EDFI MC: Driving Sustainable Development through Global Gateway

As the world grapples with the challenges of achieving the Sustainable Development Goals by 2030, innovative approaches to development finance are becoming increasingly important. The European Union’s Global Gateway strategy represents a significant shift in this direction, aiming to mobilize investments in sustainable infrastructure in emerging countries. By engaging the private sector and promoting European values, Global Gateway seeks to create a more equitable and sustainable development landscape. EDFI Management Company (EDFI MC) plays a crucial role in driving sustainable development through its comprehensive suite of services. These include:

• Direct investments or Market Development Facilities: EDFI MC manages initiatives like AgriFI and ElectriFI, which provide early-stage risk capital for sustainable agriculture and renewable energy projects, respectively.
• Risk-Sharing Facilities or Guarantees: EDFI MC manages European Fund for Sustainable Development Plus (EFSD+) guarantee programs, enabling European Development Finance Institutions (EDFIs) to access risk coverage for higher-risk investments in emerging markets.
• Technical Assistance (“Grants”): EDFI MC supports technical assistance programs that enhance investment readiness and capacity building for ElectriFI and AgriFI partners.

Global Gateway

The European Union’s Global Gateway strategy, launched in December 2021, marks a significant shift in international development and geopolitical engagement. This ambitious initiative aims to mobilize up to €300 billion in investments by 2027, offering a sustainable and high-quality alternative to global infrastructure development. It focuses on five priority sectors: digital infrastructure, climate and energy, transport, health, education and research. While global in scope, it places a strong emphasis on Africa, allocating approximately half of its resources to the continent.

The novelty of the EU’s Global Gateway (GG) strategy lies mostly in the innovative approach the EU takes in its external action, whereby an investment agenda becomes a crucial component of the EU’s engagement with its partner countries. The strategy emphasizes equal partnerships, working closely with countries to tailor projects to local needs while supporting EU strategic interests. It leverages public and private investment using de-risking tools like the European Fund for Sustainable Development Plus (EFSD+), combining grants, guarantees, and technical assistance to attract sustainable financing.

To implement the GG strategy, the European Commission works with all European development actors, including European DFIs, on coordinating a set agenda for upstream and investment readiness activities, which are mostly structured around Team Europe Initiatives and GG flagship projects.

European DFIs and EDFI MC play a pivotal role in accelerating the implementation of the Global Gateway strategy, particularly through supporting private companies and effective mobilisation and engagement of the private sector—an area where DFIs are uniquely positioned to provide critical expertise and impact.

For more information European Fund for Sustainable Development Plus – European Commission.

Background information of EDFI MC with EFSD+ guarantees

The current multiannual financial framework (MFF 2021-2027) with an € 8 billion EFSD+ ‘open architecture’ window, awarded EDFI MC in 2022 with €1.4 billion in EFSD+ support for six new EU budgetary guarantee programmes, making EDFI MC the second largest recipient of EFSD+ under Open Architecture Window.

This budget support has created, first, an opportunity space for all EDFIs, to become essential delivery agents of Global Gateway. Secondly, by supporting more collaborative and unique EFSD+ guarantee programmes that all EDFIs can use is a game changer for enhancing access to EFSD+ and strengthening a “Team Europe” approach and speeding up the pace of investments.  Twelve out of the fifteen EDFI members are fully EU Pillar Assessed enabling all twelve to directly access EFSD+ from EDFI Joint guarantees managed by EDFI MC. Due to the significant cost of designing, negotiating and managing, and reporting on EFSD+ programmes, many of the smaller EDFIs have chosen to access EFSD+ via EDFI MC and additionally have merged bilateral programmes into EDFI MC ones in order to reduce the cost on the DFI and obtain more benefit via an EDFI Joint guarantee.

Through its management of other EFSD+ programmes such as TCX and LPI, coupled all together with the sub-delegation responsibilities of ElectriFI and AgriFI via FMO, EDFI MC has significantly enhanced its offering not only to the EDFIs but also to the EC in providing an essential entry point for EDFIs to access blended finance solutions and is therefore playing a significant role in the European DFIs EU Partnership Plan.

Added value of EDFI MC

EDFI MC offers great value to the market in several ways. Firstly, by pooling resources from multiple DFIs and increasing the availability of capital for sustainable investments, by enabling risk sharing mitigation mechanisms across DFIs, by promoting standardized investment practices and frameworks, streamlining the guarantee programme negotiation phase with the European Commission and making it easier for DFIs and co-investors to collaborate while reducing costs.

The EDFI joint guarantees serve as a pertinent example of how innovative financial instruments can facilitate financing in high-risk markets and enable the participation of both public and private co-investors, thereby enhancing private sector mobilization.

We provide a single point of contact to access the EDFIs network, along with our market-oriented expertise in originating and managing investments in emerging markets and in designing and negotiating EU-funded programs. Our commitment to equitable access and a level playing field ensures that the implementation of guarantees aligns with a market-based approach, thus preventing unfair advantages between EDFIs and mitigating the risk of potential market distortion. As a pillar-assessed entity, we uphold established standards and procedures that ensure the sound implementation of EU guarantees, acting as a watchdog to consolidate and report on the activities of European DFIs. We share common objectives and interests with the EU and European DFIs. This alignment, evident in both sectors and geographies, fosters a partnership structure that encourages collaboration and resonates with the Team Europe spirit.

Current programmes

The allocation of the EFSD+ EDFI budgets managed by EDFI MC is now channelled through six different guarantee programmes:

• EDFI MSME Platform and MSME Platform Plus: they are designed to address financial constraints faced by micro, small and medium-sized enterprises (MSMEs) in Sub-Saharan Africa and the EU Neighbourhood by enhancing the capacity of EDFIs and their co-investors to provide loans to local financial intermediaries.
• EDFI Carbon Sinks: designed to support EDFIs and their private and public co-investors to scale up equity investments in forestry and regenerative agribusiness companies investing in carbon sink projects
• EDFI Renewable Energy Transition (EDFI RET): designed to support EDFIs and their co-investors in addressing the ongoing energy access gap in emerging markets.
• EDFI Transforming Global Value Chains (EDFI TGVC): designed to support EDFIs and their private and public co-investors to scale up debt investments into local, regional and value chain companies and services in developing countries.
• TCX: designed to cover local currency swaps which then in turn help investors access hedging support for local currency projects.  
• LPI: is an innovative blended finance initiative designed to address the lack of liquidity in emerging markets by creating a secondary market platform.