|Pilot Name||Guarantee Fund|
|Client Type||H2020 Programme|
The Eco Fund, Slovenian Environmental Public Fund, has been promoting development in the field of environmental protection since its establishment in 1993. The fund offers financial incentives such as soft loans and grants for various environmental investment projects. The use of soft loans for investments in environmental protection as a revolving fund is an excellent way for the Eco Fund to promote sustainability, as it ensures that the fund remains financially stable while still providing support to environmental projects. Additionally, the focus on maintaining the real value of its assets is a critical aspect of the Eco Fund’s operating environment, as it ensures that the fund can continue to provide support for environmental projects in the long term. The grant program, which was allocated to the Eco Fund in 2008, provides another financial mechanism to support environmental investments. The grants are financed primarily by fees paid by end-users of energy and funds from the Climate Fund, which generates revenue from CO2 allowances. This diversified funding source allows the Eco Fund to support a wide range of environmental projects and promote sustainable development in Slovenia.
The pilot project aims to develop a framework that will enable the design and implementation of a commercially viable and sustainable credit guarantee scheme. The primary objective of this scheme is to address the Eco Fund’s challenge of transferring loan risks while expanding the scope of EES/EPC debt financing and maintaining the real value of its assets.
Refinancing Instruments and Guarantee Instruments
The ex-ante assessment of loan guarantee scheme, potentially including refinancing instruments, tentatively prepared a set of recommended features and processes for setting up and operating the scheme based on market demand, funding alternatives, financial analysis and legal considerations. These features are grouped around five key design issues: the guarantee product; the scheme’s funding and registration; the scheme’s governance and staffing; guarantee processes; and monitoring and evaluation. The guarantee product defines the scope of the guarantee, including the types of loans that are eligible for the guarantee, the maximum amount of the guarantee, and the conditions for accessing the guarantee. The scheme’s funding and registration determine the sources of funding for the scheme, the mechanism for collecting fees and premiums, and the process for registering and approving loans for the guarantee.
The scheme’s governance and staffing determine the organizational structure of the scheme, including the roles and responsibilities of the governing body, the staff, and any third-party service providers. Guarantee processes will specify the procedures for applying for the guarantee, assessing the eligibility of the loan, and monitoring and managing the risk of the guaranteed loans.
Finally, monitoring and evaluation will determine the criteria for evaluating the performance of the loan guarantee scheme, including the impact on the market, the efficiency and effectiveness of the scheme, and the overall financial sustainability of the scheme.
The REFINE rating system on refinanceability of energy efficiency services in specific sub-segments of the EPC/ESC market is currently showing a decrease in perceived risk for energy efficiency projects involving SMEs energy service companies (ESCOs). However, it appears that the market financial environment is missing a portfolio guarantee instrument, which stakeholders prefer.
De-risking tools such as guarantees proved to be necessary in mitigating loan risks related to financing energy efficiency (EE) for households in multi-apartment buildings. The use of such tools could help to extend loan maturity, which could address the long payback time associated with investments in comprehensive, deep, and wider renovations. Micro, small, and medium ESCOs have limited access to sources of financing for EE projects. Guarantee fund for loan guarantees of EE projects are seen as a crucial means of ensuring of ensuring that financing is available to support the development of the renovation market.
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