Could Rules on State Aid to Promote Risk Finance Investments also Promote Sustainable Economic Growth?

Posted: 16 Jun 2021

Date Written: June 15, 2021


This article intends to contribute to a discussion on possible adjustments in the State aid regulations by proposing an inclusion of the objective of sustainable economic growth into rules that promote risk finance investments.
The rules promoting risk finance investments respond to a market failure that has profound consequences for the economies of the Member States, i.e. the access to finance of micro, small and medium enterprises (SMEs), small mid-cap and innovative mid-cap. The so-called financing gap hinders them during not only the seed and start-up stages, but also later as they develop and grow. Young and small undertakings often lack collateral and a track record, which makes them rather unattractive to potential private finance providers in spite of their growth prospects. Having recognised the importance of SMEs to EU economy at large, State aid law allows for granting risk finance aid in response to such a failure in finance markets.
The current rules on risk finance aid were adopted as part of State Aid Modernisation in 2014, following public consultations on the Community guidelines on state aid to promote risk capital investments in small and medium-sized enterprises of 2006 and the General Block Exemption Regulation of 2008.
The risk finance framework puts much emphasis on responding to the 2008/2009 financial crisis that exacerbated the problems with access to bank lending. The 2014 rules aim thus to attract and channel private financing to support the public policy goals of economic growth and job creation, which was particularly important in times of economic crisis.
The Guidelines on risk finance aid refer to many ambitious initiatives such as the Europe 2020 strategy, the Innovation Union flagship initiative that aims to improve framework conditions and access to finance for research and innovation so as to ensure that innovative ideas can be turned into products and services that create growth and jobs, the Industrial policy for the globalisation era flagship initiative that is designed to enhance the business environment and to support the development of a strong and sustainable industrial base able to compete globally or the Roadmap to a resource-efficient Europe that calls for framework conditions to increase investor certainty and ensure better access to finance for companies making green investments that are seen as riskier or that have longer payback times.
Yet, the economic growth and job creation can no longer be seen in isolation from securing the social foundation for humanity now and in the future while staying within planetary boundaries.
The question of how one may integrate sustainable economic growth into the State aid rules on risk finance aid requires, however, answering a number of questions. The first is how one should translate the idea of sustainability in business into the language of State aid, in particular, the notion of market failure? The next concerns the compatibility assessment.

Suggested Citation

Cyndecka, Malgorzata Agnieszka, Could Rules on State Aid to Promote Risk Finance Investments also Promote Sustainable Economic Growth? (June 15, 2021). University of Oslo Faculty of Law Research Paper No. 2021-17, Available at SSRN:

Malgorzata Agnieszka Cyndecka (Contact Author)

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics