Presentation of intergroup on Long Term Investment and Reindustrialisation

1) Background

The “Long Term Investment and Reindustrialisation” Intergroup aims to provide the European Parliament (EP) with an efficient horizontal tool supporting the activities of the relevant committees (ECON, BUDG, ITRE, TRAN, REGI, EMPL, ENVI, etc.), enabling to develop an overview on these topics over the legislature 2014-2019. Its missions include in particular defining long-term financing needs, identifying bottlenecks and barriers that constitute obstacles for long term investments, discussing and identifying a regulatory framework more conducive to long term investors, thinking about a way to diversify funding instruments, promoting cooperation among financial institutions and policy makers, sharing best practices and monitoring EU policies. Its main objective is to bring around the same table the relevant stakeholders concerned about the long term horizon (project promoters, investors and legislators).

2) General organisation

The following entities participate to the Intergroup:

  • The Committee of Members: It gathers the Members of the European Parliament who wish to contribute to the work of the Intergroup. The Members designate among themselves the Members of the Bureau.                                                                                                                                                                                                                                                          
  • The Bureau: It is composed of the President, Vice-Presidents, and Members of the Bureau. It gives strategic input to the Intergroup and approves the initiatives conducted within this framework (organisation of events, issuance of Recommendations and press releases).                                                                                                                                                                                           
  • Associated Members: European and national elected representatives (members of the European Committee of the Regions, European Economic and Social Committee, national legislative assemblies) can join the intergroup as associated members. As such, they receive the same information and invitations than ordinary members of the intergroup. They do not participate to meetings of the Committee of Members, unless the Bureau decides otherwise.
     
  • The Committee of Partners: It gathers the entities that support to the Intergroup. The Partners can submit proposals to organise events related to long term investment and reindustrialisation as well as technical contribution to support and to stimulate the debate within the intergroup. The admission of new Partners during the parliamentary term is proposed by the Secretariat and validated by the Bureau.                                             
  • The Secretariat: The day-to-day management of the Intergroup will rely on a light “Secretariat” jointly provided by the assistants of the Members of the European Parliament from the Bureau and officers from Caisse des Dépôts et Consignations (CDC), Cassa Depositi e Prestiti (CDP) and KfW Bankengruppe (KfW) liaison offices to the EU in Brussels. The Secretariat’s activities will be carried out on voluntary basis and informally.

            Download the Charter for the functioning of the Intergroup

3) An institutional forum on Long Term Investment

The intergroup serves firstly as forum on Long-Term Investment for MEP’s. The meetings would be open to their assistants, EU institutions’ staff, and stakeholders including from the private sector. Monthly meetings welcoming public as well as private actors focus on financial matters with an operational and public interest perspective. They focus on two main priorities:

a) Defining the long term financing needs

Europe’s growth potential is being undermined by a lack of sustainable long-term investment. There are particularly large unsatisfied needs as regards the financing of innovative businesses, infrastructures and the transition towards an economy that is more respectful of mankind and the environment and more efficient in its use of natural resources. In order to move forward on the road to firm and sustainable growth, Europe must embark upon a massive programme of investment, both quantitatively and qualitatively. The intergroup work could be focused on the following priorities:

  • SMEs and mid-caps funding: these actors are a true engine of economic prosperity and growth, representing around two thirds of employment and nearly 60% of value added in the EU, and playing a key role in innovation and R&D. Nonetheless, they are facing significant difficulties in accessing long term finance (longer maturity loans, credit worthiness) ;
  • Economic infrastructures for sustainable transport, energy and communication. They constitute the backbone of the European economy and are, in the same way as innovation, one of the pillars of its competitiveness and long-term growth. They are also of major structural importance for society in the long run;
  • Social infrastructures, which will be a crucial challenge for the next few decades: investments in training and education, health, age appropriate living and other social infrastructures, financing of the development of human capital;
  • Regional integration policy, as Long-Term investment in neighbourhood countries can be a viable instrument to foster local sustainable growth, job creation and ultimately stability, objectives that are for instance expressed as part of the European-Mediterranean basin integration objectives (InfraMed Fund);
  • EU research & innovation funding, which will be a crucial determinant of the EU competitiveness over the coming years.

Moreover, capitalizing on actions taken by the G-20 and the OECD, a more comprehensive intent to define Long-Term Investment could address the following topics:

  • Establishing a dedicated statistical methodology?
  • Calibrating the new prudential rules aiming at lifting constraints and penalties for long-term investments financing?
  • Adapting the accounting rules to correct short-termism and pro-cyclical bias of current asset valuation methods, especially regarding the fair value accounting approach?
  • Taking into account in financial evaluation and reporting Environmental, Social and Governance criteria that may affect the economic, operational and financial performance of assets, as environmental and social challenges facing Europe cannot be decoupled from Long-Term Investment?

b) Diversifying funding instruments for Long Term Investment

Recent years have seen many reforms (CRD IV / CRR, Solvency II; IFRS) tightening the financial regulatory framework to prevent the risk of a return of the crisis of 2007 / 2008. This adjustment resulted in massive reductions of banks commitments. It justifies a thorough review of additional funding channels, especially capital markets and other private institutional investors such as pension funds for instance. Several lines of action could be taken into consideration:

  • Promoting a taxation framework which is more favourable to long term investment (neutrality between debt and equity funding, Financial Transaction Tax);
  • The future role of banks for Long-Term investment (prudential rules in terms of liquidity, leverage effect, risk weight; efficiency of local cooperative banks);
  • The future role of private institutional investors, asset managers, private equity firms and households for Long-Term investment;
  • Developing a high-quality securitisation;
  • Creating an integrated European market for covered bonds;
  • Developing access to capital markets for SMEs;
  • Broadening the model of Project bonds for infrastructure and Green or Climate adaptation bonds for other long-term investment projects;
  • European Long Term Investment Funds (ELTIFs).

The intergroup could also deal with the optimisation of funding channels in order to improve the efficient mobilisation and channelling of European savings for growth and jobs and to ensure the highest level of protection for citizens. The following topics may thus be addressed:

  • The regulatory ways to optimise market structure for long-term financial vehicles;
  • The Development of Crowdfunding and micro-credit;
  • The efficiency of existing retirement saving devices.

c) Promoting further cooperation among Financial institutions with a public mandate in Europe

As the European Council explicitly announced on June 28, 2013 and in line with the recommendations of the HLEG on SME and Infrastructure Financing published on December 11, 2013, not only the EIB should strengthen its cooperation with national development banks but all national development banks should be allowed to operate on a cross-border basis within the EU, as a way of reducing financial fragmentation and improving lending conditions for both SMEs and LTI projects across Europe. Furthermore, in a recent Communication to the European Parliament and the Council on March 28, 2014, the Commission said that it “will encourage and monitor the cooperation of NPBs [National Promotional Banks] with the EIB/EIF and possibly other MDBs [Multilateral Development Banks] as requested by the June 2013 European Council and report to the December 2014 Council”. The intergroup could accompany the steps given by the Commission towards reaching the objective set by the Council.

4) An observatory of EU policies

The Intergroup could also be an observation deck allowing MEPs to ensure appropriate focus on Long-Term Investment by the EU institutions, in particular by the European Commission and the European System of Financial Supervision implementing authorities work. It could assess the role of key financial actors for the long-term financing of the real economy (banks, insurance companies, pension funds, rating agencies, etc.), with hearings of prominent figures from the fields of politics and business. Such events would also represent an opportunity to promote the high priority placed in Long-Term Financing by MEPs. The following officials may for instance be included:

  • International institutions (G-20, OECD, FSB, Basel);
  • European Commissioners for Financial Services and Economic and Monetary Affairs;
  • Members of the Executive Board of the European Central Bank (ECB);
  • Members of the boards of supervisors of the European System of Financial Supervision (European Banking Authority – EBA, European Financial Markets Authority – ESMA, European Insurance and Occupational Pensions Authority – EIOPA);
  • CEOs and Senior officers of European, multilateral and national Long-Term Investors (EIB, EIF, CEB, EBRD, NIB, KfW, Caisse des Dépôts, Cassa Depositi e Prestiti,, Instituto de Credito Oficial, etc.) and, as appropriate, of the private financial sector (pension funds and asset management industry).

The intergroup may also wish to actively raise awareness. As such, its Bureau could undertake different types of actions:

  • Statements when legislative initiatives are introduced by the Commission;
  • Enhanced dialogue with the Commission initiated by members of the intergroup;
  • Press Releases and interviews of the intergroup main representatives on current issues.

5) A Forum for MEPs and Public Long-Term Investors to share best practices

The development of Financial institutions with a public mandate in all Member-States and the coordination of their activities could become significant channels to catalyse private investment towards priority sectors. The intergroup could serve as well as a forum for exchanging good practices on the use of public funds in the form of Innovative Financial Instruments (InFIs), discussing the following topics:

  • The large-scale deployment of InFIs (loans, equity, guarantees, risk sharing mechanisms, etc. ) under the European Structural and Investment Funds and the EU funds under direct management;
  • The initiation of public investment transnational / multiregional projects building on the first experiences in this field (Marguerite, Inframed, European Energy Efficiency Fund, etc.);
  • The development of public devices in support of securitised bank assets including real estate, infrastructure and corporate SME loans;
  • The promotion of platforms aiming at providing Technical Assistance for project preparation.

The intergroup should provide a forum for exchanges with public and private European Long-Term Financial Institutions endowed with the implementation of Long-Term Investment strategies defined at national or EU scale by public authorities. Thematic meetings between these financial institutions officials, as well as private investors, long term investment users, and MEPs could contribute to identifying the most efficient ways to exercise a leverage effect on private investments toward the main priorities (SMEs, economic and social infrastructures).

6) Meetings of the intergroup

The Intergroup plans to organise at least 4 events per year.

In order to ensure its day-to-day management and to prepare and discuss the work programme, the following entities meet on a regular basis:

  • The Secretariat, indicatively every two weeks. 
  • The Secretariat and the Committee of Partners, indicatively  once  a year.     
  • The Secretariat and the Bureau, indicatively on a quarterly basis.

The main purpose of the Intergroup is to promote “Long Term Investment and Reindustrialisation” related topics. In this prospect, it organises thematic events on long term investment with the presence of Members of the Bureau and interested Partners. The events are organized by various Partners in several different formats (conferences, breakfasts, dinners). They must conform with the following procedure:

  1. The Partners address to the Secretariat their proposals of events, in the form of a one page draft, 
  2. Building on the proposals received from the Partners, the Secretariat elaborates a draft work programme which indicates the date, topic, potential Partners, Representative from the Bureau, guests, key speakers and estimated costs for each event.        
  3. The draft work programme is submitted, every semester, to the Bureau.
  4. On the basis of the Secretariat’s proposal, the Bureau adopts the work programme.
  5. The Bureau receives, directly or through the Secretariat, proposals from MEPs about working groups, topics to discuss, etc. and with the support of the Secretariat amend and integrate the work programme consequently. 
  6. The practical organisation and funding of the events is entrusted to the Partners, which work in close relationship with the relevant Member of the Bureau.

7) Secretariat

The Bureau acknowledges that CDC, Cdp and KfW intend to contribute on a non-exclusive basis to the Secretariat, in close relationship with the Bureau, by undertaking the following activities:

  1. Coordinating, through the Secretariat, the proposals from the Committee of Partners in order to articulate a work programme, to be presented every semester to the Bureau.
  2. Contributing, through the Secretariat, to the day-to-day management of the Intergroup (supervising the organisation of thematic events by Partners, including promoting the Intergroup’s news and activities, developing and updating the website of the Intergroup: http://longterminvestment.eu/).              
  3. Organising, once per trimester and in the presence of at least one member of the Bureau, an event (workshop, roundtable, dinner talk etc.) on an issue related to long term investment and Reindustrialisation. CDC, CDP and KfW plan to organise each at least one event per year. 

8) Budget

If necessary, an indicative budget for each specific event (rent of the meeting room, catering, documents’ preparation, etc.) is elaborated and proposed by the Secretariat.

The organization costs of the thematic events are shared between the Partners represented amongst the speakers or participants on a voluntary basis. Any Partner can decide to contribute to the organisation of an event in coordination with the Secretariat. Expenses arising from meetings, events or conferences organised by Partners and their representatives are supported by the Partners themselves.

The Secretariat elaborates a draft budget for each event that is presented to the Bureau for information purpose and it has the only scope to identify in a transparent way the real costs for the event organisation.