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2.3.2. Main entry points in greening blended finance

✅ Engage in a green dialogue with the financial institutions. The dialogue with financial institutions held by DGs INTPA and NEAR, and EU Delegations must convey the importance that the Commission places on maximising opportunities to contribute to the green transition and ensuring compliance with the DNH and ‘green and clean’ principles. This dialogue can touch on any issues of concern, such as prioritisation of investments based on green criteria, the use of robust environmental safeguards/standards, and ensuring adequate environmental and climate risk monitoring and reporting provisions.

✅ Understand the applicable environmental standards and safeguards of the Lead Financial Institution (LFI). In the case of environment and climate risk screening and assessment, verify that the requirements are aligned to those under the EU EIA Directive^[37]. If not aligned, the application of stricter standards can be requested from the LFI. If intermediary financial institutions will be involved, enquire about the standards and safeguards that will be applied and how the LFI is ensuring their quality, possibly by supporting the intermediary institutions to build their capacities and upgrade their standards.

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✅ Understand the environment and climate risks of the project[38]. Make sure the LFI clearly indicates the environment and climate risk category of the project, and whether an Environmental Impact Assessment (EIA), and/or a Climate Risk Assessment (CRA)^[39] are required.

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The INTPA-NEAR tool for the screening of investment project pipelines (Annex 13) can be used to get an initial appreciation of the potential environmental and climate-related risks.

✅ Pre-TAM (Technical Assistance Meeting) review of applications. The TAM meeting should be used mainly to clarify any outstanding concerns to ensure the maximisation of opportunities and compliance with the ‘do no harm’ principle. If there are grounds to believe that the project does not comply with the DNH/DNSH and the ‘green and clean’ principles, or if the project is not compliant with Art. 29 (of the NDICI-Global Europe Regulation), the project should not be supported.

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Although most elements are common, the entry points for the greening of budgetary guarantees are slightly different for the cases of EIB and open architecture guarantees. The differences are highlighted below.

✅ Include environment and climate change in the dialogue with the financial institutions. Please refer to the point on green dialogue with financial institutions in the section 2.3.2 on blended finance above.

✅ Contribute to the investment pipelines. In dialogue with finance institutions and national partners, proactively identify investment opportunities that contribute to the green transition.

✅ Review of Proposed Investment Programmes (PIP) (relevant for open architecture guarantees). The applications for PIPs must be reviewed from an environment and climate change integration perspective, both to maximise positive contributions and to ensure compliance with the DNH principle. Although not strictly corresponding, the orientations to review an application for blended finance can also be used to review a PIP application.

✅ Screen investment pipelines from an environment and climate change integration perspective.

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The screening of investment pipelines tool allows to assess investments based on their expected contributions to the green transition and their environmental and climate risks; it provides guidance on aspects that can be addressed in the dialogue with finance partners – including the regular pipeline review meetings - and in the review of more detailed applications.

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       ✅Understand the applicable environmental standards and safeguards of  of the LFI. Please refer to the the section 2.3.2 on blending operations. The EIB environmental and social standards can be consulted consulted here.

     ✅Understand the environment and climate risks of the project. Please  Please refer to to the section 2.3.2 on blending operations. In the case of EIB guarantees, the review of the pipelines will already provide an initial orientation of priorities and concerns that can be further examined when more information on the project is made available.

      ✅Review of applications and Art. 19 consultations. Please  Please refer to the the section 2.3.2 on blending operations. In the case of EIB the Article 19 consultations offer an additional entry point, where the Commission can give a positive opinion, a positive opinion with comments (to which EIB must respond) or a negative opinion. If a project is non-compliant with Art. 29 of the NDICI-Global Europe Regulation, or significant and unacceptable adverse impacts on the environment are expected, a negative opinion should be given. A positive opinion with comments should be given if there are significant environment or climate-related concerns that need to be clarified.

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Contracting and monitoring are under the responsibility of the lead financial institution. Nevertheless, the Commission and EU Delegations must ensure that the greening opportunities and environmental risk mitigation and management measures are effectively implemented and monitored.

      ✅Ensure that the guarantee and blending agreements address key environmental and climate change concerns. The environmental standards and safeguards applicable to the project should be stipulated. 

The guarantee and blending agreements with the different lead FIs should include a clause to ensure environmental objectives will be implemented by the different financial partners along the investment chain.

The use of green procurement should be promoted, in which case the applicable green procurement procedures and criteria should be referred to in the guarantee/blending agreement.

      ✅Ensure adequate environment and climate impact mitigation and risk management measures. Make sure that recommendations from the EIA and/or CRA are integrated in the project design, and that the Environmental Management Plan (EMP) (or Environmental and Social Management Plan – ESMP) are reflected in the project’s monitoring framework.

Guarantee and blending agreements should indicate the key findings of any EIA or CRA that were prepared, and the environmental and climate risk management measures that must be implemented. These may be specified in a separate document annexed to the agreement (e.g. the Environmental and Social Data Sheet in the case of EIB).

      ✅ Monitoring. Depending on the environmental and climate risks of the project, the Commission/EU Delegation may decide to follow-up more closely on the implementation of the project and its EMP. This can take place by accompanying monitoring missions organised by the Lead FI or a ROM (for blending). In any case, it is recommended that delegations check the monitoring reports prepared by the LFI.

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2.3.5. Greening evaluations: learning from greening of blending and guarantees

      Use ✅ Use the opportunities offered by evaluations to measure the effectiveness and efficiency of environment and climate change integration into investments. Some questions that can be addressed in mid-term and final evaluations include, inter alia:o    

• Were the environmental and climate risk mitigation measures identified at the start effective at preventing adverse impacts on the environment and managing climate risks?

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• Did the investment effectively contribute to the environment and/or climate objectives it claimed? Which were the main environmental impacts? Key success factors?

      Consider ✅ Consider the organisation of an audit- in coordination with the LFI - in particular if there are high environmental and climate risks, to check the correct implementation of the applicable environmental and social safeguards and standards.

2.3.6. Seeking more effective greening of investments at national level: promoting upstream opportunities

      ✅ Promote the integration of environment and climate change in sector planning. Outside of the investments pipeline per se, it is encouraged to promote the integration of environment and climate change in government sector planning processes, so that future projects which are identified are aligned to environmentally-integrated sector plans and strategies. To this effect, Strategic Environmental Assessments (SEA) can be promoted jointly with other development partners.

      ✅ Promote the greening of investments through upstream green finance frameworks. The EU is engaged in promoting upstream financial frameworks and instruments to green financial systems in partner countries and financial institutions. Current initiatives include, inter alia, the promotion of green bonds, sustainable finance taxonomies and integrated national financial frameworks (INFF). Refer to Annex 16 on greening investments through upstream green finance frameworks for guidance on such opportunities.

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