Equity facility to facilitate innovation

23rd February 2024 By: Nadine Ramdass - Creamer Media Writer

Equity facility to facilitate innovation

BUILDING BLOCKS The Defence Equity Facility is the first step in improving access to finance for the defence sector
Photo by: Oscar Romero

The newly launched Defence Equity Facility (DEF) aims to bolster private equity and venture capital funds in European companies that are developing innovative technologies with dual-use components, within the European Union (EU), over the next four years.

The facility was launched by the European Investment Fund (EIF), which is part of the European Investment Bank (EIB) Group, and the European Commission’s Directorate General for Defence Industry and Space.

The facility consists of €100-million from the European Defence Fund and an additional €75-million from the EIF to expand investment capacity.

“With the DEF, we deliver a first step in improving access to finance for the defence sector. This initiative will contribute to sending a positive signal to the market and stimulate private investment in support of defence innovation,” European Commissioner Thierry Breton states.

By mobilising additional private investments of about €500-million, the facility aims to contribute to the EU’s defence and security objectives by strengthening the technological competitiveness of the defence sector.

The DEF also aims to stimulate the development of an ecosystem of private funding, consequently focusing on technologies with dual-use potential encompassing both civilian and defence applications. This approach is reflected within the EIB Group policies that explicitly exclude investments in weaponry and armaments.

This new funding opportunity will be accompanied by capacity-building activities to support managers in the development and management of their funds.

The facility plays a crucial role in improving access to finance for innovative mid-caps, including startups, and small and medium- sized enterprises within the EU’s defence and security sector. These companies often face challenges in securing adequate funding for their research, development and commercialisation activities, says the EIB.

By providing equity investments and mobilising private investment, the facility offers financial support to the industry, enabling businesses to bring their dual-use innovative technologies to market.

“Our partnership with the European Commission, under the European Defence Fund, represents a significant milestone in our efforts to drive investment and innovation in a sector of strategic importance for Europe,” says EIF deputy chief executive Roger Havenith.

“This partnership will further enhance European defence capabilities in an increasingly interconnected world facing new geopolitical challenges,” says EIB VP Kris Peeters.

“The DEF will contribute to the objectives of EIB’s Strategic European Security Initiative and play a key role in promoting state-of-the-art technologies [to bolster the] EU’s defence and security, confirming this strategic area as a priority for the EIB Group.”

The facility aligns fully with the December 2023 European Council call for enhancing the EIB Group support of European security and defence, building on the Strategic European Security Initiative launched in 2022 and updated in June 2023.

Through the initiative, the EIB has committed €8-billion in financing over the next five years to support investments that will boost European security.

EIB Group notes that the financing commitment is more than ever before, highlighting the EU bank’s commitment to support the safety and security of European citizens.

Eligible projects for financing include the areas of cybersecurity, space, military mobility, protection of critical infrastructure and other dual-use investments.