REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of the European Fund for Sustainable Development
Date: 2020-06-02
Institutions: Directorate-General for International Cooperation and Development, European Commission
Subjects: ACP countries, Africa, European Neighbourhood and Partnership Instrument, eligibility criteria, fund (EU), investment promotion, regional investment, sustainable development

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 2.6.2020  COM(2020) 224 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of the European Fund for Sustainable Development  
 
 
Table of Contents 

1. 

2. 

Executive summary ........................................................................................................................... 2 

Purpose and scope of the implementation report ........................................................................... 4 

The European Fund for Sustainable Development and its implementation ................................ 4 
3. 
3.1. 
EFSD Guarantee ................................................................................................................................. 4 
3.2.  Blending  ............................................................................................................................................. 6 
Africa Investment Platform ................................................................................................ 6 
Neighbourhood Investment Platform ................................................................................. 6 

3.2.1. 
3.2.2. 

4. 

Assessment methodology .................................................................................................................. 6 

5. 
Findings and answers to assessment questions  .............................................................................. 7 
5.1.  Relevance ............................................................................................................................................ 7 
Effectiveness and value added ............................................................................................................ 7 
5.2. 
5.3. 
Efficiency ............................................................................................................................................ 8 
5.4.  Coherence and co-ordination .............................................................................................................. 9 
Sustainability .................................................................................................................................... 10 
5.5. 

6. 

Conclusions and recommendations ............................................................................................... 10 

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1.  EXECUTIVE SUMMARY 

The European Fund for Sustainable Development (EFSD) was set up by Regulation (EU) 
2017/1601 the (‘EFSD Regulation’)1. It provides the legal basis for the use of innovative 
financial tools under the External Investment Plan (‘EIP’ / the ‘Plan’), notably budgetary 
guarantees. 

The EIP consists of three pillars. The EFSD constitutes the first pillar of the EIP, with the 
key  objective  to  provide  an  integrated  financial  package  to  finance  investments  in  the 
regions of Africa and the European Neighbourhood. It includes both blending operations 
and the guarantees. Technical assistance is provided through Pillar 2, to local authorities, 
as well as to enterprises, companies or cooperatives to develop better and viable projects. 
Technical  assistance  is  also  provided  to  activities  classified  under  Pillar  3,  which  are 
activities  supporting  structured  political  and  private  sector  dialogue  with  partner 
countries  and  other  stakeholders  for  improving  the  investment  climate  and  business 
environment. 

Together  with  its  partner  Financial  Institutions  (‘FIs’),  the  European  Commission  has 
already  made  good  progress  in  putting  the  Plan  into  practice  with  many  activities 
ongoing in all three pillars. 

The  present  report  builds  on  an  external  independent  assessment  that  was  carried  out 
between  July  2019  and  January  2020.  This  assessment  underlined  that  the  EFSD  is 
strongly  relevant  to  the  investment  needs  of  the  Sub-Saharan  Africa  and  the  EU 
Neighbourhood regions, as well as to the EU priorities and commitments. 

With  regard  to  ‘relevance’,  the  EFSD  approach  has  been  characterised  as  highly 
relevant  in  the  ‘new  Sustainable  Development  Goals  (SDG)-led  global  development 
finance model’2, given the EFSD’s catalytic role, risk sharing capabilities and ability to 
enhance partnerships. It is thus considered to be one of the leading examples of this new 
model  in  action  so  far.  By  launching  the  EFSD,  the  EU  is  defining  the  term  ‘new 
generation donor’. 

On ‘effectiveness and additionality’ the assessment states that early stage dialogue in-
country ensures that the EFSD pipeline is aligned with SDG priorities. 

The  EFSD  enables  the  EU  to  do  two  things  that  are  difficult  to  do  with  other  EU 
instruments:  engage  much  more  broadly  in  support  of  private  sector  development  and 
sub-sovereign investments, and support broad innovation. 

With regard to ‘efficiency’, the external assessment confirms that the EFSD governance 
structure facilitates transparency and coordination with all involved actors. 

On  ‘coherence’,  the  external  independent  assessment  points  out  that  the  EFSD 
encourages greater coordination and alignment between the EU and FIs. With the EFSD 

1   Regulation  (EU)  2017/1601  of  the  European  Parliament  and  of  the  Council  of  26  September  2017 
establishing  the  European  Fund  for  Sustainable  Development,  the  EFSD  Guarantee  and  the  EFSD 
Guarantee Fund 

2   A  model  where  development  finance  is  targeted  at  the  attainment  of  the  Sustainable  Development 
Goals  by  2030,  therefore  helping  to  bridge  the  financing  gap  identified  by  the  United  Nations  in 
relation to that objective 

2 

 
 
                                                      
Guarantee,  efforts  have  been  made  to  engage  with  more  FIs,  including  an  open  access 
model3 and portfolio approach that provides increased flexibility. 

Finally the external assessment highlights that long-term sustainability of the EFSD as 
an  approach  is  currently  ensured  by  high  levels  of  demand.  This  is  reinforced  by  the 
potential  of  the  EFSD  (guarantees  in  particular)  to  test  and  develop  new  financial 
products. 

These positive findings are reflected by the state of implementation of the EFSD. On the 
blending  side,  EUR  3.1  billion  have  been  allocated  so  far  for  blending  projects  – 
financing  154  projects  across  the  African  continent  and  the  EU  neighbourhood.  This 
EUR  3.1  billion  is  set  to  bring  in  about  EUR  30  billion  in  overall  investment  in  the 
energy and transport sectors primarily, while also developing the private and agricultural 
sectors. 

On  the  guarantee  side,  seven  guarantee  agreements  had  already  been  signed  by  April 
2020.  The  Commission  signed  the  first  guarantee  agreement  concerning  the  NASIRA 
project at the end of 2018, only a bit more than one year after the EFSD Regulation was 
adopted. As outlined in the external independent assessment, setting up a programme this 
large  and  innovative  in  such  a  time  line  can  be  considered  fast  as  compared  to  other 
similar mechanisms. The subsequent signature of the other guarantee agreements showed 
the need to clarify persistent horizontal issues (see below), which would thereafter ensure 
the swift conclusion of all subsequent  guarantee  agreements  prior to  end of the present 
Multiannual Financial Framework. 

The  EFSD  Guarantee  utilises,  amongst  others,  structures  that  aim  to  pinpoint  the 
incremental  risks  of  moving  into  new,  more  challenging  markets,  such  as  second-loss 
guarantees.  There  is  a  stronger  focus  on  supporting  additional  investments  by  private 
investors  and  the  guarantees  not  only  aim  to  support  investment  but  also  to  create 
markets,  which  may  ultimately  make  the  guarantee  support  unnecessary.  The  EFSD 
Guarantee  thus  represents  a  major  development  in  the  set  of  instruments  used  by  the 
Commission in external cooperation. 

With regard to the investment climate in 2019 alone, the Commission has made available 
over  EUR  600  million  to  support  the  efforts  of  our  partner  countries  to  become  more 
compelling places in which to invest. 

Thus, overall the EIP and the EFSD are well on track and, in spite of some challenges, 
the  initial  target  should  be  surpassed  with  the  EFSD  leveraging  EUR  47  billion  of 
investments by the end of the investment period, using EUR 4.6 billion under blending 
grants and EFSD guarantees. 

3   Since the late 1970s, the EEC/EU has provided budgetary guarantees to cover the  risks of financing 
operations  undertaken  by  the  European  Investment  Bank  outside  the  EU  (the  so-called  External 
Lending  Mandate,  most  recently  evaluated  in  SWD(2019)  333  final).  Under  the  European  Fund  for 
Sustainable Development,  the EU is able to provide budgetary guarantees to the EIB as  well as to a 
number of other international financial institutions or development finance institutions of EU Member 
States  

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2.  PURPOSE AND SCOPE OF THE IMPLEMENTATION REPORT 

Article  17(1)  of  the  EFSD  Regulation  provides  that  the  Commission  shall  evaluate  the 
initial  functioning  of  the  EFSD,  its  management  and  its  effective  contribution  to  the 
purpose and objectives of the Regulation. 

In  order  to  provide  as  much  information  as  possible  and  taking  into  account  the  early 
implementation  stage  of  the  EFSD,  the  Commission  produced  this  implementation 
report, encompassing the initial assessment of the main evaluation criteria of relevance, 
efficiency, effectiveness, coherence and value added. The current report is based on the 
results of an external assessment carried out between July 2019 and January 2020. 

The  scope  of  the  report  covers  the  period  from  1  January  2017  to  30  September  2019  
(the cut-off date). 

In  terms  of  instruments,  the  report  covers  the  Africa  and  Neighbourhood  Investment 
Platforms,  including  both  blending  operations  and  the  EFSD  guarantee.  In  line  with 
the  EU 
the  geographic  coverage 
these, 
Neighbourhood (east and south) countries. 

the  Sub-Saharan  Africa  and 

includes 

3.  THE  EUROPEAN  FUND  FOR  SUSTAINABLE  DEVELOPMENT  AND  ITS 

IMPLEMENTATION 

The EFSD constitutes the first pillar of the External Investment Plan. Its key objective is 
to provide an integrated financial package to finance investments starting in the regions 
of  Africa  and  the  Neighbourhood.  EFSD  is  composed  of  two  Regional  Investment 
Platforms: one for Africa – the Africa Investment Platform (‘AIP’) and the second for the 
EU Neighbourhood – the Neighbourhood Investment Platform (‘NIP’). These platforms 
were established on the basis of previous blending facilities, Africa Investment Facility 
and  Neighbourhood  Investment  Facility.  They  combine  EU  blending  with  a  new 
guarantee  instrument  (EFSD  Guarantee)  The  aims  are  to  scale  up  resources  for 
addressing  the  root  causes  of  migration  and  to  contribute  to  the  achievement  of  the 
SDGs. 

3.1.  EFSD Guarantee  

The EFSD Guarantee is a key innovative element of the EU External Investment Plan 
used to reduce the risks  for investment in sustainable development in partner countries, 
thus  helping  mobilise  investment.  Its  aim  is  to  support  investments  in  Africa  and  the 
European Neighbourhood with a view to foster sustainable and inclusive economic and 
social development, maximise additionality, as well as to crowd-in private sector funds. 
The  guarantee  is  intended  to  serve  as  a  risk  mitigation  mechanism  to  leverage  private 
sector financing whilst avoiding market distortions. 

The  EFSD  Guarantee  shall  not  exceed  EUR  1.5 billion  to  be  covered  from  the  general 
budget, with  the possibility for contributions from  other parties. Until the end of 2019, 
additional  contributions  include  USD  50  million  from  the  Bill  and  Melinda  Gates 

4 

 
 
 
Foundation, EUR 9.6 million from Denmark, EUR 300 000 from the Czech Republic and 
EUR 100 000 from Estonia. 

As  provided  in  Article  9(4)  of  the  EFSD  Regulation,  the  Commission  established  five 
investment windows along the main priority areas4: 

  Sustainable Energy and Connectivity  
  Micro, Small and Medium Enterprise (MSME) Financing 
  Sustainable Agriculture, Rural Entrepreneurs and Agribusiness 
  Sustainable Cities 
  Digital for Development  

For each investment window, a variety of eligible counterparts presented their proposals, 
referred to as Proposed Investment Programmes (PIPs). 

EUR  1.54  billion  have  been  allocated  to  twenty-eight  proposed  guarantee  programs. 
These are set to bring in an expected EUR 17.5 billion in overall investment. In terms of 
priority  areas,  the  guarantee  amounts  approved  in  the  sector  of  sustainable  energy  and 
connectivity  reached  EUR  603.5  million,  in  intermediated  lending  for  MSMEs  and 
agriculture  EUR 522 million,  in  digitalisation  EUR 220 million,  in  sustainable  cities 
EUR 167 million,  while  EUR  22  million  was  foreseen  to  support  local  currency 
financing5.  
Of the twenty-eight guarantees, seven guarantee agreements were signed by April 20206.  
More signatures are to follow, with possible refocussing in order to contribute to a robust 
and targeted EU response to support partner countries' efforts in tackling the coronavirus 
pandemic7. 

In  parallel  to  the  swiftness  of  their  implementation,  appropriate  provisions  must  be 
agreed implementing the regulatory requirements for financial instruments and budgetary 
guarantees  as  set  out  in  the  EU  Financial  Regulation8  and  other  EU  legislation.  In 
particular, contracting with non-European development financial institutions has proven 
more  effort  and  time  intensive,  as  the  EU  requirements  sometimes  go  beyond 
internationally  accepted  standards,  e.g.  on  anti-money  laundering  and  non-cooperative 
jurisdictions.  In  order  to  ensure  the  effectiveness  in  the  implementation,  it  is  therefore 
important for the Commission to  have  taken due account when selecting and involving 
FIs  of  their  financial  and  operational  capacity  so  as  to  build  a  financial  architecture 
contributing  to  the  policy  objectives  and   to  ensure  adequately  the  sound  financial 
management  of  Union  funds.  This  requires  intensive  dialogue  and  negotiation  of 
comparable contractual clauses between the Commission and its partners. 

4    C(2017) 7899 final 
5    https://ec.europa.eu/international-partnerships/system/files/181213-28-guarantees-table_en.pdf 
6   FMO’s  NASIRA  Guarantee  Facility,  CDP  and  AfDB’s  Archipelagos  Guarantee  Agreement,  FMO’s 
Ventures  Programme  Guarantee  Agreement,  EBRD’s  Framework  to  Scale-up  Renewable  Energy 
Investments, AECID and World Bank Group’s Resilient City Development (RECIDE), KfW’s African 
Energy Guarantee Facility ‘AEGF’ and EIB’s SME Access to Finance Guarantee Agreement 

7   https://ec.europa.eu/commission/presscorner/detail/en/ip_20_604; Coronavirus: EU global response to 

fight the pandemic 

8   Regulation (EU, Euratom) 2018/1046 

5 

 
 
 
                                                      
It is crucial that the agreements are thoroughly sound and comprehensive and in line with 
the requirements  set  by the EU Financial Regulation  and the EFSD Regulation, so that 
our  partners  are  clear  about  what  they  are  expected  to  deliver  with  these  guarantees, 
backed by the EU taxpayers’ money. 

3.2.  Blending  

Blending  combines  EU  financial  support  with  loans  or  equity  from  other  public  and 
private financiers to leverage public and private investments contributing to sustainable 
economic development. In the framework of the EFSD, blending is implemented through 
two  regional  blending  platforms:  Africa  Investment  Platform  (AIP,  formerly  the  Africa 
Investment  Facility;  AfIF)  and  the  Neighbourhood  Investment  Platform  (NIP,  formerly 
the Neighbourhood Investment Facility; NIF). 

From 2017 to 2019 a total of EUR 3.75 million was pledged and paid to the NIP Trust 
Fund, of which EUR 2.75 million by Germany and EUR 1 million by Estonia. 

3.2.1.  Africa Investment Platform 

The  key  objective  of  the  Africa  Investment  Platform  is  to  promote  the  economic  and 
social  development  of  partner  countries,  including  through  the  mobilisation  of  private 
sector resources, with a focus on sustainability and decent job creation, socio-economic 
sectors and sustainable agriculture. 

During  the  period  2017-2019,  under  the  Africa  Investment  Platform,  the  EU  has 
contributed  EUR 1.8 billion  towards  78  operations,  unlocking  total  investment  in  Sub-
Saharan Africa of EUR 13.5 billion. 

Projects  thus  far  have  primarily  been  focused  on  the  transport  and  energy  sectors, 
accounting  for  44%  and  34%  of  operations  respectively.  Ensuring 
improved 
infrastructure  and  access  to  energy  are  both  prerequisites  for  future  effective  growth. 
Remaining projects have targeted the private sector development, environment, ICT and 
agriculture 9. 

3.2.2.  Neighbourhood Investment Platform 

Similarly, during the period 2017-2019, under the Neighbourhood Investment Platform, 
the  EU  has  contributed  EUR 1.3 billion  towards  76  operations.  It  is  estimated  that  this 
funding  will  help  to  unlock  total  investment  in  the  Neighbourhood  region  of  some 
EUR 16.2 billion. 

The  regional  split  between  Eastern  and  Southern  Neighbourhood  is  44%-56%.  Projects 
thus far have primarily been focused on private sector development (33%), energy (18%) 

9   For detailed information refer to the upcoming EFSD Operational Report 2019 (to be published)  

6 

 
 
 
 
                                                      
and  water  and  sanitation  (18%).  Remaining  projects  have  targeted  the  transport, 
environment, education, urban development and agriculture10. 

4.  ASSESSMENT METHODOLOGY 

The implementation report provides the assessment by the Commission services, on the 
initial functioning of the EFSD, its management and its contribution to the purpose and 
objectives  of  the  EFSD  Regulation.  This  Commission’s  report  is  based  on  the  work  of 
external consultants, which provided an independent external assessment. 

The external assessment was commissioned to provide an independent view of the initial 
stage  of  the  implementation  of  the  EFSD  and  was  based,  as  much  as  possible  at  this 
stage,  on  the  five  assessment  criteria  of  relevance,  efficiency,  effectiveness,  coherence 
and value added.  

5.  FINDINGS AND ANSWERS TO ASSESSMENT QUESTIONS  

5.1.  Relevance  

The  first  evaluation  question  refers  to  the  relevance  of  the  EFSD  and  reads:  ‘Do  the 
EFSD guarantee/blending tools respond to the call for a new development finance model 
in the SDG era, as well as the investment needs of the two regions and EU priorities and 
commitments?’  

In  response  to  this  question,  the  external  assessment  states  that  the  EFSD  is  highly 
relevant to the need for a new global development finance model and similarly strongly 
relevant  to  the  investment  needs  of  the  two  regions  (Sub-Saharan  Africa  and  the  EU 
Neighbourhood), as well as to the gamut of EU priorities and commitments. 

The  EFSD  was  found  to  be  highly  relevant  to  the  requirements  of  the  ‘new  SDGs-led 
global  development  finance  model’,  particularly  in  terms  of  catalytic  role,  sharing  risk 
and developing partnerships. It is considered to be probably one of the leading examples 
of that new model in action so far.  

The evidence shows that the EFSD is policy driven. Its policy focus is compatible with 
the SDGs, compatible with the demand (needs) in partner countries and impacts the loan 
allocations  of  FI  partners,  by  providing  guidance  to  those  allocations  based  on  policy 
orientations. 

The evidence shows that the EIP  – and the EFSD within it  – builds on and is coherent 
with  a range of other EU commitments and priorities.  It  also  shows that  the EFSD has 
enabled the EU to engage more broadly.  

In view of the fact  that the EFSD only  supports  loans and  equity  related  to  investment 
projects,  it  cannot  be  a  substitute  for  budget  support,  which  does  not  accommodate 

10   Idem 

7 

 
 
                                                      
projects, nor for direct grants to entities that do not have the capacity to borrow, such as 
non-governmental organisations. 

5.2.  Effectiveness and value added 

The  second  evaluation  question  refers  to  the  effectiveness  and  the  value  added  criteria 
and  reads  ‘Does  the  EFSD  deliver  against  objectives  and  specific  EU  priorities  and 
provide additionality in its support to target countries?’ 

In  response  to  this  question,  the  external  assessment  states  that  the  EFSD  delivers  on 
financial additionality, shows early promise of delivering on non-financial  additionality 
and  has  enabled  broader  engagement.  While  visibility  is  in  compliance  with  the 
Regulation, there is an opportunity for further enhancement by developing a ‘brand’. 

The  EFSD  is  crowding-in  substantial  amounts  of  other  funding  (including  private  co-
financing). As the study informs, taking blending and guarantees together, the EFSD data as 
of  September  2019  shows  that  EFSD  approvals  of  EUR  4.03  billion  mobilise  EUR  40.5 
billion  of  total  investments  –  which  gives  an  average  financial  leverage  figure  of  10.0411. 
This demonstrates the effectiveness of the EFSD model to attract more money.  

Below the headline figure there is considerable complexity and diversity as regards to the 
instrument, sector, country or regions. The future leverage will thus depend on EFSD’s 
instrument,  project  and  country  mix.  Furthermore,  blending  and  guarantees  mobilise 
different  types  of  ‘additional  money’,  reflecting  the  different  types  of  projects  they 
support. 

The external assessment further considers that early stage dialogue in-country ensures the 
EFSD pipeline is aligned with SDGs priorities and initial evidence shows there is broad 
alignment with many SDGs priorities and targets. Additionality at project level appears 
strong  and  qualitatively  substantiated  –  but  rarely  quantified.  At  policy  level,  there  are 
examples where EFSD supported to, or reinforced a policy change.  

The  first  guarantee  agreement  signed,  NASIRA,  implemented  by  FMO,  gives  a  good 
example on how the root causes of migration are being addressed; it addresses the high 
risks,  both  perceived  and  real,  involved  in  lending  to  under-served  entrepreneurs  in 
countries  neighbouring  the  EU  and  in  Sub-Saharan  Africa,  many  of  whom  have  been 
forced  to  flee  their  homes.  It  gives  them  access  to  investment  loans  by  offering  local 
financial  institutions,  such  as  banks  and  microfinance  institutions,  portfolio  guarantees 
containing loans to entrepreneurs. 

The  EFSD  enables  the  EU  to  do  two  things  that  are  difficult  to  do  with  other  EU 
instruments  –  at  least  to  the  same  scale  and  with  existing  budgets:  engage  much  more 
broadly  in  support  of  private  sector  development  and  sub-sovereign  investments,  and 
support innovation. 

11   Corroborated by end-2019 update: approvals of EUR 4.6 billion unlock EUR 47 billion of investments 
https://ec.europa.eu/commission/sites/beta-political/files/update4_jan20_factsheet_eip_en_0.pdf 

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The visibility picture complies with the EFSD Regulation and EU Guidelines, but some 
challenges  and  opportunities  lie  ahead.  These  include  possible  improvements  in  the 
definition of the communication strategy at project level, creation of brand image for EU 
development  support,  as  well  as  adequate  follow-up  on  the  existing  communication 
activities especially with the private sector. 

5.3.  Efficiency 

The  third  evaluation  question  refers  to  the  EFSD  efficiency  and  reads:  ‘To  what  extent 
does the set-up, design, functioning, management and structure of the EFSD contribute 
towards achieving its aims?’ 

In response to this question, the external assessment states that within the existing set-up, 
the  governance  of  the  EFSD  complies  with  the  Regulation,  as  does  the  financial 
management. 

The  external  assessment  confirms  that  the  EFSD  governance  structure  facilitates 
transparent management and partnership and complies with the EFSD Regulation. 

Certain  challenges  and  operational  issues  were  identified  and  stressed  in  interviews. 
These  related  to:  managing  the  product  diversity  within  the  EFSD  (i.e.  blending  and 
guarantees),  the  business  process  and  timing  impact;  staff  capacity  and  division  of 
responsibilities;  knowledge management. These issues can be attributed to the ‘learning 
curve’ given the early stage nature of the guarantee programmes. Based on the analysis, 
the  study  concludes  that  EFSD’s  operational  blueprint  needs  more  detailed  review 
focusing  on:  i)  the  purpose  and  design  of  the  business  process;  ii)  the  organisation 
structure; iii) staff skills and training; and iv) knowledge management. 

While blending grants are set as result of calculation and considering “available budget”, 
quantification  of  calculations  should  be  more  regularly  used.  In  the  case  of  the  EFSD 
Guarantee, allocations to PIPs were modified and adapted responding to a programming 
exercise designed to ensure a spread of programmes across the five windows.  

The EFSD monitoring framework design is aligned with the EU Results Framework for 
development  cooperation,  but  its  ability  to  produce  data  that  can  be  consolidated  and 
aggregated  should  be  improved,  taking  into  account  the  following:  i)  the  methodology 
still needs to be agreed for some of the proposed indicators, ii) limited added value and 
lack of comparability of core sector indicators; and iii) tensions between the Commission 
services’ reporting needs and FIs’ own systems and approach to monitoring: FIs need to 
report  on  two  frameworks  (EU’s  and  internal)  which  increases  costs  and  encourages  a 
narrower focus on common ground (similar or comparable indicators). 

5.4.  Coherence and co-ordination 

The  fourth  evaluation  question  refers  to  the  EFSD  coherence  and  co-ordination  and 
reads: ‘To what extent is the EFSD equipped to ensure coherence internally, in relation 
to EU strategies and policies in the regions, and with FIs’ operations?’ 

9 

 
 
 
In response, the external assessment considers the EFSD coherence at three different levels: 
a) amongst EFSD components, b) with other forms of EU support; and c) with the activities 
of FIs.  

As  regards  the  coherence  amongst  the  EFSD  components,  the  launch  of  the  EFSD 
guarantee programmes may affect the future range of blending grants, and diminish the 
rationale for guarantees under blending, as well as the applicability of paid-in risk capital 
for first-loss tranches in structured funds. So some formal rationalisation may be needed 
to  improve  the  coherence  of  the  EFSD  ‘product  mix’.  Operational  and  project  cycle 
aspects may need review in order to improve synergies. 

In  terms  of  coherence  with  other  forms  of  support,  the  study  considers  that  the  EFSD 
represents  a  differentiated  set  of  tools  and  complements  other  forms  of  support.  The  study 
confirms  that  the  integration  of  the  EFSD  as  one  of  the  three  pillars  of  the  EIP  should 
encourage greater complementarity and coordination between the EFSD and other forms of 
EU support.  

Blending operations are relatively well coordinated with other forms of support, which is 
mostly due to direct engagement of EU Delegations. However, attention is drawn to their 
role and involvement as regards the detailed formulation of the blending projects and the 
actual implementation of the EFSD guarantees. 

The EFSD encourages greater coordination and alignment between the EU and FIs. With 
the  EFSD  Guarantees,  efforts  have  been  made  to  engage  with  more  FIs,  including  an 
open access model and portfolio approach that provided increased flexibility. 

5.5.  Sustainability 

The fifth evaluation question refers to the sustainability of the EFSD and reads: ‘Are the 
EFSD guarantee and blending operations sustainable?’ 

In  response,  the  external  assessment  states  that  the  EFSD  has  the  potential  to  target 
sustainable policy reforms, though only few projects and programmes incorporate that as 
an explicit objective. 

The  EFSD  is  aligned  with  the  SDGs  and  compliance  is  checked  at  the  project/programme 
level.  Gender  and  other  cross-cutting  indicators  are  also  considered,  but  it  is  not  clear 
how the EFSD will be able to monitor performance due to limitations of the monitoring 
framework,    for  example  by  the  capacity  of  FIs  to  collect  disaggregated  data  when  working 
through intermediary financial institutions that might not have systems in place collecting such 
types of data. 

The  long-term  sustainability  of  the  EFSD  as  an  approach  is  currently  ensured  by  high 
levels  of  demand.  This  is  reinforced  by  the  potential  of  the  EFSD  (guarantees  in 
particular) to test and develop new financial products. 

6.  CONCLUSIONS AND RECOMMENDATIONS 

This chapter provides lessons learnt and recommendations, based on the findings of the 
independent  external  assessment.  It  includes  the  response  of  the  Commission  services 
and, where relevant, it refers to measures included in the report from the Commission to 

10 

 
 
the  Council  on  the  recommendations  of  the  high-level  group  of  wise  persons  on  the 
European financial architecture for development12. 

Relevance: 

On  relevance,  the  external  report  recommends  to  develop  tailored  risk  reduction 
packages for specific investor groups and to exploit the strong market position to co-opt 
more donors with a view to achieving a greater risk reduction impact. 

Commission response:  

The  recommendations  are  accepted  and  the  Commission  agrees  to  further  expand  the 
analysis  and  targeting  of  the  private  sector  to  increase  the  attractiveness  of  the  EFSD 
instrument.  The  Commission  is  already  developing  this  approach,  either  through 
individual  programmes  or  through  sectoral  studies  on  investment  in  natural  capital  and 
the circular economy. 

More  particularly,  further  work  will  be  carried  out  to  increase  the  investment 
opportunities for green and circular economy. 

The issue of bringing on board other donors is  taken up. Additional  contributions  have 
already  occurred  and  in  future,  donors  (EU  Member  States  or  others)  may  wish  to 
contribute to the EFSD through a transfer of funds either (i) under existing governance 
structure (ii) or through a dedicated structure, which would require specific governance. 

Effectiveness and additionality: 

In  terms  of  effectiveness  and  additionality,  the  external  report  recommends  that  the 
portfolio should be managed to give greater prominence to the ‘newer’ SDG sectors and 
targets  (e.g.  digitalisation,  sustainable  cities  and  agriculture).  It  further  recommends 
improvements to be introduced in the additionality section of the application form and in 
the visibility towards the private sector partners.  

Commission response: These recommendations are welcome and accepted. 

- The Commission will continue the emphasis on achieving the policy priorities. Through 
creating  specific  windows  for  agriculture,  digitalisation  and  sustainable  cities  for  the 
EFSD  guarantee,  the  Commission  made  an  important  step  to  encourage  investment  in 
these areas. By supporting such investments through the EFSD, the Commission will also 
continue to aim at addressing specific socioeconomic root causes of migration, including 
irregular  migration,  and  to  contribute  to  the  sustainable  reintegration  of  migrants 
returning  to  their  countries  of  origin  and  to  the  strengthening  of  transit  and  host 
communities.  The  Commission,  in  its  Neighbourhood,  Development  and  International 
Cooperation  Instrument  (NDICI)  proposal13,  establishes  an  EFSD+  with  a  worldwide 
scope which will be the successor to the EFSD for next MFF. Pursuant to the proposal, 

12   COM(2020)  43  Final,  Report  from  the  Commission  to  the  Council  on  the  recommendations  of  the 
high-level  group of  wise persons on the European  financial architecture  for development https://eur-
lex.europa.eu/legal-content/EN/TXT/?qid=1580526319085&uri=COM:2020:43:FIN 

13   COM(2018)  460  final  Proposal  for  a  regulation  of  the  European  Parliament  and  the  Council 

establishing the Neighbourhood, Development and International Cooperation Instrument 

11 

 
 
 
 
                                                      
the EFSD+ would follow the ‘policy first’ principle, according to which the use of these 
implementing tools should comply with the programming documents. These documents 
would identify the EU and partner countries priorities, which would cover newer ‘SDGs’ 
sectors  including  digitalisation,  sustainable  and  smart  cities  and  sustainable  agriculture, 
and  would  also  complement  and  strengthen  efforts  carried  out  in  the  context  of  the 
Union’s migration policy with third countries.. Respective modifications will be taken up 
in  the  future  revisions  of  the  application  form.  Performance  indicators  and  their 
subsequent  monitoring  have  been  included  in  the  text  of  the  signed  guarantee 
agreements. 

- The Commission recognises the need for consistent branding and narrative to reinforce 
the  EU’s  global  development  strategy.  In  a  report  to  the  Council14,  the  Commission 
outlined  several  potential  actions  to  take  ensuring  consistency  across  the  various 
implementing  partners  and  actors.  The  Commission  also  welcomes  an  increase  in 
Member  State  ownership  via  this  common  branding,  which  will  widen  the  EFSD’s 
current audience and reach. 

Efficiency: 

On efficiency, the  external  assessment  recommends launching a review  of the business 
process,  assess  the  selection  of  the  database  for  risk  assessment  and  develop 
methodologies for the results measurement indicators.  

Commission response: These recommendations are welcome and accepted. 

The review of the business process shall relate to the ongoing review of the new financial 
architecture.  The  EFSD  is  a  novel  and  innovative  instrument  for  which  new  processes 
were put in place with the entry into force of the EFSD Regulation. The future EFSD+ is 
proposed  to  be  based  on  the  ‘policy  first’  principle  and  on  an  open  and  collaborative 
architecture,  with  specific  governance15.  In  application  of  the  policy  first  principle,  the 
programming  would  allow  establishing  long-term  priorities  for  our  cooperation  with 
partner  countries,  including  through  the  use  of  modalities  such  as  blending  and 
guarantees  in  the  pursue  of  these  priorities.  Programming  is  an  inclusive  and  iterative 
process  requiring  consultations  of  partner  countries,  Member  States,  civil  society 
organisations,  private  and  public  sector  and  financial  institutions,  as  well  as  the 
involvement of the Council and the European Parliament.  

Staff skills training is ongoing and will be further developed in line with the current and 
future needs. In terms of ongoing actions, and as indicated in the recent report from the 
Commission  to  the  Council16,  the  Commission  is  increasing  its  capacity  and  financing 
expertise  by  expanding  staff’s  training  in  development  financing,  project  financial 
management  and  by  further  upgrading  the  skills  of  its  staff  specialised  in  the  legal, 
financial and budgetary specificities of financial instruments. The Commission will also 
continue  hosting  experts  seconded  from  FIs.  This  enhanced  capacity  will  help  the 

14   COM(2020) 43 Final 
15   COM(2018) 460 final  
16   COM(2020) 43 final  

12 

 
 
 
 
 
 
 
                                                      
Commission  to  protect  the  EU  budget  and  manage  the  foreseen  increase  in  exposures 
covered by budgetary guarantees in the next programming period. 

With  regard  to  the  selection  of  the  database  for  risk  assessment,  the  Commission,  in 
cooperation with FI experts and other partners, is in the process of developing dedicated 
software  that  would  help  to  model  risks  under  the  EFSD+  guarantee,  recognising  the 
specific challenges in developing and transition countries and building on data from the 
Global Emerging Markets Risk Database (GEMs). The provision of expert advice on the 
risk  profile  and  guarantee  remuneration  will  enhance  the  Commission’s  capacity  to 
identify  the  portfolios  of  investment  projects  to  be  guaranteed.  This  advice  will  also 
support the monitoring and management of the accumulated portfolio risk. 

Finally, the Commission  has been using results framework in  the  guarantee agreements 
signed to date. The list of indicators, the frequency and format of reporting are part of the 
guarantee agreements  signed with  the financial institutions. The work on harmonisation 
of reporting on the results is ongoing.  

Coherence: 

The  external  assessment  recommends  the  existing  EFSD  product  mix  to  be  further 
defined  based  on  added  value  and  efficiency  considerations  and  providing  clear 
guidelines for the FIs. It further recommends building on the open access model, which 
has  proven  to  increase  the  diversity  of  the  FIs  involved  improving  the  coherence  and 
efficiency of the operations.  

Commission  response:  These  recommendations  are  accepted.  Further  definition  of  the 
product  mix  will  be  done  in  the  context  of  deployment  of  the  EFSD+.  In  the  NDICI 
proposal  the budgetary  guarantees will be subject to programming along with the other 
forms of assistance17 so they will be in line with identified needs and priorities identified 
and coordinated with other aid modalities. 

The Commission encourages the open financial architecture model and this approach will 
be further pursued in  the new programming cycle.  Streamlined governance of blending 
and budgetary guarantees is foreseen in the context of the ‘integrated financial package’ 
to be provided by the European Fund for Sustainable Development Plus (EFSD+). 

The  Commission  also  strongly  encourages  the  submission  of  proposals  by  consortia  of 
Development  Finance  Institutions  (DFIs)  including  at  least  one  small  FI  in  its 
composition. Furthermore, the Commission is currently looking at ways to facilitate and 
support the pillar assessment in order to further strengthen inclusiveness.  

Sustainability: 

17   Article  12  (1)  of  the  proposed  NDICI  Regulation  (COM(2018)  460  final)  stipulates  that  ‘the 
implementation of this regulation shall be carried out for geographic programmes through multiannual 
country and multi-country indicative programmes’ 

13 

 
 
 
 
 
 
 
 
 
 
 
                                                      
On  sustainability,  the  external  assessment  recommends  that  the  EFSD  projects 
consistently  consider  the  linkages  with  policy  reform  objectives  in  order  to  maximise 
synergies and encourage greater alignment with Pillar 3 activities. It further recommends 
that  demand  levels  for  different  EFSD  products  are  monitored  and  knowledge 
management systems are designed to collect ex-post information on financial innovation, 
in order to identify and encourage best practices.  

Commission services response: These recommendations are accepted.  

The Commission will continue to work on linking investment mobilisation with support 
to investment climate improvements under Pillar 3, with view to enhance the integrated 
approach  of  the  EIP.  This  includes  promoting  the  policy  first  approach,  supporting 
enhanced  public-private  dialogue  with  key  stakeholders  including  DFIs  to  identify 
investment  obstacles,  engaging  with  governments  to  address  policy  reforms,  and 
providing technical assistance and capacity building to public and private actors. 

On monitoring the demand for EFSD products, this recommendation can be linked with 
the first recommendation. In terms of the knowledge management systems, EFSD will be 
integrated  inside  the  new  knowledge  management  system  for  the  external  action, 
OPSYS, with specifically adjusted modules as maybe required.  

The  use  of  platforms  such  as  the  EU  Platform  for  Blending  in  External  Cooperation 
(EUBEC), the Practitioners Network and the Technical Assessment Meetings (TAM) of 
the  blending  platforms,  all  serve  as  ways  of  bringing  together  key  international  and 
European DFIs to discuss best practices, evolving approaches and better coordination, to 
the benefit of the EU external cooperation. 

14