Game-changer: Financing the European Green Deal

This briefing, prepared by seven civil society organisations (European Environmental Bureau, Finance Watch, CAN Europe, WWF Europe, Greentervention, Positive Money Europe, Fondation Nicolas Hulot), welcomes Mrs von der Leyen’s proposal for an ambitious European Green Deal and calls on the new Commission President to equip the proposal with a financing framework equal to the task.

We believe that a real, game-changing Green Deal is feasible in the short-term – but only if the European Commission can succeed in overhauling the conditions for both private and public financing.

Summary of recommendations

Shifting private finance from brown to green:

• Amend the non-financial reporting directive to ensure mandatory and harmonized ESG corporate reporting;
• Bring a legislative proposal on human rights and environmental due diligence;
• Stick to the original timeline for the application of the ‘Green taxonomy’, expand its categories, and create a ‘Brown taxonomy’;
• Deliver a consistent ‘EU Ecolabel’ for retail investors;
• Give institutional investors a duty to reflect their customers’ sustainability preferences;
• Penalize brown bank lending in prudential regulations;
• Implement existing proposals to reduce short-termism in financial markets;
• Revise the CMU strategy to reduce systemic risk and integrate sustainability measures;
• Review the Credit Rating Agency regulation to ensure integration of ESG risks;
• Use stress tests and macroprudential tools to reduce climate-related financial risks;
• ‘Green’ the ECB’s collateral framework and corporate bond asset purchases.

Mobilising public finance to help fund the transition:

• Link the European Semester to the EU’s environment and social targets;
• Give the new Commissioner for the Green Deal the ability to influence financial policy;
• Reform fiscal rules to facilitate public investment in decarbonizing the economy;
• Eliminate fossil-fuel subsidies via a reporting regime and phase-out plan;
• Double the portion of the EU’s budget spent on climate and environment from 25% to 50%;
• Ensure that all EU spending is consistent with Paris Agreement goals;
• Use the EU’s Cohesion Fund to increase funding for a ‘Just transition’;
• Increase the size of the ‘InvestEU’ fund and give it a greater focus on climate;
• Upgrade the EIB with more capital, stronger governance, a fossil-free mandate, and green bond programme;
• Mobilise funding from the EBRD and the Council of Europe Development Bank;
• Develop the EU’s network of National Promotional Banks;
• Review the impact of State Aid rules on National Promotional Banks;
• Publish a Communication on “The role of NPBs in the European Green Deal”;
• Adopt a ‘market-shaping’ approach in competition rules;
• Promote fossil-free approaches by export credit agencies and other public financial institutions;
• Revise the EU Energy Tax Directive to meet Paris Agreement goals

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