European Commission reinforces sustainable future with €1.85trn coronavirus recovery plan

EC unveils coronavirus recovery plan, which includes €750bn to sharpen the region’s focus on moving to a sustainable economy

Ursula von der Leyen, German politician president of the European Commission


Elena Johansson

The European Commission (EC) has unveiled a coronavirus recovery plan, which includes €750bn to sharpen the region’s focus on moving to a sustainable economy

The EC presented a revamped long-term EU budget and a €1.85trn recovery plan including the proposal to create a new recovery instrument, Next Generation EU (€750bn), and has also unveiled its adjusted Work Programme for 2020.

In total the EU’s long-term budget proposal has been set up €1.1trn for the years 2021 to 2027, taking it up to €1.85trn.

European Commission president Ursula von der Leyen commented: “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalisation will boost jobs and growth, the resilience of our societies and the health of our environment.”

An EU statement estimated the bloc’s gross domestic product (GDP) could fall by some 15% in the second quarter of 2020 compared to the same time last year.

Common debt

The Next Generation EU fund of €750bn will be financed on the financial markets, it said.

The funds raised will need to be repaid through future EU budgets, and the EC proposes using a number of own funds, such as resources based on the EU emissions trading scheme, a carbon border adjustment mechanism, or a new digital tax.

To foster private investments and long-term certainty, the Commission highlighted the importance of the European climate law and proposals for emission reduction targets for 2030.

The EU sustainable finance taxonomy will guide investment in Europe’s recovery and be supported with a Renewed Sustainable Finance Strategy, which will be released later this year, EU said.

To ensure environmental and social interests are fully embedded into business strategies, the Commission will also put forward a new initiative in 2021 on sustainable corporate governance.

Through the upcoming renovation wave, which is an energy efficiency initiative, the EU said that it will aim to at least double the annual renovation rate of existing building stock.

Breakdown of proposal

The EU said that the €750bn Next Generation EU fund will be invested across three pillars:

Support to member states with investments and reforms, including:

  • A new recovery and resilience facility of €560bn will offer financial support for investments and reforms, including for the green and digital transition and the resilience of national economies;
  • A new initiative, REACT-EU, will provide a top-up for cohesion support to member states, with a budget of €50bn; and
  • An additional funding of €30bn for the Just Transition Fund and €15bn for the European Agricultural Fund for Rural Development to support the green transition and sustainable development.

Kick-starting the EU economy by incentivising private investments, including:

  • A new solvency support instrument will mobilise private resources to support viable European companies in the sectors, regions and countries most affected. It can be operational from 2020 and will have an additional budget of €26bn, aiming to unlock €300bn in solvency support for companies from all economic sectors and prepare them for a cleaner, digital and resilient future; and
  • A budget increase in InvestEU, Europe’s investment programme, to a level of €30.3bn to mobilise private investment and boost the resilience of strategic sectors and key value chains, including those crucial to the green and digital transition.

Addressing the lessons of the crisis, including:

  • A new health programme, EU4Health, to strengthen health security and prepare for future health crises with a budget of €7.7bn and €2bn for the union’s civil protection mechanism (rescEU);
  • An additional €13.5bn for Horizon Europe to increase the support for health and climate-related research and innovation activities; and
  • A budget of €15.5bn to fund the Neighbourhood, Development and International Cooperation Instrument.


Deirdre Cooper, co-portfolio manager of the Ninety One Global Environment Fund, welcomed the announcement:

 “The EU’s Green Recovery Plan will drive growth for businesses that are enabling the transition to a sustainable economy. This will expand investment opportunities across all three pathways to a low-carbon future: renewable energy, electrification and energy efficiency.

 “Encouragingly, the EU clearly sees greening the economy as completely aligned with its aim of supporting livelihoods in the wake of the pandemic. There need not be a trade-off between environmental progress and social aims.

 “The green recovery plan is also fair to future generations. The unprecedented size of the financial stimulus the EU has announced to encourage economic recovery will result in a debt burden that our children and grandchildren will be responsible for. It is therefore right that the money be used to leave them a more sustainable planet.

 “While we see ‘decarbonisation’ as a valuable growth area in an otherwise growth-challenged world, investors need to be careful in accessing this structural trend.

 “Outside of Europe, the path of environmental policy is difficult to predict at present – most importantly in the US and China – and the uncertain economic outlook may prove to be a stern test for weaker companies with fewer competitive advantages. This argues for a selective, best-in-class investment approach.”

 Meanwhile, Pascal Canfin, French MEP at the European Parliament and member of Renew Europe Group, said that the European Commission’s recovery fund is “a major political victory”, and “will ensure true European solidarity through common debt, a strengthened Just Transition Fund, and the Green Deal at the heart of the economic recovery”.

“I am delighted that the European Commission has committed to defining the investments that will be needed to achieve the climate objectives, through the roadmaps of the national energy and climate plans and the taxonomy that will guide the investments of the European recovery to ensure that they are aligned with climate ambitions.”

Ester Asin, director of the WWF European Policy Office, added: “Today’s announcements are an effort to uphold president von der Leyen’s pledge to make the Green Deal the ‘motor’ of economic recovery.

“Unfortunately, half the motor is still missing, so this recovery looks set to stall. In particular, we are missing clear mechanisms for implementing and enforcing the green conditions to truly ensure that no money spent by member states will go to harmful activities, such as fossil fuels or building new airports and motorways.”

A version of this article first appeared on Expert Investor, a sister publication to ESG Clarity

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