Friday October 9 2020

News Source: Fund Regulation

Focus: General - Fund Regulation

Type: General

Country: European Union

The German investment funds association BVI has proposed 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.

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.

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