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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^[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)^[25] 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^[26] translate international commitments^[27] 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.

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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