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RECOMMENDATIONS FROM THE PROJECT ON FINANCING ECO-INNOVATION Morten Larsen, Oxford Research, Brussels 30 November 2010 Oxford Research A/S Falkoner Allé 20, 4. sal 2000 Frederiksberg C Danmark Oxford Research AB Norrlandsgatan 11 103 93 Stockholm Sverige Oxford Research AS Kjøita 42 4630 Kristiansand Norge
Todays agenda Agenda 1.Overall policy considerations and conclusions 2.Existing instruments 3.How to attract more financing to eco-innovation Financing eco-innovation Work in progress
Financing eco-innovation Overall policy considerations: Framework for eco-innovation finance: a mix of micro policy and macro policy Policy stability important Investment rationale of financial actors is the same as for investments in other innovative sectors (look for same rate of return) Double externality challenge Some eco-innovative SMEs have high risk profile HOW TO IMPROVE ACCESS TO FINANCE - ON REASONABLE TERMS FOR BOTH PUBLIC AND PRIVATE PROVIDERS OF FINANCE?
Financing eco-innovation Overall policy considerations and conclusions: Market maturity differs between sub- sectors Energy is in some respects different from other types of eco-innovation Venture capital flows mainly to energy related investments (generation + efficiency) HOW TO IMPROVE ACCESS TO FINANCE - ON REASONABLE TERMS FOR BOTH PUBLIC AND PRIVATE PROVIDERS OF FINANCE?
Financing eco-innovation Many eco-innovative SMEs are not VC fundable Early stage: Debt financing is also important – used by almost half of the early stage SMEs in our survey SMEs and VCs perceive banks to be insufficiently engaged in eco-innovation (non-energy) Small-scale financing is requested by eco- innovative SMEs (less than €300,000) Overall policy considerations and conclusions:
Financing eco-innovation A DIVERSE SET OF EU INSTRUMENTS AND PROGRAMMES FOR FINANCING (ECO-) INNOVATION ALREADY EXISTS: GRANTS EIP Market Replication and First Application Projects Private-sector focused Support market uptake of first commercial deployment and market demonstration LIFE+ - Action Grants Support public-sector development and implementation of new legislation, policies, programmes and strategies Public-sector focused Awareness raising
Financing eco-innovation A DIVERSE SET OF EU INSTRUMENTS AND PROGRAMMES FOR FINANCING (ECO-) INNOVATION ALREADY EXISTS: Financial instruments CIP - €1.1 billion for 2007 to 2013 High Growth and Innovative SME Facility (GIF) - EIF co-invests in VC Funds to increase risk capital for innovative SMEs – early stages (GIF1) and expansion phase (GIF2) SME Guarantee (SMEG) Facility - Loan guarantees – in one instance focused on eco-innovation - Micro-Credit Guarantees - Equity Guarantees - Securitisation Risk sharing finance facility - Debt-financing instrument under FP7 (loans and/or guarantees) - Provide additional loan finance for R&D, Demonstration and Innovation - E.g. for renewable energy and energy efficiency projects
Financing eco-innovation HOW TO ATTRACT MORE FINANCIAL ACTORS AND FINANCING TO ECO-INNOVATION? General policy stability and focus is an important issue but there are also unique conditions for eco- innovative SMEs that should be addressed. Market failure – knowledge gap Public R&D funding Private financing for commercialisation and scaling up Knowledge of new solutions and regulation needed to make informed investment decisions Knowledge of new solutions and regulation More knowledge => perceived risk reduced Work in progress Calls for further investigation of flexible risk sharing instruments, including: Small scale financing Debt financing Business Angel co-financing Links between instruments
THANK YOU Morten Larsen, Oxford Research, Brussels 30 November 2010 Oxford Research A/S Falkoner Allé 20, 4. sal 2000 Frederiksberg C Danmark Oxford Research AB Norrlandsgatan 11 103 93 Stockholm Sverige Oxford Research AS Kjøita 42 4630 Kristiansand Norge
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