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The EU contribution to an investment should result in an additionality, which can be environmental, and which is expected to go beyond regulatory obligations^[33^24]. The preparation of Environmental Impact Assessments cannot be considered an additionality as it is a legal requirement in most cases.  

In the case of blending operations and budgetary guarantees it is the environmental and social standards and safeguards of the lead financial institution (LFI)[3425] that are applicable. However, ensuring the integration of environment and climate change remains an obligation for the Commission, and inadequate attention to these elements can also pose a significant reputational risk for the organisation.

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Recent European policies and legislation on sustainable finance[3526] translate international commitments[3627] into a framework for European FIs to integrate the sustainability objectives and upgrade their environmental policies and systems. Most of them have pledged for net zero strategies, and the CBD COP15 Decision on Resource Mobilisation calls for alignment of their portfolios with goals and targets of the Global Biodiversity Framework. Nevertheless, integrating recent pledges and regulation in investment processes and cascading implementation of sustainability strategies down to the projects on the ground is complex. Additionally, not all EU partner FIs fall under the European regulations.

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In addition to promoting sustainable finance, environment and climate change must be integrated in all EU supported investments, irrespective of the form of support

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Click here for ideas on how the use of blending and guarantees can be geared to support environmental and climate objectives.

The entry points for the EU to integrate environment and climate change in blended finance and guarantees are very similar, although the processes are different. In all cases it is essential that environment and climate change concerns are addressed upstream in the process, as early as possible, and that these remain a constant element throughout the whole cycle.

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References

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[24] [24]

^[24[1^] The Blending Guidelines provides clarifications on additionality of EU support in blending operations. 

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[25] [25]

^[1^25] The lead financial institution is the pillar-assessed IFI which carries the project and gets into contractual arrangements with the EU. Other IFIs may be involved as co-investors.

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[26] [26]

^[1^26] The European Sustainable Finance Strategy (ESFS), including the EU Taxonomy for sustainable activities, the Sustainable Finance Disclosures Regulation (SFDR), and the upcoming Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).

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27] [27]

^[27] Including the 2030 Agenda for Sustainable Development (2015), Agenda 2063, the Addis Ababa Action Agenda (2015), the Paris Agreement on Climate Change (2015), the Sendai Framework for Disaster Risk Reduction (2015-2030), and the UN Security Council Resolution 2282 (2016) on sustaining peace and the Global Biodiversity Framework (2021).

[1] Directive 2011/92/EU as amended by 2014/52/EU.

[1]Applicable at preparation stage to investment agreements which relate to specific projects. In the case of investment agreements related to funds or portfolios, this might be rather applied during implementation.[1] These can also be in the form of an Environmental and Social Impact Assessment (ESIA) and/or a Climate Risk and Vulnerability Assessment (CRVA).

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2.2. Greening budget support

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