As you are reading this update, we are anticipating the announcement of a new tender of the European Fund for Sustainable Development (EFSD) any day. We are well prepared; back in October we already started preparing our bid for the so-called EFSD+, the successor of the EFSD Guarantee and the EFSD Guarantee Fund. But it wouldn’t be the first time the release of the tender would be pushed forward. The funding window was initially expected to open in December of last year.

The EFSD+ is a very comprehensive instrument that includes not only guarantees but also grants provided through blending –a mix of EU grants with bank loans–, technical assistance to help improve the quality of projects and the implementation of reforms, and several other types of support tools that can be used to support the development of EU partner countries.

The FMO team has invested a lot of time in understanding this funding window, including attending regular meetings with the EU and pitching our proposal to the EU policymakers who advise the EFSD+ on the bids submitted. We are happy the Consortium is supported by the (EU) fundraising experts at SNV and WWF (PSP team) who are part of the DFCD fundraising team.

After going back and forth a few times, it became clear that the DFCD is very well positioned to apply for the EFSD+’s guarantees, but that the funding instrument doesn’t offer an efficient way of refinancing our Origination Facility.

From millions to billions

What does the DFCD EU funding proposal look like? Please note that the proposal has not been fully finalised, so may be subject to changes. Under EFSD+, the DFCD plans to apply for an EU guarantee cover for the Land Use Facility. Climate Fund Managers is submitting a separate proposal that will be supporting DFCD’s Water Facility. With these guarantees, the maximum size of the DFCD's total investment portfolio will grow to more than a billion.

Any funding provided by the Land Use Facility has an immediate leverage of 1.6 times through the EFSD+ guarantee. However, given that the Land Use Facility can be used in sub-ordinated/equity tranches below other investors/funds, its total leverage will be around 4.8 times depending on client, sector, and country risk.

Replenishing the Origination Facility

SNV and WWF are working closely together on a joint fundraising strategy to approach large donors, a mix of European national development corporations and large foundations and funds that are looking for large-scale investments in climate adaptations.

WWF’s PSP team has connected us with the wider PSP network, and we are encouraged by all the interest and feedback. It has led to interesting follow-up meeting with the PSP teams in for instance France and the US, while we are also in touch with Belgium and Germany.

We will intensify our engagement once we have submitted our EFSD+ proposal. One of our big wishes would be to finance smaller projects of up to €5 million in size which we currently cannot do. This is a gap in the life and financing cycle of many bankable nature solutions.

We are looking forward to continuing the conversations!