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The main project under this initiative is the Recovery and Resilience Facility (RRF) which provides grants and loan funding to EU member states to support reform and investment. In order to access these funds, each EU Member State must propose a plan which must be approved by the European Commission and then by the Council .
Climate finance is "finance that aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts", as defined by the United Nations Framework Convention on Climate Change (UNFCCC) Standing Committee on Finance.
The Global Environment Facility (GEF) is a multilateral environmental fund that provides grants and blended finance for projects related to biodiversity, climate change, international waters, land degradation, persistent organic pollutants (POPs), mercury, sustainable forest management, food security, and sustainable cities in developing countries and countries with economies in transition.
The EU has a leading position in the sustainable funds market with 84% of global assets in this sector. Additionally, it stands as the most advanced and diversified market for ESG investments. In comparison, the US, following at a distance, accounted for 11% of these global sustainable fund assets by September 2023. [37]
It is part of the wider sustainable investing and aims to reduce the impact on the environment of new lending activities. It includes green bonds (debt), green loans (often linked to a specific project) and sustainability-linked loans (typically tied to sustainability performance objectives). [1]
The main activists in this market have been Impax Asset Management Group, which is a UK-based specialist in environmental impact investing, Sarasin and Partners, which has a history of pressing investee companies on sustainability issues, and Triodos Investment Management, which is a Netherlands-based manager which focuses on sustainability issues.
In 2021, the European Investment Bank was the leading issuer of green and sustainability bonds among multilateral development banks, with sustainability funding reaching €11.5 billion equivalent. [30] [31] As of at least 2017, China held the largest share (23%) of the green bond market. [32]: 88
Sustainability Bonds are fixed-income financial instruments where the proceeds will be exclusively used to finance or re-finance a combination of Green and Social Projects and which are aligned with the four core components of the International Capital Market Association (ICMA) Green Bonds Principles and Social Bonds principles.