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Statement

EDFI recommends the next MFF to:

➢ Maintain and improve the Open Architecture (OA) and ensure the OA meets the geostrategic needs of Europe. This includes the need to mobilize European private and institutional capital for investment in EMDEs;

➢ Further simplify procedures, in particular funding allocations and contracting. We believe there is scope for this as we are all pillar-assessed organizations;

➢ Ensure the availability and complementarity of a diverse range of instruments. Guarantees, blending and grants are far more effective when deployed in complement;

➢ Engage deeper in frontier markets. Stability and security in these markets is of quintessential importance for safety, prosperity and welfare in neighbouring countries and in Europe;

➢ Incentivize localization and ensure deeper engagement with the EMDE financial sector;

European Development Finance Institutions (EDFIs) play a crucial role in delivering highimpact investments aligned with the EU’s strategic goals. With a combined committed portfolio of over €60 billion, EDFIs drive sustainable growth in emerging markets by leveraging private capital and filling financing gaps.

In 2022 alone, EDFI-backed investments:

• delivered 8.6 million jobs, generated €33 billion in taxes,
• produced 97 TWh of clean electricity, and
• avoided 15 million tonnes of CO2 emissions

European DFIs deliver strategic value for EU external action:

• Largest Providers of Private Sector Finance – EDFIs represent over half of the European Financial Architecture for Development (EFAD) total private sector financing (52%).

• Aligned with future EU Priorities – Green and digital transitions, job creation, and economic resilience and a strong alignment with current Global Gateway activities. As a result of this alignment, EDFIs have been allocated over 40% of EFSD+ in December 2022.

• Strongest Presence in Africa – EDFIs account for 84% of annual private sector investments among EFAD stakeholders in Sub-Sahara Africa (SSA). Many of these investments have had a direct or indirect benefit for European companies.

• ‘Boots on the Ground‘ – in addition to robust and long-lasting investment partnerships with local partners, many European DFIs have an effective network of representative offices in Emerging Markets and Developing Economies (EMDEs), translating into strong local origination capacity.

• Additionality – EDFIs assume higher risk where private capital is insufficient.

• Access to Capital Pools – Our connections to deep institutional capital support long-term, scalable investment.

These characteristics are key to carrying out core recommendations in last year’s Letta and Draghi reports: boost Europe’s competitiveness and enhance its capacity to establish investment partnerships in emerging markets and diversify investment portfolios. EDFIs stand ready to further scale-up their role in harnessing Europe’s capability to build long-lasting partnerships in EMDEs.

Key Recommendations for the Next MFF

The Draghi report underlines the need to adopt an ambitious external EU budget with a “foreign economic policy” based on securing critical resources and value chains to the EU. This includes focusing on innovations and enhancing EU competitiveness in emerging markets in line with the ambition of the Global Gateway strategy.

Against this backdrop, EDFI recommends seven principles to guide the allocations and instruments that support the EUs external action in 2028 – 2034.

1. Maintain and improve the Open Architecture (OA):

EDFI recommends maintaining and evolving the Open Architecture for European development finance. In the coming MFF period, the OA will need to evolve to provide geostrategic depth to Europe’s External Action. To efficiently serve Europe’s external security and geopolitical ambitions, the OA should rely on three distinct but closely connected pillars: (i) the mobilisation of European private capital in Emerging Markets and Developing Economies (EMDE), in which the European DFIs (EDFI) are leading institutions; (ii) European public investment in EMDEs, in which the European Public Development Banks (PDB) and Multilateral Development Banks are leading institutions; and (iii) European trade/export finance in EMDEs in which European export promotion agencies and export credit agencies (ECA) are leading. The cooperation among these financial organizations needs to be well choreographed within the Open Architecture. For such coordination, it is vital to distinguish different mandates and funding envelopes. This will avoid the risks of a fully fungible approach under a single pillar. Opportunities for joint envelopes should be explored, but this should not come at the expense of individual mandates. The diversity and agility of Europe’s development finance institutions and their strong link with the European private and financial sector, including institutional investors, are a strong asset for Europe.

EDFI supports the further evolution of the OA in this direction, based on the lessons learned under the current MFF, and reflecting the achievements of all institutions under EFSD+ and other instruments (see diagram 1 below). A level playing field between EU implementing partners is essential to fully realize the benefits of this approach. Competitive, merit-based access to EU instruments and equal treatment must be ensured. In this context, it is crucial that all key European financial institutions, including the EIB, continue to operate within the same OA framework rather than separate regimes. Deviation from this principle risks fragmenting the OA, undermining a coordinated and efficient approach and weakening Europe’s comparative advantage in EMDEs.

2. Be flexible and simplify:

The success of Global Gateway within the 2028–2034 MFF will depend on institutional innovation that bridges long-term strategic goals with the demands of a rapidly evolving global environment. In an increasingly volatile international landscape, future EU external action instruments will need to be sufficiently flexible and agile to respond more rapidly to unexpected crises and geopolitical developments. The next MFF should build on the experiences and lessons learned from EFSD+, leveraging both its successes and areas for improvement. While a project-based approach can be valuable, it should not require case-by-case approval of each operation. Instead, clear reference frameworks and investment criteria should guide decision-making, avoiding inefficient multiple review layers.

Under the current EFSD+, EDFI contributed to process innovation through the design of large joint Programmes managed by EDFI Management Company. This has complemented individual DFI engagements under EFSD+. The new structure has helped the European Commission deploy its budgetary resources through the EDFI network, while ensuring risk diversification among different investors and projects, as well as saving transactional costs through one-for-all Programmes. The existing capacity in terms of network, processes and systems can be further leveraged under the new MFF to match policy goals and implementation efficiency.

In addition, funding allocation processes should be accelerated and simplified to the greatest extent possible. By harmonizing existing and new funding instruments, reducing bureaucratic hurdles, and creating a coherent regulatory environment that enables institutional capital mobilization by entrusted institutions such as DFIs and MDBs, the EU can make the Global Gateway offer more attractive to partner countries and private investors while ensuring accountability and alignment with the Union’s values and strategic objectives. Accredited institutions have already undergone rigorous pillar assessment processes, establishing a foundation of mutual trust. Introducing additional requirements beyond accreditation would only add complexity and delays, without clear benefits. Relatedly, in the context of consolidating existing regulations impacting financial institutions and the Omnibus Directive we would urge the European Union to align the evolution of sustainable finance and prudential regulatory frameworks with Global Gateway ambitions, ensuring its global interoperability while considering the unique operational modalities of European impact and commercial investors in EMDE. Finally, alignment of reporting requirements with the Joint Impact Model would further increase efficiency, reduce implementation costs, and increase the potential to mobilize private resources (as private parties familiarize themselves with the JIM).

3. Use a diversity of instruments from Europe’s toolbox:

The EU’s financial toolbox for external action must prioritize a diverse range of separate, yet complementary instruments to maximize impact. Combining adapted financing such as guarantees and blending tools enhances the EFAD’s impact and the EDFIs’ contribution to EU policy by increasing market creation opportunities and private capital mobilization while reducing risks for other investors to step in.

Complementarity of instruments is essential for the EFAD to deliver sustainable and scalable results and stand out as an equal partner for the governments and private in EMDEs.

Within this toolbox, the various parties need to adhere to the DFI Enhanced Blended Concessional Finance Principles for Private Sector Projects. These principles will ensure the efficient deployment of concessional resources and impact maximization.

4. Engage deeply in Frontier Markets:

For the next MFF, it is crucial to reaffirm the geographic priorities, particularly focusing on Africa, frontier markets, and countries facing hardest challenges such as LDCs and conflict affected areas. Contributing to stability in partner countries is central to the EU’s external action, including the Global Gateway strategy. To solidify this commitment, a minimum percentage should be established in the future regulation, ensuring that these regions receive dedicated and predictable support. In addition, for DFIs to encourage investment in frontier markets and fragile contexts, it is essential to provide guarantee instruments that adequately cover DFIs’ risks and provide instruments that can support much-needed market creation instruments.

Frontier markets, including fragile and conflict-affected geographies, require targeted investment approaches that balance urgent humanitarian needs with long-term economic resilience. Donor collaborative platforms (i.e., ARIA, Invest for Impact Nepal, etc.) offer effective models to catalyze sustainable economic activities. Broader investment ecosystem development is critical to integrating and increasing European private investments in LDCs and fragile states through the Global Gateway strategy. Given the importance of regional security for the stability of EMDEs, frontier market investment and tackling fragility should always remain an integral part of Global Gateway.

5. Mobilize private and institutional capital:

Prioritizing the mobilization of private institutional investors is essential for Europe’s geostrategic depth in Africa, Asia and LAC. Without mobilizing power, new European sources of capital for sustainable development cannot be unlocked.

The large European pools of institutional capital need to connect to the potential of future productivity in these EMDEs. Cooperation on blended finance and market development is key to enabling European DFIs to channel more private capital into the projects supporting EU’s external action, including Global Gateway. Mobilization is at the heart of the mandate and expertise of European DFIs. The EDFIs’ priority is to tap into capital markets and attract private investment to maximize development impact and financial sustainability.

Across all EDFI members, some €4.4 billion of private capital was mobilized in 2023 alone. A key bottleneck to increasing mobilization is not the supply of institutional capital but creating offers which fulfill the risk-return-expectations of the market. It is also sufficient demand for the type of financing private investors can offer. Blending and concessional finance has emerged as a promising tool to allow DFIs to develop impactful pipeline projects together with private entrepreneurs. Building on the positive experience with existing programmes, such as ElectriFI and AgriFI of the EDFI Management Company, European DFIs see a lot of potential for cooperation with the EU on market creation if well aligned with private sector needs, and in synergy with other Team Europe actors.

With respect to private and institutional capital mobilisation, the EU’s should continue to play a leadership role in guiding reforms that promote innovative financing models, including through initiating large transformative global and regional programs that have been set up with the help of DFIs and are essential for the further development of capital markets (i.e., TCX, GGBI, LPI).

6. Localize

Needs and demand at local level should define the European approach. EDFI members have invested in EMDEs for decades and understand the need for local opportunity-driven sourcing of investments which fulfill political priorities according to the individual mandate of each EDFI. Opportunities need to be seized where they are and followed up with enough room to maneuver and cannot be imposed from top-down. EDFIs support the development of the next MFF ensuring a balance between Europe’s strategic priorities and the development needs of partner countries. A substantial blending envelope dedicated to DFIs will be essential to achieving this balance, enabling impactful investments that align with both EU objectives and local economic development.

7. Deepen European engagement with the EMDE financial sector, including MSMEs

Supporting corporates along the value chain and expanding access to finance for MSMEs are fundamental contributions to Europe’s engagement in EMDEs and to sustainable development. Fostering enabling business environments, which includes investments in women-led businesses and in young entrepreneurship, allows the EDFIs to lay the groundwork for any large private investments (including infrastructure). Our strong position in the EMDE financial sector thus aligns seamlessly with the Global Gateway agenda, advancing sustainable, inclusive global growth. Building on the ambitious NDICI benchmarks (i.e., 30% for climate action, 10% for biodiversity, and 85% for gender equality) it is crucial to scale up external financing for these priorities. Doing so will strengthen alignment with the EU’s overarching goals while enhancing Global Gateway’s ability to drive real change and strengthen European engagement in the heart of the economies in partner countries.

Figure 1. European development finance to countries outside EU (2020):

EDFI members: BII (United Kingdom), BIO (Belgium), Cofides (Spain), DEG (Germany), Finnfund (Finland), FMO (The Netherlands), Impact Fund Denmark (Denmark), Norfund (Norway), OeEB (Austria), Proparco (France), SIFEM (Switzerland), Simest and CDP Development Finance (Italy), SOFID (Portugal), Swedfund (Sweden).