In a speech today before European Parliament, European Commission, President Ursula von der Leyen unveiled “Next Generation EU” — a seven-year, €1trn budget proposal and a €750bn recovery plan that rely heavily on sustainable and digital transitions as a path not only toward recovery from the devastating impacts of the COVID crisis, but also a resilient future for Europe.

“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,” von der Leyen said. “This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer.”

The spending will be guided by a sustainable finance taxonomy, aimed to channel private investments into technologies and solutions that contribute to at least one of six pre-defined environmental objectives:

  • Climate change mitigation
  • Climate change adaptation
  • Sustainable use and protection of water and marine resources
  • Transition to a circular economy
  • Pollution Prevention Control
  • Protection and restoration of biodiversity and ecosystems

The taxonomy sets performance thresholds for economic activities, including that they make a substantive contribution to one of the six environmental objectives, and “do no significant harm” (DNSH) — which could in theory prevent investments into coal and other highly polluting fossil-based power sources.

Approved investments must also meet minimum safeguards (e.g., OECD Guidelines on Multinational Enterprises and the UN Guiding Principles on Business and Human Rights).

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