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Why is climate finance important?

Page Last modified 15 Oct 2021
2 min read
Becoming climate-neutral by 2050 requires significant investments from both the public and the private sectors. Climate finance refers to investments that support significant reductions in greenhouse gas emissions, and to financial measures that help adapt to the current and future impacts of a changing climate.

Europe needs to invest substantially in climate change mitigation and adaptation, with investment needs totalling hundreds of billions of Euros per year. Sustainable climate finance aims to channel private investment into the transition to a climate-neutral, climate-resilient, resource-efficient and just economy. Private investments will complement investments of public money at the European, national and local levels.  

Europe needs to invest substantially in climate change mitigation and adaptation, with investment needs totalling hundreds of billions of Euros per year.

Climate change mitigation and climate change adaptation are two of the six environmental objectives of the EU regulation establishing a framework to facilitate sustainable investment (the Taxonomy Regulation). This regulation sets out the overarching conditions that an economic activity has to meet in order to qualify as environmentally sustainable. More information on sustainable finance can be found on the website of the European Commission.

EU framework on sustainable investment

EU Framework on sustainable investment

Source: European Commission, 2020.

 

The EEA’s contribution

The EEA is assessing the connections between climate action, including current and future measures to reduce emissions and adapt to the impacts of climate change, and the financial and fiscal systems. A greater understanding of these connections is necessary to facilitate access to climate finance and to redirect funds to support a transition towards climate neutrality and climate resilience.

The EEA has been contributing extensively to European-level expert work on sustainable finance over the last five years. As part of a Technical Expert Group on sustainable finance, the EEA has helped develop recommendations for identifying economic activities that can make a substantial contribution to climate change mitigation or adaptation. The recommendations also address how to ensure that climate investments avoid significant harm to other environmental objectives such as sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention control, and protection and restoration of biodiversity and ecosystems.

The EEA is now a member of the EU Platform on sustainable finance, set up as a permanent expert group under the EU Taxonomy Regulation. Together with other experts from across the economy and civil society, the EEA advises the European Commission on several tasks and topics related to further developing the EU taxonomy for all 6 environmental objectives and on the Commission's sustainable finance policy more broadly.

In line with the Paris Agreement, the EEA is also collecting Member States’ information on financial support committed and provided to developing countries, as specified under the 2018 EU Regulation on the Governance of the Energy Union and Climate Action. 

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