2.3.2. Main entry points in greening blended finance

2.3.2. Main entry points in greening blended finance

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✅ 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^[28]. 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.

✅ Understand the environment and climate risks of the project^[29]. 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)^[30] are required.

Request the LFI to provide a summary of the findings of any EIA or CRA that was prepared, including the key risks identified and how they are addressed in the project design and monitoring framework. In the case of EIB, this information should be contained in the Environmental & Social Data Sheet.

If considered necessary, request the full assessment reports for their review, which should be shared by the LFI as early as possible. It is pertinent to recall that EIA-related documents (especially the EIA report) must be publicly available. In case of doubts, check the quality of these documents; INTPA and NEAR thematic units in HQ can provide support.

If the EIA has not yet been prepared, and if the EIA ToR are open for comments, think of promoting ambition beyond the minimum requirements, for example asking for the potential for nature-based solutions to be explored as part of the project’s design. Other relevant document that should be shared (if available) include biodiversity management plans and Environmental Management Plans to avoid, minimise, restore or offset negative impacts.

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.

It may be the case that the first knowledge of a project comes with the blending application submitted ahead of the TAM meeting. In this case the considerations highlighted above (ascertaining the quality of the applicable environmental safeguards and standards, and understanding the environmental and climate risks of the project) should be addressed. Approval may be given conditioned to the satisfactory response to any environment or climate-related concerns identified.

In addition to the points already highlighted, the feedback provided at the TAM meeting must be based on a review of the blending application that should pay particular attention to the following elements:

• Ensure that the OECD DAC Rio markers and the policy markers for aid to environment and DRR are correctly scored. Please refer to Annex 2 for guidance on the use of the Rio markers.
• If climate change mitigation, climate change adaptation, biodiversity, environment or combating desertification are indicated as ‘significant’ or ‘principal’ objectives:
  • The issues in relation to the relevant themes should be described in the context. This is particularly important when claiming contributions to climate change adaptation, as the climate vulnerability context that will be addressed should be clearly indicated.
  • The description of the intervention, the results framework and the activities must clearly show that the themes concerned are addressed to a significant extent.
• If climate change mitigation is a principal objective, check the qualification and quantification of the expected CO₂eq emissions reductions.
• The context must indicate the alignment to environmental and climate policies - such as the European Green Deal -, and consistency with the DNSH principle.
• If relevant, environmental and climate risks should be indicated in the risk assessment.
• If the EU support has an environmental additionality, this must be indicated. Remember that completion of mandatory requirements, such as an Environmental Impact Assessment, does not constitute an additionality.
• The monitoring, reporting and evaluation must ensure the implementation of any environmental and/or climate risk management plans.
• Review and identify possible missed opportunities to enhance positive contributions to environment and climate, such as synergies for biodiversity and climate co-benefits, and alternatives.

Considerations related to contracting, monitoring and evaluations, including due diligence provisions, are common to both blended finance and budgetary guarantees, and are described in section 2.3.4.

References

^[28] Directive 2011/92/EU as amended by 2014/52/EU.

^[29] 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..

^[30] These can also be in the form of an Environmental and Social Impact Assessment (ESIA) and/or a Climate Risk and Vulnerability Assessment (CRVA).