Council of European Municipalities and Regions (CEMR)
European section of United Cities and Local Governments

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Climate and energy transition

Sustainable finance - 28.05.2020

Local governments gear up to invest in a green recovery
Well-insulated buildings, wind turbines and convenient public transport networks: all these and more will be a necessary part of Europe’s low-carbon future. Such projects are often expensive however and that’s why CEMR is working on enabling the financing of sustainable development in Europe’s towns and regions.

CEMR held a webinar on this topic on 14 May, featuring 75 participants from municipalities, regions, their representative associations and the European institutions. This was an opportunity to exchange on the state of play of European policymaking and current local needs on sustainable finance, as well as to prepare for upcoming developments.

At a time when the European economy has been devastated by the coronavirus crisis, policymakers are pushing for a recovery that is both strong and sustainable. What’s more, as part of its Green Deal, the European Commission is moving forward with a wide range of environment measures, from reforms to the Common Agricultural Policy to new public procurement rules. Many of these measures will have a significant impact on local and regional governments.

Financial firepower for local transitions

The Green Deal’s financial arm is the Sustainable European Investment Plan (SEIP), which will mobilise billions of euros for sustainable investments. CEMR will work to make sure that local and regional projects will also be eligible for this programme, notably to provide technical assistance. The SEIP is currently being discussed in the European Parliament MEPs in the ECON and BUDG committees are expected to determine their position by mid-June.

The SEIP may follow the EU’s taxonomy for what are environmentally friendly or harmful investments. This would mean SEIP investments would have to avoid taxonomy’s harmful “brown” sectors. Some CEMR members expressed concerns about such binding requirements, as this could lead to heavy administrative burdens for local governments. Any proposed “green” criteria risks being complex and constantly evolving with the technological context, and would not necessarily meet local needs.

Local actions for a sustainable Europe

Towns and regions across Europe are already making significant investments for the sake of sustainable development, notably in terms of building renovation and new infrastructure. In the Nordic countries for example, local governments have created shared credit institutions in order to issue “green bonds” and lower borrowing costs for sustainable investments.

Meanwhile in the region of Hauts-de-France, the regional government is encouraging private home renovation to improve energy efficiency. The administration supports individuals throughout the process and has mobilised some 50 million euros of support with the help of the European Investment Bank (EIB) and the ELENA facility. So far, 600 houses and 12 condominiums have been renovated and six other regions in France have developed similar systems.

There are many more cases throughout Europe of cities and regions taking the lead in investing for a sustainable society. However, local governments often lack the technical capacity and financing to fulfill their potential in this area. This is why supportive financial and regularly frameworks, at both national and EU level, are needed if Europe is to realise the climate and energy transition.

Next steps

CEMR will continue exchanging on sustainable finance with our member associations to determine local and regional governments’ key messages for the European institutions. We will, among other actions, contribute to the EIB’s consultation on becoming a climate bank and to DG FISMA’s* renewed sustainable finance strategy.

* The European Commission’s Directorate‑General for Financial Stability, Financial Services and Capital Markets Union, in charge of EU policy on banking and finance.
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