Fact of the Week: EU Initiative That Co-Finances Loans for Risky R&D Projects Induced 14 Times the Initiative's Investments Between 2007 and 2016

Caleb Foote April 1, 2019
April 1, 2019

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An EU initiative that co-finances loans for risky R&D projects induced up to €255 billion in business R&D between 2007 and 2016, 14 times the initiative’s investments.

Source: Anabela Marques Santos and Michele Cincera, “Sharing the Risk of Innovative Investment: Assessing the Effect of a New European Financing Instrument,” iCite Working Paper 2018-029, December 2018.

Commentary: The European Union in 2007 established the Risk Sharing Finance Facility (RSFF) to improve access to debt financing for high-risk R&D projects by co-financing loans with private banks. A new study has analyzed the impact of the €18.2 billion that the RSFF invested from its inception through 2016. It finds that each euro of RSFF funding induced an additional €8.40 to €14 of business R&D expenditure, for a total of €153 to €255 billion added business R&D. Further, this multiplier effect is dramatically larger than EU grant and subsidy programs, which are estimated to induce 2.2 times their cost in added business R&D.