REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT on the activities of the EU Platform for Blending in External Cooperation (EUBEC) from August 2014 until end of 2015
Date: 2016-09-19
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU financing, EU investment, co-financing, development aid, financial aid, investment project, operation of the Institutions, regional investment, third country

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 19.9.2016  COM(2016) 600 final   REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT on the activities of the EU Platform for Blending in External Cooperation (EUBEC) from August 2014 until end of 2015  
 
 
Contents 

1. 

Introduction .................................................................................................................................... 3 

2.  Blending as aid delivery mechanism ............................................................................................. 4 

2.1.  Update on governance of EU blending facilities ....................................................................... 4 

2.2. 

Follow-up on external reviews .................................................................................................. 6 

3. 

Technical discussions in the EUBEC ............................................................................................... 7 

3.1. 

Climate action ............................................................................................................................. 7 

3.2. 

Private sector .............................................................................................................................. 8 

3.3. 

Export Credit Agencies ............................................................................................................... 9 

3.4. 

Civil society ................................................................................................................................. 9 

3.5. 

Future discussions ...................................................................................................................... 9 

4.  Conclusions ................................................................................................................................... 10 

2 

 
 
 
 
 
 
 
1. 

Introduction 

The recitals of Decision 1080/2011/EU of the European Parliament and of the Council of 25 October 
20111  encouraged  the  Commission  (EC)  to  study  the  development  of  an  "EU  Platform  for  External 
Cooperation  and  Development"  with  a  view  to  optimising  the  functioning  of  mechanisms  for  the 
blending  of  grants  and  loans  in  the  field  of  external  action.  In  its  report  to  the  Council  and  the 
European  Parliament  of  26  October  20122,  the  EC  proposed  setting  up  the  new  EU  Platform  for 
Blending in External Cooperation (EUBEC), which was subsequently launched as an EC Expert Group 
on 14 December 2012.  

In line with the commitment that the EC will report to the European Parliament and Council, a first 
report covered the work of the EUBEC since its establishment on 14 December 2012 until end July 
20143. The present second report covers the period from August 2014 until December 2015. 

The objective of the EUBEC is to improve the quality and efficiency of EU development and external 
cooperation blending mechanisms, taking due account of the policy frameworks that govern the EU 
relations  with  the  different  partner  countries,  notably  EU  Development,  Neighbourhood  and 
Enlargement  policies.  The  EUBEC  should  provide  guidance  for  the  harmonisation  of  key  principles 
regarding blending activities whilst allowing for differentiation by sectors and regions. It should focus 
on  sectors  where  financial  instruments  can  be  most  usefully  deployed,  within  and  across 
geographical regions, and help to strengthen the coherence of blending activities with EU policies. 

The  EUBEC  works  through  the  Policy  Group  (PG)  that  is  chaired  by  the  EC  and  composed  of 
representatives of the EU Member States and the European External Action Service (EEAS), with the 
European  Parliament  (EP)  and  the  Financial  Institutions  (FIs)  involved  in  the  technical  work  as 
observers. Other participants may also be invited as observers. The EC also provides the Secretariat 
ensuring coordination and communication. The PG met four times in the current reporting period to 
discuss  the  technical  work,  namely  on  17  December  2014,  22  June  2015,  2  October  2015  and  6 
November 2015.  

Technical  work is  pursued  by  the EC  services,  the  EEAS,  FIs  and  a  number of  representatives  from 
Member States, as well as the EP. In the reporting period, two specific Technical Groups (TGs) were 
established, one focusing on the mobilisation of private sector resources and the other on the fight 
against  climate  change.  Each  concluded  with  a  report  and  follow-up  was  ensured  through  one 
additional  technical  level  meeting  respectively.  In  addition,  a  technical  meeting  on  Financing  for 
Development was organized. 

The  following  report  provides  firstly  an  update  on  the  structural  issues  pertaining  to  the  blending 
facilities:  their  governance;  the  measures  addressing  recommendations  by  the  Court  of  Auditors; 
and the involvement of other stakeholders. The report then recaps discussions at technical level and 

1 OJ L 280, 27.10.2011, p. 1. 
2 Ares(2012)1274079 
3  COM(2014)733.  Further  detailed  working  documents  and  reports  can  be  found  in  the  Register  of  Commission  Expert 
Groups: http://ec.europa.eu/transparency/regexpert/index.cfm, in which EUBEC is registered under no. E02852.  

3 

 
 
 
                                                            
at PG level during the reporting period on the blending facilities' contribution to mobilising private 
sector resources, the fight against climate change and Financing for Development before concluding.  

2.  Blending as aid delivery mechanism 

2.1.  Update on governance of EU blending facilities 

 According to the recommendations expressed by the EUBEC paper on governance of the blending 
facilities  endorsed  by  the  PG  on  11  July  2014,  EU  Blending  operations  are  organised  in  blending 
frameworks for each relevant financing instrument (DCI, ENI, EDF and IPA), with a single governance 
structure for each framework. Meetings of the relevant governance bodies should be organised by 
blending  framework.  The  meetings  should  be  held  back  to  back  with  the  respective  financing 
instruments' Committees, whenever possible.   

It was agreed that it should be possible to group several "facilities4” under a blending framework in 
order to be able to better address the different regional and thematic strategic priorities, to increase 
policy  leverage,  to  increase  impact,  efficiency  and  visibility  of  the  EU  aid  by  strengthening 
coordination  to  effectively  align  blending  operations  with  EU  policy  dialogue  and  priorities  with 
third-countries and to increase transparency in reporting. An addendum to the "Discussion paper on 
the future  governance  of  the EU  blending facilities"  referring  to  the channelling of  thematic funds 
was discussed and endorsed. 

In  that  sense,  the  DCI  blending  framework  with  the  Latin  American  Investment  Facility  (LAIF),  the 
Asian Investment Facility (AIF), the Investment Facility for Central Asia (IFCA) and thematic blending 
operations  was  set  up  by  Commission  Decisions  C(2014)  9128  of  04/12/2014,  C(2014)  8785  of 
26/11/2014, C(2014) 9534 of 16/12/2014 and C(2014) 9451 of 15/12/2014, respectively. 

For the European Neighbourhood Instrument (ENI), a blending framework has been set up with the 
Neighbourhood Investment Facility (NIF) by Commission Decision SI(2008)190 of 14 February 2008, 
revised by Commission Decision C(2014)5750 of 20 August 2014, and the NIF Trust Fund agreement 
dated 26 January 2009. 

The  EDF  blending  framework  is  composed  of  the  Africa  Investment  Facility  (AfIF)  (Commission 
Decision  C(2015)5210  of  29/7/2015),  the  Caribbean  Investment  Facility  (CIF)  and  the  Investment 
Facility for the Pacific (IFP). The Action Documents renewing the CIF and the IFP will be approved in 
2016. The new AfIF has a broader sectorial scope in comparison to the old EU-Africa Infrastructure 
Trust Fund (ITF) and its governance is in line with the rest of the facilities.  

It  is  also  possible  to  create  dedicated  Facility  Trust  Funds  to  enable  EU  Member  States  or  other 
donors  which  are  interested  to  provide  additional  contributions  to  blending  operations  under  the 
Facilities.  The  specific  rules  applying  to  the  Facility  Trust  Funds  will  be  determined  in  the  relevant 

4 These "facilities" have been set-up as financial envelopes and are not separate legal entities. 

4 

 
 
 
 
                                                            
Facility  Trust  Fund  Agreement.  Trust  Funds  have  already  been  created  to  support  the  NIF  and  the 
Western Balkans Investment Framework (WBIF).  

In order to be fully compliant with the new governance structure, it was also necessary to align the 
rules of procedure of the facilities. It was decided that there will be a set of rules for each one of the 
EU  blending  frameworks,  with  parallel  procedures  but  with  the  possibility  to  adapt  them  to  the 
specific features of the different blending frameworks (e.g. strategic discussions in EDF).  

In  each  one  of  the  blending  frameworks,  it  is  foreseen  that  the  decision-making  process  will  be 
organised in a two-level structure with:  

-  Technical  Assessment  Meetings,  which  are  chaired  by  the  EC  and  composed  of 
representatives of the EC services, the EEAS and FIs; and 

- Board meetings, chaired by the EC and composed of representatives of the EC services, the 
EEAS,  the  EU  Member  States  as  voting  members,  and  the  Financial  Institutions  (FIs)5  as 
observers.  

Thus, the operations of the blending frameworks, including dedicated Trust Funds, are governed by 
the Board. The Board is supported by a Technical Assessment Meeting which reviews the FI's draft 
applications from a technical and financial point of view before they are submitted to the Board. The 
conclusions of the Board are incorporated in relevant complementary Commission decisions, except 
for projects funded under the dedicated Trust Fund (which follow the rules set out in the Trust Fund 
Agreement). 

Regarding  the  strategic  discussions,  in  the  DCI  and  ENI  blending  frameworks,  the  EC  services,  the 
EEAS and  the EU Member States  hold  a regular dialogue on strategic orientations for each Facility 
with  partner  countries  and  relevant  regional  organisations.  As  a  general  principle,  the  EC  services 
and EEAS will conduct and co-chair strategic discussions at highest appropriate level with Member 
States,  beneficiary  countries  and  relevant  regional  organisations.  Discussions  should  be  held 
whenever deemed necessary by the Board, normally once a year, to discuss strategic issues, overall 
orientations  and  priorities  of  the  Facilities.  This  dialogue  will  be  based  on  relevant  strategic 
programming  documents  that  have  been  adopted  in  accordance  with  relevant  comitology  and 
democratic scrutiny. 

In the context of the European Development Fund (EDF) blending framework, strategic orientations 
will  be  discussed  with  beneficiary  countries  and/or  relevant  regional  organisations  in  dedicated 
meetings6,  under  the  ownership  principle  of  EU  development  cooperation.  These  discussions  will 
cover regional investment plans and priorities, provide strategic and policy guidance and advice for 
identification  and  preparation  of  the  most  relevant  proposals  for  blending  and  for  the  Board  to 

5 Financial Institutions for the purposes of this document comprise Lead Financial Institutions participating in blending 
operations and other invited Financial Institutions, including EDFIs (European Development Finance Institutions). Non- 
European FIs active in a particular region should be invited to attend relevant meetings as observers in technical meetings 
as well as meetings of the Board. 
6 These strategic meetings are the regional steering committees set-up in the context of the different Regional Indicative 
Programmes, the ACP-EU Private Sector Development platform and the Consultative Committee established in the context 
of the Pan-African Programme. 

5 

 
 
                                                            
review  the  pipeline  and  formulate  an  opinion  on  the  most  relevant  projects  for  achieving  EU 
objectives. 

2.2.  Follow-up on external reviews 

On 22 October 2014, the European Court of Auditors (CoA) published its Special Report No 16/2014 
on “The effectiveness of blending regional investment facility grants with financial institution loans to 
support EU external policies”.7 

Following this publication, exchanges of view were organized on this Special Report in the presence 
of the CoA and the EC by the EP Committee on Budgetary Control (CONT) on 19 January 2015 and by 
the  EP  Committee  on  Development  (CODEV)  on  22  January  2015.  A  second  exchange  with  the  EC 
was organized by CONT on 23 February 2015 and a third one by the CODEV on 6 May 2015. 

The  Council  Working  Party  on  Development  Cooperation  examined  the  report  in  accordance  with 
the provisions laid down in the Council Conclusions on the procedure for examining Special Reports 
drawn  up  by  the  CoA.8  On  21  April  2015,  the  Working  Party  reached  agreement  on  draft  Council 
Conclusions  prepared  by  the  Presidency  and  Coreper  has  confirmed  the  agreement  on  the  text 
before submitting it to the Council for adoption. 

Most of the recommendations made by the CoA have been dealt with by the EC in the context of the 
EUBEC with:  

 

the development of a harmonised and improved  project application form and its guidance 
notes;  
the development of a results measurement framework including standard indicators;  
the adoption of a Guidelines document on blending operations;  

 
 
  a  more  proactive  and  closer  role  of  the  EU  Delegations  in  identifying  and  selecting  the 

blending projects;  

  a revised new Governance of the blending facilities;  
  a streamlined and shortened approval process;  
  an  extended  training  programme  for  EC  officials  dealing  with  blending  in  Brussels  and  in 

Delegations;  

  and the publication of a short description of each blended project in a dedicated website for 

visibility purposes9.  

The  EC  is  still  internally  discussing  the  necessary  adaptation  of  its  Results  Oriented  Monitoring 
(ROM) methodology to the specific characteristics of blending. 

The  EC  is  also  conducting  an  evaluation  on  blending,  which  is  now  well  underway.  Blending  is  a 
relatively new instrument which is considered innovative and presenting high potential. At the same 
time, the instrument attracts increasing interest of a number of European, regional and international 
stakeholders.  There  is  a  clear  need  to  collect  more  evidence  in  relation  to  the  degree  of  its 

7 This special report is also available on the Court's website: http://eca.europa.eu 
8 Doc. 7515/00 FIN 127 + COR 1 
9 At https://ec.europa.eu/europeaid/policies/innovative-financial-instruments-blending/blending-operations_en   

6 

 
 
                                                            
effectiveness.  The  evaluation  will  make  use  of  the  evidence  provided  by  past  and  incoming 
evaluations and studies (including the NIF, ITF, WBIF evaluations as well as the Results Measurement 
study  conducted  by  Cambridge  Economic  Policy  Associates  (CEPA)  in  2013  for  ITF-supported 
projects)  and  will  avoid  duplicating  the  work  already  done.  The  evaluation  shall  build  on  what  is 
already known, and strengthen  the evidence base in relation  to the effectiveness of blending.  The 
evaluation was launched in January 2015 and its work is still ongoing.  

3.  Technical discussions in the EUBEC 

At  the  Addis  Ababa  Summit  from  13  -  16  July  2015,  the  Addis  Ababa  Action  Agenda  (AAAA)  was 
adopted,  establishing  the  move  to  a  new  sustainable  development  paradigm,  including  aspects  of 
governance,  gender,  partnerships,  and  working  with  the  private  sector.  Many  parts  of  the  AAAA 
were relevant for the EU Blending: employment and decent work for all as a central objective, access 
to finance for micro, small and medium-sized enterprises (MSMEs), transparent and stable rules and 
standards and free and fair competition, conducive to achieving national development policies.  

In the margins of the Summit the African Union (the AU) and the EU co-organized a side-event on 
Private  sector  and  Blending  that  attracted  over  200  participants.  Two  panels  dealt  with: 
"Contributing  to  build  a  strategic  framework  for  working  for,  and  with,  the  private  sector  towards 
achieving  the  AU  ‘Agenda  2063’"  and  "Catalysing  private  sector  resources  and  engagement  for 
development through blending, in particular in the agriculture and energy sector".  

As the flows of refugees and migrants intensified in the course of the year 2015, the EUBEC group 
identified the importance of the potential contribution of blending to addressing this challenge as an 
urgent  priority,  in  particular  with  a  view  to  addressing  the  root  causes  of  migration.  At  the  Policy 
Group  meeting  in  November  2015,  EUBEC  members  agreed  to  exchange  relevant  information  and 
coordinate on available blending funds in the concerned countries. Financial instruments already in 
place were explained, and FIs were called to contribute to the best of their ability according to their 
individual  strengths.  Going  forward,  efforts  to  maintain  complementarity  will  be  intensified,  with 
migration set to become a standard point in the Policy Group meetings. The EUBEC group will be an 
important  tool  to  involve  both  FIs'  expertise  and  Member  States'  policy  guidance  as  the  EU 
formulates its holistic response to this crucial challenge.  

3.1.  Climate action 

Climate action is an integral part of the EU blending, with about 62% of operations directly relevant. 
Blending is a powerful tool to support EU climate action both in adaptation and mitigation, because 
it  allows  climate  investments  to  be  achieved  at  scale,  leveraging  additional  sources  of  climate 
finance. The regional facilities are a key element of EU support to developing countries in low carbon 
and climate resilient development.  
Since  July  2014,  EUBEC  has  sought  to  improve  the  climate  relevance  and  impact  of  EU  blending 
operations.  To  this  end,  a  technical  group  on  climate  was  set  up  (Technical  Group  7),  which 
discussed possible improvements and prepared a report with options to strengthen climate action in 

7 

 
 
 
 
 
 
the EU blending facilities.  
There  was  a  strong  agreement  that  the  EU  Blending  Facilities  should  continue  providing  climate 
finance  based  on  its  proven  strengths  and  building  on  synergies  with  other  instruments,  continue 
playing  a  strong  role  in  the  preparation  of  project  pipelines  and  mainstreaming  low-carbon  and 
climate  resilient  development  in  the  pipeline,  and  work  with  private  and  public  sector  actors  and 
multilateral  climate  funds  (e.g.  the  Green  Climate  Fund),  notably  to  mobilise  private  capital  for 
improve  the  communication,  visibility  and 
climate 
transparency of climate action in EU blending. 
The  EUBEC  discussions  were  a  contribution  to  the  EU  preparations  for  and  participation  at  the 
successful  Paris  Climate  Agreement,  including  a  well-attended  and  received  side  event  during  the 
COP21. 

investments.  EUBEC  also  continued  to 

3.2.   Private sector  

Taking into account the EU principles and criteria for supporting private sector actors, as detailed in 
the  Private  Sector  Development  Communication  and  supported  by  the  Council  Conclusions  of  12 
December 2014, and previous work carried out under the EUBEC on further use of specific financial 
instruments, the Technical Group 6 identified lessons learned, as well as a number of good practices 
to be considered in blended operations. The Group presented recommendations to the December 
2014  PG,  briefly  summarized  as:  (1)  The  success  in  attracting  private  sector  resources  for  projects 
financed through the blending mechanisms will be monitored according to a common methodology 
through  a  specific  leverage  indicator;  (2)  Contributions  by  private  stakeholders  at  Blending  Facility 
level  could  be  done  through  dedicated  funds,  alongside  additional  contributions  from  Member 
States, while preserving the capacity of the EU to ensure alignment of supported projects with EU 
strategic  objectives  and  priorities;  (3)  Donor  support  is  an  important  tool  for  the  EU  and  FIs  to 
develop  local  markets,  e.g.  through  local  currency  financing  instruments,  dedicated  funds,  and 
portfolio  risk  sharing;  (4)  Technical  Assistance  to  all  relevant  parties  is  indispensable  to  develop  a 
local business environment conducive to investment, to increase the supply of bankable projects, to 
develop  local  services  supporting  business  and  to  improve  absorptive  capacity  of  potential 
beneficiaries; (5) The scope for closer cooperation with selected social investors and NGOs that have 
developed  specific  expertise  in  areas  where  FI  are  less  active  in  the  context  of  the  blending 
instruments  could  be  examined;  (6)  It  is  important  that  recourse  to  blending  for  private  sector 
operations  be  properly  justified,  with  clear  identification  of  the  market  failures  addressed  or 
distributional objectives and to ensure that the subsidy is properly calibrated and is structured in line 
with  actual  needs,  also  in  view  of  non-financial  risks  related  to  the  use  of  specific  financial 
instruments  in  blending  operations  with  private  sector  involvement;  (7)  Ensuring  that  projects 
involving  private  sector  are  assessed  in  terms  of  their  development  results,  and  in  particular  with 
regards  to  the  risk  that  financial  incentives  outweigh  development  principles,  can  be  achieved 
through strong monitoring systems strict adherence to high standards of conduct by beneficiaries, 
with respect to environmental and social policies and practices, corporate governance, transparency 
and integrity, including prevention of tax fraud and tax evasion.  

As a follow up of the work undertaken in the framework of TG 6, a Technical Meeting was held on 16 
October 2015, focused on the main constraints preventing institutional and other private investors 

8 

 
 
 
 
from  participating  in  the  financing  of  projects  in  the  emerging  countries.  Inadequate  risk/return 
profiles, rating, liquidity, currency and transaction size were identified as some of the aspects that 
should be considered. Possible solutions included loan syndication, participation of private investors 
in  the  loan  market,  participation  in  equity  funds,  and  donor  support  to  reduce  expected  loss  and 
increase attractiveness. 
FIs stressed that some success at attracting institutional investor interest on a per project basis for 
relevant  projects  had  been  attained.  However,  success  at  the  portfolio  level  has  been  limited  to 
date,  though  efforts  are  ongoing.  Some  innovative  examples  were  discussed,  aiming  to  attract 
private investors on the basis of a shared portfolio. Looking ahead, financial Institutions were asked 
to  submit  more  concrete  concepts  for  further  discussion  in  view  of  enhanced  private  sector 
participation and potential EU involvement. 

3.3.  Export Credit Agencies 

Regarding  the  potential  collaboration  between  Finance  Institutions  and  Export  Credit  Agencies 
(''ECAs''), participants discussed some of the possible issues of bringing in the ECAs and commercial 
banks in public sector programmes financed by the EC and the FIs. 
Some  financial  institutions  pointed  out  that  there  is  a  danger  of  ECAs  crowding  out  commercial 
finance that is actually available, thus distorting the market and setting the wrong incentives. FIs also 
noted  that sharing the  preferred  creditor  status  would  not  bring  in additional  benefits,  since  ECAs 
usually  are  preferred  creditors  as  lenders.  FIs  expressed  their  view  that  sharing  the  preferred 
creditor status with commercial banks is not an option for the FIs in public sector projects where the 
sovereign acts  as  borrower  or  guarantor,  while  in  private  sector  projects  this  is  quite  common.  As 
pointed  out  by  the  FIs,  European  Banking  Association  and  the  Danish  ECA,  there  are  already 
examples of cooperation between FIs, commercial banks and ECAs in developing countries, such as 
the mixed credit schemes in Belgium, Denmark and Austria as well as the collaboration between FIs 
and ECAs in the context of the Berne Union in various areas.  
The  participants  concluded  that  cooperation  with  ECAs  and  commercial  banks  in  the  context  of 
blending facilities is already a possible option, and no further sessions will be needed. Participants 
were  invited  to  propose  concrete  project  ideas  involving  the  ECAs  and  commercial  banks  for 
consideration in the blending frameworks. 

3.4.  Civil society  

The EC continued its exchange on blending with CSOs and private sector. Four meetings were held 
during  2014:  three  in  the  context  of  the  Policy  Forum  on  Development  (PFD)  during  the  sessions 
organised  in  Lima  (Peru),  Bangkok  (Thailand)  and  Brussels.  A  specific  workshop  on  the  work 
produced in the context of TG6 was also organised in November 2014. 

3.5.  Future discussions 

Technical meetings and Policy Group meetings under the EUBEC will continue to be held on key EU 
policy  issues  such  as  the  response  to  the  migration  crisis,  climate  change  and  private  sector 
engagement, including on the possibilities for using a guarantee model in third countries, building on 

9 

 
 
 
 
 
 
 
the  experiences  with  the  Investment  Plan  for  Europe,  that  would  allow  International  Financial 
Institutions to address specific bottlenecks to investment and thus crowd in private actors.  

4.  Conclusions 

1)  The EU blending facilities have continued to perform adequately in support of EU external 

policies. Clear and consistent governance is now in practice.  

2)  Most  of  the  recommendations  raised  in  a  report  by  the  Court  of  Auditors  regarding  the 
effectiveness of the blending facilities have already been dealt with mainly in the context of 
the EUBEC, and the EC will continue to pay close attention to the process and any concerns 
raised.  

3)  Blending remains a relatively new instrument, and an independent external evaluation of its 
effectiveness is now ongoing, based on evidence so far. Consultation of other stakeholders 
such as Civil Society Organisations also continues. 

4)  On  private  sector  mobilisation,  building  on  previous  EUBEC  work,  technical  discussions  on 
particular  concepts  presented  by  the  FIs  continued,  and  FIs  were  asked  to  continue  to 
present concrete concepts for further discussion.  

5)  Regarding  climate  action,  the  regional  blending  facilities  need  to  continue  to  integrate 
climate  action  in  the  EU  blending  operations  and  support  the  implementation  of  the  Paris 
Climate Agreement. The EUBEC discussions should support the implementation and provide 
further horizontal guidance as needed.  

10