Episode 18: Ready for FI Campus?

Good morning to all our listeners and welcome to a new episode of the fi-compass Jam Sessions podcast. My name is Frank Lee, Head of Financial Intermediary Advisory at the EIB, and I will be your host today. 

Today we welcome Jonathan Denness, Head of Unit in the European Commission's Directorate-General for Regional and Urban Policy. 

Welcome Jon, and thanks for joining us!

Jonathan Denness: Morning Frank it's always good to talk to you.

So, Jon. We're organising this year's edition of FI Campus at the end of June in Brussels. Tell us why should people be coming to it this year? What are the key themes that we will address? What's new in this year's edition?

Jonathan Denness: Okay, you should come for three reasons, Frank. First, we've got two great themes for the financial instrument practitioners. 

• The first one is how financial instruments can help decarbonise our economies, principally through energy efficiency and renewables;
• secondly, the role of financial instruments in fostering SME competitiveness and also resilience across the EU.

Second, and we know this is valued by people who've come to past editions - the networking opportunities. This year we have a special Olympic themed event which will enable you to interact with fellow financial instrument professionals and compete for a gold medal. 

Last but definitely not least, we have two very special guests who will join us. For the first time, we'll be joined in person, by Commissioner for Cohesion and Reforms Elisa Ferreira and EIB President Nadia Calviño.

This is great news, as we will have two great enthusiasts of cohesion who can set out their vision of how financial instruments can contribute to reducing the gap between rich and poor in the Union. They can also talk about how the Commission and the EIB group working together can achieve this.

Jonathan Denness: They can also reflect on the future after the end of the current programming period in 2027 - how financial instruments can deliver in the future. 

Indeed! So starting with the first theme then, we will recall that last year we presented the so-called model financial instrument with a grant component combined for supporting energy efficiency investments. This was of course, part of the REPowerEU initiative. This year we have another novelty to present in support of the same sector. It's called the Scale-Up initiative. So what is it and why do we think it's needed?

Jonathan Denness: The Scale-Up initiative is a direct response to the need to increase the pace and scale of green investments across the EU, especially in respect to energy efficiency. By 2030, EU energy consumption needs to be reduced by 11.7% – this is a binding target in all EU member states. It's ambitious and it needs action. With Scale-Up, we are trying to address the key challenges faced by financial instruments for energy efficiency, also using grant combinations to help incentivise this further. 

How are we going to do this? We're aiming to bring together experts from managing authorities, national promotional banks, financial intermediaries as well as the Commission and the EIB Group – all the key stakeholders involved in the design and implementation of shared management financial instruments. Together these experts will work to share their experiences and identify common solutions over an 18-month period, to overcome the barriers that currently prevent a scale up in the use of financial instruments with grants in this area! It's a really innovative approach and we will be sharing the results with everybody as we go along.

We have seen a lot of interest in this topic of combination with grants, so I'm sure the participants will be looking forward to hear more at FI Campus. 

So now moving on to the topic of the role of financial instruments in promoting SME competitiveness. I understand that DG REGIO is keen to see what evidence exists to support the theory that financial instruments have a more positive impact on competitiveness, than do grants. This is a bold ambition, Jon, and I suppose it will go a long way in convincing the Commission and the managing authorities of the power of financial instruments in a crucial area such as this. So, can you tell us more about your thinking on this one?

Jonathan Denness: In the current programming period, just over a third of the investment in SME is being delivered through financial instruments. We think this is too low and we also would like to find out and to demonstrate that financial instruments, loans, guarantees, equity stakes have a better impact on the long term competitiveness of SMEs than grants do. So, as you say, this is a bold ambition. We want to demonstrate this so that we can - not just convince the Commission and the managing authorities - but also those who will be negotiating the new regulation and the other stakeholders in cohesion policy to expand the use of financial instruments for SME support. We think this is very important, and we very much hope that we will have a very good result in a year's time. 

Great, that's good to hear, and I think we're obviously having our event in June this year, which is a pretty important and critical point in time I would say. Certainly with the new Commissioners coming into place and the reflections, I understand, that are already ongoing for the next Multiannual Financial Framework (MFF), and I imagine that a lot of this will be on people's minds coming to FI Campus this year. Can you tell us, has the Commission already made progress on this and is there anything you can share with us at this stage?

Jonathan Denness: Yes there is a lot of thinking going on about the new MFF, but as you say, this will depend on the European Parliament elections, which will take place before FI Campus takes place. When FI Campus is taking place, the new Commission will be beginning to be formed and it will in principle come into being in the late autumn of this year. The thinking on the MFF is fundamentally based around one thing - that we don't expect the European budget to grow in the next MFF period, and that we will have to do more with less. This is not as bad news as we think, because doing more with less means that we have to use financial instruments more to get the leverage, to get the reflows, to use the money more efficiently, to harness the power of the private sector, to evaluate projects under market conditions and get more effective and more efficient investments on the ground. 

Indeed, I think that's good news for our financial instruments aficionados who will be joining us this year at FI Campus. Certainly, some of us have been waiting for some time now to be able to show, really, the power and the influence that financial instruments can play. So I think that most people would agree that you have successfully simplified the Common Provisions Regulation (CPR) in the current programme period, but do you see any further streamlining perhaps needed? Are there any lessons to be learned from the Recovery Resilience Facility (RRF) for example? Will participants have the opportunity at FI Campus to share their own thoughts and ideas on this?

Jonathan Denness: On the last point - very much so, and that's one of my key hopes that we will get a lot of input from participants about how the new CPR can be constructed and how the new regulatory framework can be taken forward. In terms of our thinking, we are thinking that the RRF model has some useful elements in it. Playing against milestones or targets or reforms rather than against invoices is certainly a key part of our thinking. 

We have a vision on the financial instrument side that, I mean essentially there are three categories of reforms or milestones that we could reimburse against. One could be something related to the financial instrument itself, for example, achieving a certain level of leverage in the financial instrument. The second one would be effects on the ecosystem of financial instruments and financing for projects and investments. So, for example, in those member states where there is no national promotional bank, the formation of a national promotional bank could be a milestone target. The third category is a reform that is desirable, which is not relevant to the financial instrument itself.

So, this is the sort of thinking we are having at the moment. It's all at a very early stage. As I said at the beginning, that's why we would like to hear from those working on the ground, what could be useful for them to guide our thinking going forward on this.

Yeah, that sounds very interesting. We do hope that the participants of this year's event will be able to share their thoughts at this rather critical time in the Commission's thinking. So, before we conclude, there's a planned live podcast that we will be having together at FI Campus this year. This is becoming a bit of a tradition, isn't it? I think it's the second time we're having it.

Jonathan Denness: Yes it is, and this is one of the most frightening things of my year because we are opening ourselves up to questions, and the title of this year's podcast is going to be “Ask Me Anything” or “AMA”. We really value the input we get from the financial instrument practitioners throughout the year, but especially at FI Campus. So, this year, we are inviting you to ask any question that you want on any subject related to financial instruments, and we will endeavour to answer it. To soothe my fears, if you could send them in advance by email to info@fi‑compass.eu, that will be great, but we will accept them on the day and we will try to answer them on the day. So please be active, please ask us questions. That way we know what's worrying you, what you're unsure about, and we can do our very best to help out and reassure you.

So indeed, I hope you pick up the challenge there – listeners - that Jon has put out to you. Please do send us through your questions ahead of the podcast. Finally Jon, another tradition I suppose, the Showcase award. We're expecting one again this year?

Jonathan Denness: Frank, how could we not do a Showcase award at FI Campus. If the podcast is the most frightening part, the Showcase is probably my favourite part, especially the faces of the winners who receive the Showcase award. So, we're asking you to send in your videos showing the great use of financial instruments under shared management programmes to fi-compass by the end of May, and we will have the presentation to be done by the Commissioner and the President. So, it will be a very prestigious presentation this year, and I'm personally looking forward to seeing all the great use of financial instruments that people are showcasing at FI Campus this year.

Yeah, that's great news. It's probably the most important reason for people coming this year. I know that a lot of people enjoyed,  competing for that award last year. So, thanks a lot for joining me today, Jon. Thanks, of course, to all of you listeners for tuning in. This brings today's episode to a close. We hope that it has really boosted your interest in coming to this year's FI Campus event to be held, as I said, on the 25-27 June in Brussels. We hope that we've given you a bit of a taste of what to expect, but obviously, we expect you to be there to hear much more and to be part of the community and contribute your knowledge and experience, of course, as well. 

Don't forget to send us the questions! As Jonathan said, for any of the sessions. Register for the event, of course, to secure your spot. I would imagine there will be a lot of people coming this year with our star guests being there. Don't forget to send in your Showcase submissions. The deadline for that is 31 May and of course, check them out. They'll be uploaded on our website ahead of the event, so you'll be able to already have a sneak preview of what will be showcased and given awards for. So, thanks again, Jon, for joining us today.

Jonathan Denness: Frank, it's been an absolute pleasure, and if anything, my enthusiasm and my level of anticipation for FI Campus this year has increased greatly whilst we've been recording today, so I'm really looking forward to seeing everybody at FI Campus. We've got a terrific programme prepared for you. Please participate. Please ask all your difficult questions and really frighten us, and we look forward to seeing you in Brussels on the 25 June. 

Super, many thanks and to all our listeners – have a great day and we look forward to you tuning in for the next fi-compass Jam Sessions podcast!