{
  "url": "https://openlegislation.uk/eu-decision-2014-203/annex/division-5/division-5.3/division-5.3.2/division-5.3.2.2",
  "json_url": "https://openlegislation.uk/eu-decision-2014-203/annex/division-5/division-5.3/division-5.3.2/division-5.3.2.2.json",
  "legislation": "eudn/2014/203",
  "legislation_title": "Commission Implementing Decision of 19 March 2014 on the adoption of the LIFE multiannual work programme for 2014-17 (Text with EEA relevance) (2014/203/EU)",
  "legislation_url": "https://openlegislation.uk/eu-decision-2014-203",
  "path": "annex/division/5/division/5.3/division/5.3.2/division/5.3.2.2",
  "kind": "division",
  "number": "5.3.2.2",
  "heading": "Structure of the financial instrument",
  "text": "The implementation of the PF4EE instrument will be entrusted to the European Investment Bank (EIB) by means of indirect management.\nThe PF4EE instrument will have two core objectives:\nto make energy efficiency (EE) lending a more sustainable activity across European financial institutions, incentivising private commercial banks and other financial institutions (both together ‘financial intermediaries’) to address the energy efficiency sector as a distinct market segment, and\nto increase the availability of debt financing to projects supporting the energy efficiency priorities of Member States set in the NEEAPs.\nThe PF4EE instrument will provide (i) a risk participation mechanism (Risk Sharing Facility) for private sector financial institutions and (ii) expert support for financial intermediaries (Expert Support Facility) combined with iii) EIB long-term funding (EIB Loan for Energy Efficiency).\nThe PF4EE would provide a Risk Sharing Financial Instrument with functioning mechanics comparable to a capped guarantee to share the risk between the Commission (as funder) and financial intermediaries (as lenders).\nThe RS Facility is designed to reduce the credit risk faced by financial intermediaries when lending to the EE sector and to encourage their participation. The impact will depend on the market conditions and specific characteristics of the projects. The RS Facility is expected to increase lending activity, access to finance and/or better financing conditions to the final recipients, including lower pricing, longer maturities, lower collateral or others.\nTo leverage the LIFE contribution, EIB loans will be provided to financial intermediaries at preferential rates for on-lending. Preferential rates will be passed onto final recipients to encourage take-up;\nThe recipients are also expected to make a contribution to project costs, which as a result will increase leverage calculated on investment costs;\nThe credit risk protection is provided to the financial intermediaries because the objective of the PF4EE instrument is to increase financial intermediaries lending to EE investments. EIB does not normally need a credit risk protection to the extent that it lends to financial intermediaries complying with its credit risk policy, which at present is the assumption made given the pilot phase of the PF4EE.\nIf a participating financial intermediaries has losses in the portfolio of loans to which it has on-lent EIB funding (EE loans portfolio), these losses would be partially covered by the Risk Sharing Financial instrument.\nLIFE funding would be used to provide the financial contribution required for the risk-sharing facility and expert support facility, as well as the administration and direct costs incurred by EIB for setting up and managing the instrument;\nA maximum amount of cash (Maximum Available Collateral) would be allocated to each financial intermediary to offset losses in the EE Loan portfolio, but capped at a percentage of the targeted total value of the loan portfolio to be created by the financial institution. This amount would be capped to a specific percentage of the targeted total EE loans portfolio, depending on the risk profile of the targeted final recipients and the agreed risk-sharing option.\nThe target final recipients for the PF4EE instrument are expected to be defined in the context of the MS NEEAPs and will be primarily those targeted by the national/regional schemes developed by MS to implement their NEEAPs. They would comprise SMEs and mid-cap larger companies and private individuals, but could also include small municipalities or other public sector bodies undertaking small energy efficiency investments, capable of using energy savings to repay up-front borrowing\nThe PF4EE instrument envisages 6-10 financing agreements (EIB Loans for EE and Risk Sharing/Expert support Facilities) signed with financial institutions over the first four years, with the potential to extend to 14-20 financing agreements in seven years.\nThe PF4EE builds on the Debt for Energy Efficiency Projects (DEEP) Green initiative of EIB. DEEP Green aims at increasing the availability of debt financing for EE investment in the European Union.\nThe selection of financial intermediaries will be driven by demand and in accordance with the principles of sound financial management, transparency, non-discrimination and the fulfilment, inter alia, of the following requirements:\n(i) to be private sector financial institution;\n(ii) to commit and demonstrate operational capacity to distribute the PF4EE instrument;\n(iii) to demonstrate capacity to reach final recipients targeted by the relevant NEEAP priority and/or energy efficiency support scheme and/or EU Directives relating to energy efficiency within the MS concerned;\n(iv) to undertake the obligations and requirements associated with the distribution of the PF4EE instrument;\n(v) to comply with relevant standards and applicable legislation on the prevention of money laundering, fight against terrorism and tax fraud;\n(vi) to provide information required by the European Court of Auditors to allow the discharge of its duties; and\n(vii) to be acceptable as a borrower to the EIB in accordance with its credit policy and consistent with the geographical distribution targeted by PF4EE.\nA broad geographical distribution of the financial instrument over the lifetime of the programme will be ensured by setting maximum geographical concentration ratios and by providing incentives to the EIB to encourage the participation of financial intermediaries across all Member States.\nDepending on interest expressed by financial intermediaries, contract negotiations may prioritise those financial intermediaries seeking to operate in Member States where the investment needs (distance to target) are greatest. By negotiating the level of risk protection offered, the EIB will incentivise financial intermediaries to operate in Member States with higher risks reflecting for example significant under-development in the use of loan finance for EE or where the capacity to take-up loans is deemed likely to be especially low. Use of the Expert Support Facility can also be targeted to support financial intermediaries and reduce risk in higher risk Member States.\nThe PF4EE needs to be operational for as long as underlying loans covered by the RS Facility remain outstanding. Maximum tenor to be allowed under the RS Facility will be 20 years. Therefore the PF4EE will be in place for up to 20 years after the end of the implementation period (2042).\nThe allocation of funds will be valid until the last of the transactions under the programme is fully completed.\nThe management of the financial instrument will be carried out by the EIB. A Steering Committee will review, on a regular basis, the progress on the implementation of the Financial Instrument. The Steering Committee comprises appointments made jointly by the Commission, including line Commission services such as DG CLIMA, DG ECFIN and DG ENER, and the EIB, supported by a secretariat provided by EIB.\nA monitoring and reporting mechanism will be set up and the information is shared with the LIFE Committee.\nMonitoring of the financial instruments will be in line with the requirements laid down in the Financial Regulation (Article 140) and the Delegated Regulation (Article 225) and subsequently as interpreted in the Financial and Administrative Framework Agreement (FAFA) with EIB and consequent Delegation Agreement.\nThe EIB would be responsible for monitoring the implementation of activities under the financial instrument and for producing performance and financial reports in accordance with a format, content and periodicity to be agreed (initially on quarterly basis), to include regular and ad-hoc reports; site visits; audits. Performance Indicators for reporting from financial institutions to EIB would be used.",
  "extent": "E+W+S+N.I.",
  "status": null,
  "version": "current",
  "annotations": [],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/eudn/2014/203/annex/division/5/division/5.3/division/5.3.2/division/5.3.2.2",
    "retrieved_at": "2026-11-01T15:14:48.722257+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}