Financing the Green Transition

The EU aims to integrate the sustainability targets into the financial sector while fulfilling its policy objectives under the EGD as well as its international commitments on climate and sustainability goals. In this context, the EU has established a classification system called the "EU taxonomy", which creates a list of environmentally sustainable economic activities to help companies identify which of their economic activities are environmentally sustainable in order to direct investments towards sustainable projects and activities. Entering into force on 12 July 2020, the "Taxonomy Regulation" sets out the conditions that should be met for an economic activity to be considered environmentally sustainable, and the "do no significant harm (DNSH)" criterion, which stipulates that the investments to be made in this respect should not harm the environment, has also been put into practice.

As part of the Green Deal, the EU's sustainable finance strategy was also updated and the "Financing Strategy for the Transition to a Sustainable Economy" was announced on 6 July 2021. The EU's new long-term Strategy includes actions in six areas: expanding existing sustainable finance instruments, increasing inclusiveness by providing the right tools and incentives for SMEs and consumers to access transformation finance, strengthening the resilience of the economic and financial system to sustainability risks, increasing the contribution of the financial sector to sustainability, ensuring the integrity of the EU financial system and its transition to sustainability, developing international initiatives and standards on sustainable finance, and supporting the EU's partner countries.

Considering the cost of the green transformation process foreseen in the EGD and the EU's international commitments on climate change, the need for innovative sustainable financing instruments, particularly green bonds, has become even greater. In this framework, the EU established the "EU Green Bond Standard" to enhance the efficiency, transparency and credibility of the green bond market and to encourage market participants to issue and invest in European green bonds. The Regulation published in the Official Journal of the EU on 30 November 2023, is seen as a new step in implementing the EU's strategy for financing sustainable growth and transition to a climate-neutral, resource-efficient economy.