The InvestEU Sustainability Guarantee Programme supports SMEs in accessing debt financing for projects that contribute to the EU’s green and sustainable economy objectives. Implemented by the European Investment Fund (EIF) through a network of financial intermediaries, the programme provides partial portfolio-based guarantees on new loans, leases, or investments that meet EU Taxonomy sustainability criteria. It allows financing for either sustainable enterprises or specific sustainable projects, covering areas such as climate mitigation, circular economy, resource management, and biodiversity protection. The programme includes tools to assess eligibility and requires intermediaries to pass on benefits, such as lower interest rates, to end recipients.
InvestEU Sustainability Guarantee Programme in the European Union
Abstract
The InvestEU Sustainability Guarantee Programme is part of the wider InvestEU Programme, which uses an EU budget guarantee to trigger private and public investments in EU policy priority areas, including sustainability. The EUR 5.5 billion EU guarantee facility is designed to expand access to debt financing for European SMEs, Small Mid-Caps, individuals, and housing associations investing in projects that support the EU’s green and sustainable economy objectives.1
It is implemented by the European Investment Fund (EIF), which collaborates with various financial intermediaries across the EU (such as promotional banks, alternative lenders, commercial banks) to provide favourable loan conditions under this facility. This guarantee partially covers the risk of loans or investments provided by these intermediaries for projects that meet specified sustainability criteria (see below). The specific terms, including interest rates, can vary depending on the participating financial institution and the borrower’s eligibility. The eligibility criteria are based on the EU Taxonomy for Sustainable Finance. The guarantee is on a portfolio basis and only new loans, leases, investments are eligible. It is important to note that the decision to offer loans remains with the financial intermediary and not with the EIF.
The programme is implemented by the European Investment Fund (EIF), which works through a network of financial intermediaries across the EU—including promotional banks, commercial banks, and alternative lenders. Under the facility, the EIF provides a partial, portfolio-based guarantee that covers a share of the risk on new loans, leases, or investments originated by these intermediaries for eligible sustainability projects (see more below). Eligibility is assessed against EU Taxonomy for Sustainable Finance criteria. Loan pricing and other terms (e.g., interest rates, tenor, collateral) are set by the participating financial institution, not the EIF, and lending decisions remain fully at the discretion of the intermediary.
The InvestEU Sustainability Guarantee gives businesses the option to qualify as either a sustainable enterprise or a sustainable investment. This flexibility ensures that both companies and specific projects can access financing for sustainability initiatives. A sustainable enterprise is a business that meets certain sustainability criteria, meaning its overall operations contribute to environmental or climate goals. On the other hand, a sustainable investment refers to funding for a particular project with a green impact, even if the company itself does not fully meet the sustainable enterprise criteria.
Sustainable enterprise criteria2 include:
Prize and/or public support previously received
Clean energy/climate related intellectual property right
Eco-label business
Sustainable/green business/supply chain
Sustainable/green business model and impact
Environmentally certified enterprise.
Sustainable investments criteria3 include:
Investments for climate change mitigation (renewable energy; commercial and residential green and energy efficiency buildings; industrial energy efficiency; zero and low emission mobility; green ICT for climate mitigation)
Investments for climate adaptation (climate resilience)
Investments related to transition to circular economy, waste prevention and recycling (sustainable use of materials; waste reduction, collection and recovery; product as a service, reuse and sharing models that enable circular economy strategies; green ICT enabling circular economy business models)
Investments related to environmental impact and sustainable management of natural resources (water resources; pollution prevention and control)
Protection and restoration of biodiversity and ecosystems-nature-based solutions
Agricultural and forestry activities (sustainable forests and other climate change mitigation investments; sustainable and organic agricultural or aquacultural practices).
As part of the programme, both financial beneficiaries and SMEs can make use of the Sustainability Guarantee Tool (SG Tool) to assess the eligibility of enterprises or projects under the InvestEU Sustainability Portfolio Guarantee. The Tool’s primary function is to check whether projects meet the guarantee programme’s requirements, with the option to provide an indicative view of climate impact where applicable.
The guarantee includes capped and uncapped options. Uncapped guarantees cover losses up to 70%, which can rise to 80% in specific cases like cohesion regions. The fee is 75 basis points, and since the EIF has a triple-A rating, there is no cost of capital or cost of risk. All benefits must be passed on to the final recipients. Capped guarantees, on the other hand, cover losses up to a predetermined ceiling based on expected portfolio losses, with a cap rate of up to 25% and a 20 basis points fee. If the portfolio defaults, the guarantee covers losses up to this cap.
To ensure that the benefits of this programme reach final recipients, intermediaries must pass on the cost reduction (in the form of lower interest rates, lower collateral requirements, higher appetite for risk or other), documenting and reporting quarterly on pricing and loan conditions. While the EIF is not involved in approving transactions, it conducts audits and visits to ensure compliance and proper implementation.
This is one of six portfolio guarantee products under the InvestEU programme, dedicated to supporting the green and sustainable transition of small enterprises and citizens across the EU. The tool, being within the framework of InvestEU, supports broader EU sustainability objectives including the European Green Deal and the EU Taxonomy for sustainable finance. While the EU Taxonomy was still evolving at the time of the instrument’s design, the Sustainability Guarantee incorporates a structured eligibility framework that considers both the sustainability profile of the SME and the nature of the investment. This approach aims to simplify sustainability criteria for SMEs, which have historically faced difficulties in meeting stringent environmental finance requirements.
Meeting high demand while ensuring strategic impact: The InvestEU Sustainability Guarantee Programme has seen extremely high demand, with interviews indicating it is oversubscribed by a factor of three. While this level of interest reinforces the strong relevance and market need for the instrument, it also poses a challenge: ensuring balanced and equitable distribution of support across EU member states and across different market segments. In response, the EIF is considering prioritising engagement with intermediaries that reach underserved or excluded borrowers, where the guarantee provides the greatest additionality and developmental impact.
To further strengthen the programme’s reach, the EU is exploring ways to expand its financial capacity, including potential top-ups beyond the initial EUR 5.5 billion. Additional contributions could come from national governments or be channelled through instruments such as the EU Recovery and Resilience Facility. As this is the first instrument of its kind in the EU financial ecosystem, the programme remains in active development. A key consideration moving forward is the harmonisation of sustainability-related directives—particularly in sectors such as building renovation—to enable more consistent implementation and effectiveness across member states.
There are several key factors to which the success of the Sustainability Guarantee can be attributed to:
Effective risk mitigation with tangible benefits for SMEs: The instrument’s structure effectively mitigates risk for financial intermediaries while ensuring that SMEs receive tangible benefits in the form of improved financing conditions. This balance has encouraged participation from (promotional) banks and alternative lenders, helping to expand access to finance for SMEs engaged in sustainability activities.
Proactive approach to market building and capacity development: Thanks to the Commission’s InvestEU Programme budget and the EIB Advisory service, EIF was in a position to provide advisory support, an online tool, and a dedicated helpdesk. The EIF facilitated the integration of sustainability criteria into lending practices, and helped financial intermediaries navigate the complexities of sustainable finance. This has been also important because the programme intends to stimulate the development of sustainable finance for SMEs as an asset class, as banks reportedly sometimes view sustainable finance as something that applies to large corporations only. In particular, the sustainability criteria have been typically deemed as too complex, but that sentiment is changing.
Flexibility in design to enable responsiveness to market needs: A key success factor has been the programme’s flexibility in implementation, allowing it to evolve based on market feedback and operational realities. Both the eligibility criteria and product structure have been adapted over time to reflect differences in national contexts, market maturity, and sectoral priorities. For instance, elements such as the coverage ratio and guarantee terms vary by intermediary, allowing the programme to better align with existing lending practices and maximise take-up across diverse environments.
Balancing administrative efficiency with impact assurance: Another critical success factor is the programme’s ability to balance reporting efficiency with accountability. While efforts have been made to streamline compliance requirements for financial intermediaries, safeguards remain in place to ensure that the support is additional and that benefits are passed on to underserved SME segments. Achieving this balance requires a solid understanding of the internal operations and constraints of participating institutions. By refining reporting formats and maintaining a targeted due diligence framework, the programme avoids overburdening intermediaries while still ensuring that financing conditions are more favourable than what the market would otherwise offer and that impact reaches the intended beneficiaries.
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← 2. EIF (2024) Sustainability Guarantee. Use Case Document. Version 1.3. Retrieved from: https://www.eif.org/InvestEU/guarantee_products/sustainability-use-case-v1-3.pdf
← 3. EIF (2024) Sustainability Guarantee. Use Case Document. Version 1.3. Retrieved from: https://www.eif.org/InvestEU/guarantee_products/sustainability-use-case-v1-3.pdf
← 5. EIF (2024) Sustainability Guarantee. Use Case Document. Version 1.3. Retrieved from: https://www.eif.org/InvestEU/guarantee_products/sustainability-use-case-v1-3.pdf.
