Smart Finance for Smart BuildingSFSB Programme update

Brussels, December 4th, 2018

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The implementation of the EU's ambitious Paris climate change commitments is now the priority and

depends to a large extent on the successful transition to a clean energy system as two thirds of greenhouse

gas emissions result from energy production and use (*)

The Clean Energy window would cover financial instruments covering SMEs and individuals market gaps in

Energy Efficiency, Renewable Energy and Clean Technologies, the main proposed products are:

1. Capped/Uncapped guarantees to support lending by Financial Intermediaries and

2. Credit Enhancement guarantees to support Institutional Investors lending in clean energy portfolios

SFSB

Clean Energy window

(*) Clean Energy for all Europeans Nov 2016 Communication to the European parliament

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Main objectives:

Promote investments in Energy Efficiency and Renewable Energy projects to be made by

households, individuals and SMEs in Europe by:

(1) Supporting Irish Financial Institutions that invest in Energy Efficiency in buildings under

both: consumer financing and mortgage;

(2) Providing financial instruments for both household and SMEs in order for them to

invest/finance their Energy Efficiency projects;

(3) Stimulate Energy Efficiency demand in MS: by providing a technical assistance managed by

the EIB Group under the ELENA Program.

Smart Finance for Smart Building Energy Efficiency/Renewable Energy

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Smart Finance for Smart Building Energy Efficiency/Renewable Energy

Objective of SFSB Guarantee Facility:

to expand EE lending activities by

financial institutions

to intensify EE investments in

buildings:

• primarily residential buildings, HoA,

and

• secondarily (indicatively up to 30%

of projects' value of the whole

scheme): SMEs.

Scalability is crucial to reach volumes

Components of SFSB:

guarantee facility (e.g. National

Funds+EFSI+ other: EIB, EIF);

Technical Assistance;

Energy Efficiency regulatory

framework

The SFSB programme is a joint initiative of the EIB Group and the EC to incentivise

investments in Energy Efficiency for Buildings in the EU with three main pillars

SFSB

(i) Credit protection for

banks via capped and

uncapped guarantees

from EIF funded by EIB

and Nas

(i) Green Bonds

(ii) Turn Key Technical

Assistance support

provided by ELENA and

EIB Group at three

levels: NAs, Banks and

final beneficiaries

(iii) Turn key

Monitoring and follow

up services provided

by EIB Group

Eligibility

Disbursements of the

guarantee

Portfolio management

Recoveries

• Etc

EIB Group SFSB programme

1. The SFSB Pilot Phase is being tested in 5 main EU markets: Malta, France, Spain, Netherlands and

Portugal, in addition preliminary discussion are starting in Poland and Ireland. A summary of the

structures being tested are presented below:

2. The market feedback from banks and Managing Authorities is positive. The first guarantee products are

expected to be signed end of 2018 – first quarter 2019

SFSB Pilot phase current

implementation experience

SFSB Guarantee Technical Assistance

ELENA:

Reinforced in 2017 with € 97 million to support SFSB

guarantee facility;

Main objective: to help eligible entities to prepare and

implement initiatives for EE renovations of existing

buildings;

Minimum leverage factor: 10 (for buildings);

Residentials: typically 80% or more of the total PDA

costs, i.e.: awareness raising, pre-assessment checks,

energy audits, EPCs, support access to financing from

loans and grants, project monitoring.

Financial intermediaries and public authorities: eligible

costs, i.e.: develop IT tools to standardise EE

investments, capacity building, monitoring and

reporting tools, assistance in pipeline screening,

identification of projects, awareness raising.

ELENA can cover up to 90% of the eligible TA costs.

EIB managed TA support could be co-funded from different sources,

incl. i.e. the European Investment Advisory Hub ("EIAH") and the

European Local Energy Assistance ("ELENA") facility.

SFSB Guarantee

a) Effective use of public money:

• financial intermediaries undertake to increase their portfolio of

EE loans

• high leverage level: trigger additional financing from private

sources (from 4 upwards).

• Co-financing rate of up to 100% in case of combination of ESFI

and EFSI, i.e. no national match funding is required.

b) Cutting red tape:

• no need for a new or revised ex ante assessments by the

national authorities;

• if ESIF contributes to existing instrument (e.g. EFSI): no need to

select new fund managers and with the application for payments

in accordance with the agreed schedule;

c) access to technical assistance from ELENA;

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SFSB Guarantee

d) Enabling and supporting banks' transition to sustainable finance providers:

• Financial Intermediaries can benefit from EIB triple-A rating by having access

to attractive financing conditions;

• Credit risk protection to Financial Intermediaries (up to 80%)

• Sustainable financing providers' label: growing importance for institutional

investors e.g. pension funds and insurance companies;

e) unlocking private financing on the long term:

• Know-how to financial institutions;

• Establishing a fully functional financial market ready to trigger sufficient private

capital to reach EU and national energy/climate objectives;

g) Non-financial sector impact:

• local jobs, growth, reduced costs, security of supply and decrease of pollution.

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SFSB Uncapped Guarantee

1st stage market awareness

Guarantee Fee

Guarantee Fee

2. Green bond Programme applicable

to all Clean Energies (EE, RE and CET)

The growing investments in European EE, RE and CET loans granted to SMEs and individuals by potential

Participating Financial Institutions (FIs) is putting pressure on the credit fundamentals with ensuing

concerns on the financial sustainability of such a success going forward

In parallel, the Green Bond Programme aims at attracting sustainable sources of financing for the clean

energies sectors answering to a strong growing demand from institutional investors for green assets.

The structure will allow Participating financial intermediaries to transfer their current Clean Energy loans

portfolios to third-party investors with the subsequent requirement to invest the transfer proceeds into

new loans eligible under the programme

A SPV would buy the (signed and to be disbursed/disbursed) loans portfolios of Participating FIs (ie true

sale of underlying loans) with a minimum of EUR 50m. For that purpose, the SPV would raise finance in the

capital markets by issuing senior notes attracting Private Sector investors to these investments (targeting

Green Bonds label)

Investors in the Senior Green notes will benefit from an EIF first demand guarantee. Participating FIs would

retain a vertical share in the portfolio either on their B/S or through subscription of the notes

SFSB Uncapped Guarantee

2nd stage Green Bonds

Green Bond

Platform Publicly rated bond

issues

Investment Grade

targeted

Guarantee up to 25%

True sale Loans

Portfolios

Institutional

investors/others

Originator

Public o

Financial

Institutions

Puchase of Senior notes

Region1

SMEs 2

SMEs 3

SMEs 4

Re-investmentof funds in new loans

Potentially EFSI support(if needed)

Remunerated FLP to the EC

EIF Credit EnhancementGurarantee security to protect Bond holders

FLP

Credit Enhancement

Guarantee by EIF up

to 25%