Supporting financing of local adaptation actions with combination of public funding and private financing

About this call

Expected Outcome:

In support to the implementation of the EU Adaptation Strategy, the EU Mission on Adaptation to Climate change, and in particular having regard to the upcoming European Climate Adaptation Plan, project results should contribute to all of the following expected outcomes:

Local climate adaptation actors, the financing sector, the public grant sector, and climate adaptation financing experience are brought to work together on making local adaptation actions financeable by combining public grant funding and private financing via bank loans and on overcoming the practical barriers on combining these and finding solutions, and specifically through demonstrating this with intermediated EIB adaptation lending.

Local innovative adaptation actions (including nature-based solutions) have been implemented thanks to their financing by the combination of private financing via bank loans and public grant funding.

National Promotional Banks (NPBs)/other banks are mobilised to actively finance local adaptation actions.

Scope:

Rationale

Financing of local adaptation actions, especially with other means than public grant funding, is currently still not taking place sufficiently. Adaptation actions are generally not generating sufficient revenues to become bankable, although they produce financial and economic benefits through avoiding or reducing losses or diversifying risk profiles. Local adaptation actions are typically smaller in size, resulting in high transaction costs and insufficient scale for bankability. These are barriers to financing. In principle, the financing of adaptation actions can be enhanced by combining public grants with private financing, such as bank loans. Demonstration and assessment in real-life conditions is still needed on the barriers and solutions to financing local adaptation actions, in particular on combining public grant funding and private financing via bank loans, and innovation work on the financing of local adaptation actions.

Financing is one of the key enabling conditions of the Adaptation Mission . The goal of this topic is, by involving the necessary stakeholders from the private and public sector, to work on how to, by providing public grants, attract private financing via bank loans, to finance local adaptation actions, with a view to replicating and/or scaling up. The role of NPBs and other banks for financing local adaptation is, for reasons of size of and closeness to the local action, crucial and should, in view of the enormous amounts of financing required for adaptation and climate resilience [1] , grow in importance as quickly as possible.

The European Investment Bank

The European Investment Bank (EIB) as the EU Climate Bank is working, jointly with the European Commission, on addressing the barriers to adaptation financing, through both its lending and advisory assistance, in line with the EIB Climate Adaptation Plan and the EIB Climate Bank Roadmap . The EIB supports the Adaptation Mission.

This Action is aligned with EIB support for adaptation through intermediated loans with a Climate Action and Environmental Sustainability window, whereby the EIB makes intermediated lending available to National Promotional Banks and other banks for local climate adaptation actions [2] .

To support this Action, the EIB will, from its existing available resources, make available technical assistance/adaptation advisory support on the local adaptation actions for the National Promotional/other banks (under the InvestEU Advisory Hub’s G reen Gateway programme ) and/or for the project promoters (under ADAPT platform , subject to eligibility and availability).

For the purpose of this Action, the EIB will furthermore offer the selected consortium guidance and share knowledge and experience to support the successful implementation of the project.

This Action with the EIB supports the follow-up to the July 2023 Communication on EU Missions assessment .

Activities of the project

Proposals should demonstrate local innovative adaptation actions (testing and demonstration in real-life conditions) and the financing thereof by combining public grants obtained via financial support to third parties (FSTP) with private financing via bank loans. They should also generate recommendations on combining these, on the barriers to such financing and practical solutions to overcome these barriers.

The proposals will be required to address all of the following:

1. Provide FSTP in the form of grants to project promoters, to demonstrate in real-life conditions local innovative adaptation actions and their financing by combining public grant funding and bank loan financing via intermediated EIB adaptation loans, with scale up and replication potential .

At least 70% of the total amount of the EU requested contribution should be for the financial support to third parties.

Local adaptation actions should have a size between EUR 500.000 and EUR 10 million. The grant to third parties cannot cover more than 70% of the total costs of the local adaptation action.

The (first) cascade call should be launched in the first 10 months of the project.

Proposals should describe how they intend to provide financial support to third parties, in accordance with the FSTP Annex provided with the application form, while clarifying the types of activity (taking into account the activities that qualify as EIB eligible adaptation), and the procedures for giving financial support, which should assure that the no double-funding rules where applicable will be complied with and should assure that the same rules as set out for the EU call conditions in relation to eligible costs will apply (i.e. cost eligibility rules). They should also specifically take account of provisions on ‘financial support to third parties’ set out in General Annex B and incorporate them into the proposal.

Proposals should specifically consider elements within the FSTP scheme to address geographical balance and inclusivity, aiming for an as wide as possible coverage of different countries.

The consortium should establish coordination, and is encouraged to consult / involve the NPBs and other banks as stakeholders, and the consortium should work closely with the EIB, in particular on the criteria for the local innovative adaptation actions. Proposals should propose a structure / activities for this involvement and cooperation.

The project retained for granting is expected to hold dedicated exchanges with CINEA and the Mission Secretariat during the preparation of the cascade funding call(s).

2. Assessing and drawing lessons and recommendations from the financing of the above local adaptation actions from the different sources of financing, and from combinations of loans and grants that have been used in the past for financing adaptation , whether at national, regional or EU level (e.g. LIFE integrated projects, National Capital Finance Facility, etc). This covers at least the following:

Capture and analyse the barriers encountered in the financing of the above local adaptation actions, covering all sources of financing that are being combined to finance the local adaptation actions, including the combining of public funding and bank loans, and propose practical ways to overcome these.

Analyse how the EU taxonomy is being applied.

Collect lessons learnt.