Innovation support and ESIF financial instruments

Published on 12 October 2015

Support through financial instruments for Research, Technological Development and Innovation (RTDI) is an area that may be of interest to ESIF managing authorities. Thanks to the new ESIF Policy Framework extending the use of financial instruments to all thematic objectives (and also to possible synergies with Horizon 2020 and other research, innovation and competitiveness-related Union programmes1) there are now more opportunities in this area and more funding available for RTDI than ever before.

A European Commission survey of ESIF managing authorities has also identified Thematic Objective 1 ‘Strengthening research, technological development and innovation’ as an area of higher potential for the use of financial instruments. Accordingly, a specific ex-ante methodology has been produced for financial instruments in this field.

Opportunities to use financial instruments for RTDI are many and varied. Key steps involve firstly clarifying possible recipients and stakeholders and understanding the national or regional context in which innovation-driven projects/entities operate. Managing authorities should then consult with private entities and financial intermediaries to better define the financing needs and ensure that financial instruments are a useful way forward. One main benefit for managing authorities using financial instruments is the potential to re-invest the money in RTDI as it ‘revolves’ and is paid back.

Access to finance, including ‘risk finance’, by final recipients is extremely useful for the RTDI sector. In some cases though, projects or entities that could potentially merit external financing do not receive it due to market limitations. For instance, it may be that they have no credit history with a bank or insufficient collateral to offer and so are considered too risky. Financial products co-funded by ESIF such as loans, guarantees or equity can thus be a possible solution for filling investment gaps in these cases.

In practical terms, managing authorities can contribute ESIF resources to RTDI instruments involved with, among other things: product and service development; social innovation; eco-innovation; and public service applications.