Thanks to the 2020 EU Recovery Plan – largely influenced by the COVID-19 pandemic – Europe has its most ambitious recovery plan in decades. However, the bloc has also become one of the world’s biggest debt issuers and will be heavily reliant on taxpayer funds going forward. EU climate action plans have also been upended, yet the bloc must still cut emissions by at least 50% in the next decade to meet the 1.5°C Paris Agreement goal.
“We have a cross-section of speakers to debate how to shift investments for a green recovery (02:30),” opened Dharmendra Kanani, Director of Insights at Friends of Europe. “Money matters, but how do we spend it?”
Ambitious EU recovery plans
Astrid Manroth, Director for Climate Finance at the European Climate Foundation (ECF), outlined the latest key EU initiatives, noting that they highlight how “Europe can lead the world in demonstrating that an environmentally […] and socially sustainable recovery is possible (04:10).”
(04:37) We have a resounding commitment to the EU Green Deal as a framework for Europe’s recovery.
(05:06) 30% of the recovery package, on average, is for climate action, thus boosting financial instruments.
(05:21) €200bn will be raised through issuing green bonds – a landmark for European capital markets.
(06:15) Progressive business wants a green and sustainable recovery, including investors and corporates.
(06:28) EU must ensure credible implementation and credible tracking of climate action (EU Taxonomy).
(07:22) ‘Do no harm principles’ are especially relevant for the Recovery and Resilience Fund, and the Just Transition Fund.
(63:05) We need a new EU narrative that’s politically consistent, simple and understandable, to communicate to citizens how we’re protecting their lives and livelihoods (Kanani).
A pipeline of projects
Speakers backed the idea of investing in ‘shovel-ready’ green projects across the EU-27. Notable initiatives include the European Commission’s seven Smart Cities & Communities Lighthouse Projects to boost EU recovery in the short term, though these must be assessed quickly for their green credentials before roll-out, said Artur Runge-Metzger, Director of Climate Strategy, Governance and Emissions from Non-trading Sectors at the European Commission’s Directorate General for Climate Action.
(08:10) An ECF study identified over 1,000 shovel-ready green projects in the EU-27, worth €200bn, creating 2 million jobs and avoiding 2 gigatonnes of CO2 emissions; these are just 10% of green projects in Europe, with a total pipeline of over €1tn (Manroth).
(37:37) We must not only invest in projects, but also in assessing the regulatory system (Runge-Metzger).
(35:13) Lighthouse Projects, or ‘shovel-worthy’ projects, aim to sow the seeds of long-term recovery.
(35:27) Deep Renovation projects cover a building’s insulation, plus the heating system and digitalisation.
Ensuring governance and regulation
“The European Parliament believes standards like the EU Taxonomy can help create convergence for the sustainable finance market (41:37),” remarked Irene Tinagli, Chair of the European Parliament Committee on Economic and Monetary Affairs (ECON) and European Young Leader Alumna. She said the Parliament wants to play a bigger role in assessing national plans for new green projects (47:13), but was confident the highest standards would apply to use of EU taxpayers’ money for a just transition.
(43:56) Parliament is looking to support industries struggling with the just transition, notably in Eastern Europe.
(44:33) We must support the EU’s proposed carbon border tax, to support projects and protect our industry.
(62:21) We need a different and more agile infrastructure for sustainability governance (Kanani).
Promoting the private sector
Private sector investment in the EU’s recovery should be maximised, to counterbalance the vast sums coming from the bloc’s taxpayers. Speakers and the online audience also debated the value of subsidies and bailouts to the private sector. It was agreed that airlines, though heavy users of fossil fuels, are vital for other sectors like tourism.
“Since 2015, sustainability has been at the core of our business strategy (16:01),” said Alberto De Paoli, Chief Financial Officer at Enel, resulting in the group becoming world number two in market capitalisation. He argued that companies must make sustainable choices in projects and strategies. “Our aim is to make 100% of our investments in sustainable choices (17:13),” he added.
(18:19) The sustainable finance market only makes up 2% of the world’s bond market and is too focused on very few instruments, like green bonds.
(25:23) There is no single instrument for all companies.
(19:19) Enel’s sustainable finance innovation was to successfully launch SDG-linked bonds, in order to finance strategies rather than projects.
(24:30) Subsidies to companies can create more supply and demand for sustainable finance.
(39:42) Renewable energy initiatives, e.g. the hydrogen economy, might need some subsidies (Runge-Metzger).
“When bailing out companies, we should ask for more green and sustainability commitments (60:22),” said Astrid Manroth, adding that the EIB should collaborate more with banks.
(43:44) We can’t ignore the brown economy, which provides hundreds of thousands of jobs (Tinagli).
(46:16) It’s important to help SMEs with the just transition, especially in Eastern European countries, as they are key for Europe’s future (Kanani).
The amount of investment needed for achieving climate neutrality by 2050 is unprecedented and will require effective financial tools for a rapid mobilisation of the private sector. Ahead of the European Commission’s proposal for a Renewed Sustainable Finance Strategy, Friends of Europe explores policy options for supporting industry in its transition towards sustainability.
How can the impact of EU initiatives such as the Green Taxonomy and the Non-Financial Reporting Directive be maximised? Will green bonds become the standard for industry? A high-profile group of policymakers and key experts in the field will share their views and address questions from the online audience.
COVID-19 has battered the global economy, and governments have to rebuild as fast as possible. Their response, however, can also provide a once in a generation chance to step up efforts to address the climate emergency. European leaders have agreed on a historic €750bn recovery plan. More investments in innovative technologies will be vital if Europe is to be climate neutral by 2050. To get there, it is estimated that an extra investment of €260bn every year will be needed over the next decade alone.
The financial system has a pivotal role in channelling private capital towards sustainable investments. To help increase ambition, the European Commission will propose a Renewed Sustainable Finance Strategy by the end of the year. Joined by a range of EU initiatives, such as the Green Taxonomy and the revision of the Non-Financial Reporting Directive, this could be the toolkit Europe needs to help finance its green transformation.
- How can the financial system genuinely support businesses in their transition towards sustainability? What about businesses that are already sustainable?
- What are the financial instruments of the future?
- How can the EU best ensure that the sustainable finance agenda works for the long term?
Alberto De Paoli
Chief Financial Officer at Enel
Director for Climate Finance at the European Climate Foundation (ECF)
Head of Cabinet of Executive Vice-President Frans Timmermans
Chair of the European Parliament Committee on Economic and Monetary Affairs (ECON) and European Young Leader Alumna
Director, Asia, Peace, Security & Defense, Digital & Chief spokesperson
Alberto De Paoli has been working with Enel for over a decade. He initially joined in 2008 as Chief Financial Officer of Enel Green Power – the Group’s renewable power generation subsidiary and a leader in the renewable energy industry. In that capacity, he led the start-up and listing of the company on the stock exchange. De Paoli later moved on to become Head of Group Strategy, until his appointment as Chief Financial Officer at Enel Group. Before joining Enel, De Paoli worked in telecommunications at Telecom Italia, Wind Telecomunicazioni and Tiscali.
Astrid Manroth has over 20 years of experience in development finance, sustainable investments and climate finance. At ECF, she works towards alignment of the financial system with the Paris Agreement and a climate-neutral EU by 2050. Manroth previously worked at JPMorgan, the World Bank, Deutsche Bank and most recently the African Development Bank. At the African Development Bank, she was the Director of Operations, responsible for managing the delivery of its multi-billion sovereign lending portfolio and ensuring oversight of its country and regional offices. Prior to that, Manroth was Director of Transformative Energy Partnerships. She brings broad experience in public and private climate finance, including through blended public-private partnership funds.
Before joining the Cabinet of the Executive Vice-President for the European Green Deal, Diederik Samsom was a member of the Dutch Parliament for the Labour Party (Partij van de Arbeid). He also served as the leader of the Labour Party and has been the party’s spokesperson on environmental subjects. Samsom has a long history in the field, working for Greenpeace Netherlands and as the Chief Executive Officer of Real Energy (Echte Energie), a small green energy trading company.
Irene Tinagli is an Italian economist and politician who has been serving in the European Parliament since 2019. Before coming to Brussels, Tinagli was a Member of the Italian Parliament, sitting on the Committee on Public and Private Employment and on the Committee on Infancy and Childhood. She also taught Management and Organisation Design at the Carlos III University in Madrid and worked as an expert for the European Commission on creativity and innovation. In Italy, Tinagli served as an advisor to the Minister of Culture, the Minister of Education and the Minister of Justice.
Prior to joining Friends of Europe, Dharmendra Kanani was director of policy at the European Foundation Centre (EFC). He was the England director at the Big Lottery Fund, the largest independent funder in the UK and fourth largest in the world. Dharmendra has held senior positions in the public and voluntary sector and advisor to numerous ministerial policy initiatives across the UK.
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