The European Investment Fund (EIF) launched a €175-million fund, dubbed the Defence Equity Facility (DEF), on Friday to foster defence innovation around EU’s small and medium enterprises (SMEs).
“The European Commission and the European Investment Bank Group are stepping up cooperation to support investments in innovative defence technologies by launching a €175 million Defence Equity Facility that aims to support private equity and venture capital funds investing in innovative defence technologies having dual-use potential.”
The EIF stated that the fund aimed to “stimulate the development of an ecosystem of private funds” investing in defence innovation and to improve access to finance “for small and medium enterprises (SMEs)” operating in this field.
EU defence companies complain of having limited access to private and public funds as banks’ readiness to lend is declining, limiting the industry’s investment opportunities. Defence ministers voiced support for the sector in November last year.
The statement also followed repeated calls by EU leaders “for an enhanced role of the European Investment Bank Group in supporting European security and defence, building on the bank’s Strategic European Security Initiative.”
The European Investment Fund (EIF) is part of the European Investment Bank (EIB) group, which aims to invest in small and medium-sized enterprises (SMEs), start-ups and mid-capitalisation companies.
Investments take place through venture capital and risk financing instruments, with private investors contributing funds despite a high risk of failure in order to promote innovation.
Through the DEF, the EIB group and the European Commission “will have a new financial tool to invest in SMEs and mid-caps in defence innovation and support European competitiveness”, an EIF spokesperson claimed. EU Internal Market Commissioner Thierry Breton backed the fund, stating on January 11 that the new scheme was “very important”.
“The EIB is too cautious on the matter [of financing defence], and I continue to say that since its goal is to fund the Union’s policies, it should also fund the [defence] industry.”
According to the EIB Strategic European Security Initiative (SESI), which invests €14 billion in innovation, security infrastructure and technology, the fund will have both civilian and military uses.
The fund’s activities include research and development, production, maintenance of both existing defence products and “critical future and emerging defence technologies with a dual-use potential,” the EIF claimed.
Projects can cover all sectors (cyber, space, air, land, navy), including submarine systems, medical response, sensors, digital transformation, energy sustainability and environmental change.
