The challenges posed by environmental and social changes are being felt across industry, government, and society. Investors, employees, regulators, and customers are looking to business to provide solutions to these challenges. The financial services sector must be at the centre of society’s response given the crucial roles that the sector plays in providing funding to the economy, financially supporting individuals, and directing investments.
Additionally, European Union institutions are driving environmental and social changes through legislative, economic, and regulatory initiatives. This has placed the European Union and by extension its Member States, to the forefront globally of making the changes necessary to achieve climate and other environmental goals. All of this is occurring as energy security along with support for Ukraine in a time of war, have become top political priorities. This article will explore the EU’s Green Deal.
The European Green Deal was launched in 2019 with the aim of transforming the “EU into a modern, resource-efficient, and competitive economy, ensuring:
no net emissions of greenhouse gases by 2050
economic growth decoupled from resource use
no person and no place left behind.
The Green Deal is designed to ensure that the European Union can meet its commitments to meet the United Nation’s 2030 Agenda and the Sustainable Development Goals.
At the core of the Green Deal is the wellbeing of all EU citizens. The following elements make up the EU Green Deal:
A zero-pollution ambition for a toxic free environment
Preserving and restoring ecosystems and biodiversity
From 'Farm to Fork' a fair, healthy, and environmentally friendly food system
Accelerating the shift to sustainability and smart mobility
Leave no one behind (Just Transition)
Financing the transition
Building and renovating in an energy and resource efficient way
Mobilising industry for a clean and circular economy
Supplying clear, affordable, and secure energy
Increasing the EU’s Climate ambition for 20230 and 2050
The details of the EU Green Deal are set out in European Communication COM2019 640.
With the advent of the Covid-19 pandemic and the war in Ukraine, the original programme of work has been re-oriented towards additionally meeting the challenges posed by these tragic events.
The EU Green Deal is operationalised through a series of programs and actions covering the following areas:
REPowerEU – This is the EU’s plan to reduce dependency on Russian fossil fuels and move to the green transition. It is made up of a series of short term and long-term measures focused on saving energy. Producing clean energy and diversifying energy supplies whilst working with international partners.
Climate – This is the EU Commissions’ plan to achieve climate neutrality by 2050. The 2030 targets (at least a 55% reduction in net greenhouse gas emissions by 2030) has been raised again and was outlined at Cop 27 in Egypt.
Energy – As energy production and use makes up 75% (Source: EU Commission) of EU Greenhouse gas emissions, decarbonising the EU energy system is critical to achieving EU Climate Goals.
Transport – The ambition is to have a 90% reduction in transport-related greenhouse gas emissions by 2050.
Agriculture – The Farm and Fork strategy is at the heart of the EU Plan “to make food systems fair, healthy and environmentally- friendly” (Source EU Commission).
Finance and Regional Development – The EU Commission has the ambition to mobilise one trillion euros in sustainable investment over the course of the decade through the following programmes: NextGenerationEU, NextGeneration EU Green Bonds, Recovery and Resilience Facility, Sustainable Finance, Just Transition Mechanism and Green Transition Reform Support. These initiatives are of particular interest to Financial Institutions.
Industry – The EU industrial strategy is an important component of the EU Green deal and is focussed on a green, digital transformation, and global competitiveness of the EU Economy.
Research and Innovation – Undertaking successful research and innovation is regarded as crucial to the success of the EU Green Deal.
Environment and Oceans – The natural environment and its contribution to the EU’s economy and wellbeing is emphasised within the EU Green Deal and various initiatives are contained in areas such as biodiversity, circular economy, pollution plans, waste management and the blue economy.
The EU Green Deal is an ambitious programme and a robust response to the challenges faced by climate change, environmental degradation, and biodiversity loss. It is a tribute to its original formulation that the programme was capable of being adjusted to meet the twin tragedies of the COVID-19 pandemic and the Russian invasion of Ukraine. For the Financial Sector, it heralds a time of great change with a unique combination of risks and opportunities. Financial institutions are facing, amongst others, the challenges of: robustly dealing with the risks arising from climate and environmental degradation; the absorption of detailed and comprehensive regulatory changes; and playing their part in funding the necessary changes and in supporting their customers on the journey to a more sustainable future. In future articles we will look at more detail at these challenges.
Author: Enda Twomey, ESG, Culture and Risk Consultant
The views expressed in this article are the personal views of the author and not those of IOB. This article does not constitute and should not be regarded as legal or regulatory advice.