Financing the EU Green Deal

In the framework of the European Green Deal, the Commission has announced  a renewed sustainable finance strategy, aiming to provide the policy tools to ensure that financial system genuinely supports the transition of businesses towards sustainability in a context of recovery from the impact of the COVID-19 outbreak.

The renewed strategy will contribute to the objectives of the Sustainable Europe Investment Plan (also known as European Green Deal Investment Plan (see below).

Within the EU recovery packade, there is a target of spending 37 % of the €750 billion NextGenerationEU recovery fund on Green Deal objectives, and the intention to raise 30 % of the NextGenerationEU budget through green bonds.

Sustainable Europe Investment Plan

In January 2020, the Commission presented a communication on the Sustainable Europe Investment Plan. It aims to increase funding for the transition by mobilising €1 trillion for sustainable investment over the next decade through the EU budget and associated instruments.

According to the EU Green Deal guidelines, public funds should be invested in advanced research and innovation, complemented by a strategy for green financing.

The investment plan includes establishing a clear and detailed EU taxonomy, a classification system for sustainable activities.

EU taxonomy

The EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities, aiming to scale up sustainable investment and to implement the European Green Deal.

It aims to create security for investors, protect private investors from greenwashing, help companies to plan the transition, mitigate market fragmentation and help shift investments where they are most needed.

The Commission is currently preparing an IT tool that will facilitate the use of the taxonomy by allowing users to navigate easily through the taxonomy.

The Taxonomy Regulation for climate change mitigation and adaptation was adopted in 2020.

The Platform on sustainable finance plays a key role in enabling such cooperation by bringing together the best expertise on sustainability from the corporate and public sector, from industry as well as academia, civil society and the financial industry join forces.

Recovery fund

Member States are preparing recovery plans to receive funding from the EU’s €673bn recovery fund, the “Recovery and Resilience Facility”.

The plans are required to align with the European Green Deal by ensuring that 37% of investments contribute to the green transition.

Just Transition Fund

The Commission presented a legislative proposal for a new Just Transition Fund (proposal adopted in 2020) to support the people and regions most affected by the low-carbon transition.

The new fund is part of a just transition mechanism that cuts across different funds and financing instruments and targets to mobilise at least €100 billion in public and private investment.

Throughout 2021, Member States develop Territorial Just Transition Plans to access the Just Transition Fund and prepare coal and high-carbon regions for the phase out of coal. The plans need to be consistent with the EU’s climate targets and the latest version of the National Energy and Climate Plan (NECP).