Green Paper

Towards a Common Strategic Framework for EU Research and Innovation Funding

&

Specific focus on EU financial instruments

Jean-David MALODG Research and Innovation – Head of Unit C-03 “Financial Engineering”

“Sophia Café” – Sophia-Antipolis, France, Monday 8 March 2011

What is the Green Paper?• Proposing major changes to future EU research and

innovation funding– Bringing together the FP, CIP and EIT into a Common Strategic

Framework– Standardising the rules– Simplification (single entry points, common IT platforms, etc)

• For the next EU Budget (to start in 2014)• Seeking stakeholder views ahead of the Commission’s

formal proposals (to be presented by end 2011)– On the proposed changes – On the priorities and design of the Common Strategic Framework

The context: Europe 2020 strategy

• Objectives of smart, sustainable and inclusive growth• Headline targets, including 3% of GDP invested in R&D • Includes the Innovation Union Flagship initiative

– A strategic and integrated approach to research and innovation (from research to market, all forms of innovation)

– Putting in place the key conditions to make Europe attractive for research and innovation

– Common focus to address major societal challenges and aiming at competitiveness and jobs

• Endorsed by February European Council (Heads of State)

Innovation gap with US and Japan, emerging countries catching up

United States

46 45 46 48 49

-20

0

20

40

60

80

"2006" "2007" "2008" "2009" "2010"

J apan

32 36 40 39 40

-20

0

20

40

60

80

"2006" "2007" "2008" "2009" "2010"

China

-61 -60 -59 -57 -55

-90

-60

-30

0

30

"2006" "2007" "2008" "2009" "2010"

EU

Percentage gaps between EU performance (0) and other countries across 12 indicators. Other counties, such as India and Brazil, are developing fast.

Source: Innovation Union Scoreboard

EU R&D investment is lagging behind our main competitors

Evolution of World R&D expenditure in real terms, PPS€ at 2000 prices and exchange rates, 1995-2008

Evolution of R&D Intensity, 2000-2009

EU

US (2)

CN (3)

JP

KR (1)

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

R&

D In

ten

sit

y

The rationale for a Common Strategic Framework

Positive benefits from FP7 (interim evaluation and other sources)

• Enables cross-border pooling of resources to achieve critical mass and diffusion of knowledge

• Promotes competition in research, thereby raising levels of excellence

• Offers a wide range of training possibilities and enhances Europe’s research capacity

• Provides a way to deal with pan-European policy challenges and link to EU market frameworks

• Raises the international attractiveness of EU research and innovation

But concerns about FP7 and other programmes (interim evaluations and other sources) • Complexity - too many instruments and funding

mechanisms, complex landscape• Further simplification- less variation in rules, simpler

audits and controls, avoid duplicate information• Better strategy for innovation – how to commercialise

results, generate impacts• Need to focus resources – with critical mass to address the

grand challenges• Broaden participation – new Member States, women• Clearer agendas - driven by scientific, industrial, social

objectives

Scope of the Common Strategic Framework

Bringing together• The 7th Framework Programme for research, technology

development and demonstration• The Competitiveness and Innovation Framework

Programme• The European Institute for Innovation and Technology

And strengthening complementarities with the Structural Funds

Why a Common Strategic Framework (1)?

Simplifying the programmes:• FROM different rules in each programme and initiative

TO more standardised rules across all initiatives

• FROM a large number of funding schemes within and between programmes TO a rationalised toolkit of schemes that are common to all

programmes

• FROM multiple websites, guidance documents, applications TO common entry points, one stop shops, common IT

platforms

Why a Common Strategic Framework (2)?

Greater impact:• FROM fragmented calls where projects cannot go from one

stage to the next (R&D, demonstration, market take up, etc) TO support for projects and organisations from research to

market

• FROM research results sitting on the shelf TO stronger support across the whole innovation cycle

• FROM different priorities in each programme and initiative• TO common strategic priorities, focusing on societal

challenges, competitiveness and research excellence.

Summary of questions in the Green Paper

Delivering on Europe 2020• How can a Common Strategic Framework make EU funding

more attractive and easy to access? • How to cover the full innovation cycle: research to market?• Where to act at EU level (and leverage other resources)?• How to support joint programming between Member States?• What between large vs small projects?• What balance between standardisation vs flexibility in the

rules?• What measures of success?• How to complement national, regional and Cohesion Policy

funding?

Tackling societal challenges

• How to focus on societal challenges?• What scope for bottom up activities?• What support for policy making and forward-

looking activities?• Role of the Joint Research Centre?• How to involve citizens?

Strengthening competitiveness

• How to take account of non-technological innovation?• How to strengthen industry participation, including public

private partnerships?• What support for SMEs?• Use of open schemes to support innovation? • Use of financial instruments (equity, debt)?• New types of support (public procurement, prizes)?• Treatment of Intellectual Property Rights?

Strengthening the science base and the European Research Area

• Stronger role for the European Research Council?• EU support to improve Member State policies?• Greater support to mobility and research careers (Marie

Curie actions)?• EU level support to research infrastructures?• Priorities for international cooperation?• Addressing obstacles to the European Research Area?

A broad debate – next steps

• Addressed to all stakeholders: – Key questions for design of the Common Strategic Framework

• Deadline for contributions by 20 May 2011:– Online questionnaire– Submission of position papers– Interactive blog

• Next steps:– Major event to conclude consultation (10 June 2011)– Commission proposals for next multi-annual financial framework– Commission legislative proposals for the Common Strategic Framework

(by end of 2011)

European financial instruments for Research and Innovation:Post-2013 priorities and added value of future EU financial instruments

Future EU financial instruments for Research and Innovation

Trend at European level to make increasingly use of financial instruments for the next budgetary period (“Multiannual Financial Framework”, MFF)

Advantages of EU financial instruments:

Limited budget resources could be used (co-financing; risk-sharing or guarantees to mobilise private funding (« leverage effect »)

Unless risks/ losses exceed expectations, EU budget resources could be “recycled” and reused for further projects (revolving funds)

Flexibility to better meet the funding needs of target groups/ beneficiaries and address funding gaps in the market (rational for intervention)

European Commission is currently discussing the future political priority areas where European financial instruments could be of added value

Future EU financial instruments and their governance (guiding principles: streamlining, coherence, critical mass, mobilisation of private capital, delegation to Financial Intermediaries) need to be determined

Future EU financial instruments for Research and Innovation

“Financial instruments” as currently discussed mean: EU financial support measures from the EU budget in order to address a specific policy objective by way of loans, equity/ quasi-equity, guarantees or other risk-bearing instruments, possible combined with grants

Future EU financial instruments should ideally address more than one policy area (“cross-flagship” approach), for instance Research and Innovation, and they should support particular EU policy objectives such as the SET PLAN (low carbon technologies) and the Digital Agenda (ICT/ Broadband investments)

For Research and Innovation, a first outline of possible future financial instruments has been made in the “Europe 2020 Flagship Initiative Innovation Union” Communication of the EC (6 October 2010)

Risk Capital1 CIP Resources (SME)2 RSFF (SME / MidCap)

Entrepreneur, friends, family

Business Angels

Seed/Early Stage VC Funds

Formal VC Funds

Bank Loans and Guarantees

Seed / Start-Up Phase Emerging Growth Phase Development Phase

Facility: High Growth Innovative SME Scheme (GIF), Ecotech

Purpose: IP financing, technology transfer, seed financing, investment readiness

Target Group: VC Funds, Business Angels

EIF Product: Fund-of-Funds

CIP Guarantee schemes

Growth financing for SMEs

Formal VC Funds, CLOs

SME guarantees (loans, microcredit, equity/mezzanine, securitisation

FP7 RSFF

RDI financing

SMEs/MidCaps, Banks, PE Investors (sub-investment grade)

Loans (incl. Mezzanine), Funded Risk Sharing Facilities with Banks (Investors)

Investment Loans

FP7 RSFF

RDI financing

MidCaps/Large Corporates/Public Sector Entities (investment grade)

Loans, Guarantees

Later Stage Counterparts

3 4

EIF EIB

Current EU financial instruments for RDI

Future EU financial instruments for Research and Innovation

Market/ funding gaps which could/ should be addressed through EU financial instruments for R&I are:

Investment in knowledge transfer and start ups

Venture capital for fast growing firms expanding on EU and global markets

Risk-sharing finance for investments in R&D and innovation projects and loans for innovative fast growing SMEs and mid-caps

Next steps: Consensus on an integrated approach within the Commission, involvement of EU Member States (and EP), consultation of stakeholders

Thank you for your attention

Find out more and participate in the debate at:

http://www.ec.europa.eu/research/csfri/