or budget title concerned. 

The  human  resources  required  will  be  met  by  staff  from  the  managing  DG,  together  if  necessary  with  any 
additional allocation which may be granted to the managing DG under the annual allocation procedure and in the 
light of budgetary constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

Operational  and  financial  management  of  the  European  Fund  for  Sustainable 
Development communication and visibility 

External staff 

Operational  and  financial  management  of  the  European  Fund  for  Sustainable 
Development communication and visibility 

47  AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JED= Junior 

Experts in Delegations.  

48  Part  of  the  external  staff  required  will  be  met  by  internal  redeployment  of  external  staff  financed  by  ENI 
administrative support line / EDF in proportion to the operational appropriations redeployed for the action. 

49  Sub-ceiling for external staff covered by operational appropriations (former 'BA' lines). 

EN 

37 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.4.  Compatibility with the current multiannual financial framework  

–   The  proposal/initiative  is  compatible  with  the  current  multiannual  financial 

framework. 

–  X The proposal/initiative will entail reprogramming of the relevant heading in the 

multiannual financial framework. 

Explain what reprogramming is required, specifying the budget lines concerned and the corresponding 
amounts. 

The European Neighbourhood Instrument (chapter 22.04) will contribute with EUR 
100  million  in  commitment  and  payment  appropriations (EUR  25  million  per  year, 
2017-2020) to the provisioning of the EFSD Guarantee Fund as indicated in Section 
3.2.1.  

–  X  The  proposal/initiative  requires  application  of  the  contingency  margin  of  the 

multiannual financial framework. 

The  Commission  intends  to  mobilise  the  contingency  margin  under  Article  13  of  Regulation 
1311/2013 for an amount of EUR 250 million in 2017. 

3.2.5.  Third-party contributions  

–  The proposal/initiative does not provide for co-financing by third parties.  

–  X The proposal/initiative provides for the co-financing estimated below: 

Appropriations in EUR million (to three decimal places) 

Year 
2017 

Year 
2018 

Year 
2019 

Year 
2020 

Enter as many years as necessary 
to show the duration of the 
impact (see point 1.6) 

Total 

Specify  the  co-financing 
body 
European 
Development Fund  

150.000  

150.000 

50.000 

50.000 

pm 

pm 

pm 

400.000 

EU  Member  States  and 
other 2.1contributors 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

TOTAL appropriations 
co-financed  

150.000  

150.000 

50.000 

50.000 

pm 

pm 

pm 

400.000 

EN 

38 

   EN 

 
 
 
 
 
 
3.3. 

Estimated impact on revenue  

–   The proposal/initiative has no financial impact on revenue. 

–   The proposal/initiative has the following financial impact: 

– 

– 

  on own resources  

X  on miscellaneous revenue  

Budget revenue line: 

Appropriations 
available for the 
current financial year 

Year 
2017 

Year 
2018 

Year 
2019 

Year 
2020 

Enter as many years as 
necessary to show the 
duration of the impact 
(see point 1.6) 

EUR million (to three decimal places) 

Impact of the proposal/initiative50 

New  article  635  Contributions  to  the 
Sustainable 
European 
assigned 
Development 
revenue 

for 
(EFSD) 

Fund 

– 

New  budget  line  6350  Contribution  of 
the EDF to the EFSD 

New  budget  line  6351  Contributions 
from  Member  States,  including  their 
agencies,  entities  or  natural  persons  to 
the  European  Fund  for  Sustainable 
Development 

New  budget  line  6352  Contributions 
from  third  countries,  including  their 
agencies,  entities  or  natural  persons  to 
the  European  Fund  for  Sustainable 
Development 

New  budget  line  6353  Contributions 
from  international  organisations  to  the 
European 
Sustainable 
Development 

Fund 

for 

pm 

pm 

150.000  150.000  50.000  50.000 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

New  budget  line  836  EU  guarantee  for 
the  European  Fund  for  Sustainable 
Development (EFSD) 

pm 

pm 

pm 

pm 

pm 

For miscellaneous 'assigned' revenue, specify the budget expenditure line(s) affected. 

01 03 07  European  Union  guarantee  for  the  European  Fund  for  Sustainable 
Development (EFSD) 

01 03 08 Provisioning of the EFSD Guarantee Fund 

Specify the method for calculating the impact on revenue. 

The EDF contribution is an initial estimate on the basis of the possible evolution of 
the new EFSD Guarantee. 

50  As  regards  traditional  own  resources  (customs  duties,  sugar  levies),  the  amounts  indicated  must  be  net 

amounts, i.e. gross amounts after deduction of 25% for collection costs. 

EN 

39 

   EN