BVI proposes a new fund vehicle for the EU
- European Impact Funds should be available for investment in companies and in sustainable projects within the EU
- Additional billions from the private sector for ESG investments in the EU
The German investment funds association BVI is proposing to the EU Commission the introduction of a new type of fund to help both cushion the economic impact of the corona pandemic and to secure the EU's climate goals. The "European Impact Fund" (EIF), based on the UCITS legal framework, is intended to invest in ecological and social projects on a long-term basis. So far, these projects have been financed solely from the EU budget. In addition, EIFs could be used to provide urgently needed capital for small and medium-sized enterprises in the EU, especially as the capital market union is still some way off.
‘Many EU countries will struggle to revive their economies in the coming years and at the same time make them more sustainable,’ says BVI CEO Thomas Richter. ‘The new vehicle could mobilise additional billions from the private sector for investment within the EU. Investor demand for appropriate ESG investments is high and private capital from EIFs could be made available to the economy faster than funds from EU public funding sources.’
In which projects, shares and bonds the fund companies invest through the new EIFs is up to them. But EIFs are required to invest accordingly:
- invest exclusively in equities and bonds issued by EU companies, the financial sector being explicitly excluded;
- invest at least 50 percent in so-called "European Impact Bonds", being bonds issued by the EU to finance green and social EU projects as part of its regional policy;
- invest at least 20 percent of the capital of the funds in the securities of small and medium-sized enterprises in the EU. Up to 10 percent of the fund volume could be made available to companies via closed-end funds such as private equity funds.
EUR 100 billion in German sustainable funds
BVI members manage 3,400 billion euros for their clients. This makes them one of the largest investor groupings in Germany and gives them as important financial intermediary a key role in sustainable investments. The ESG fund market in Germany is growing fast: assets invested in sustainable funds have now overtaken the EUR 100 billion mark, around half of which are invested in retail funds. New business has also seen strong growth. In the first half of 2020, sustainable funds recorded net inflows of EUR 7.2 billion. Sustainable retail funds alone contributed EUR 7.7 billion; compared to the first half of 2019, this represents an increase of 160 per cent.
BVI’s "Guidelines for Responsible Investing", formulated as early as 2012, have triggered developments in the industry that have already delivered impressive results. Today, over 96 percent of the fund holdings are managed by BVI members applying the United Nations Principles for Responsible Investing (UN PRI).