Biodiversity financing

The biodiversity strategy has committed to the following actions:

• 'at least €20 billion a year should be unlocked for spending on nature' – through private and public funding at national and EU level, including through a range of different programmes in the next long-term EU budget.
• 'a significant proportion of the [25]% [note: now 30%] of the EU budget dedicated to climate action will be invested on biodiversity and nature-based solutions'. Increasing synergies between climate and biodiversity finance provides significant potential to help boost investments in biodiversity and nature-based solutions.
• 'under Invest EU, a dedicated natural-capital and circular-economy initiative will be established to mobilize at least €10 billion over the next 10 years, based on public/private blended finance'

The EU is also working towards the ambition of dedicating 7.5% of the 2021-2027 Multiannual Financial Framework to biodiversity objectives as of 2024, and 10% in 2026 and 2027.

In September 2021, the Commission pledged to double its international funding for biodiversity, in particular for the most vulnerable countries, in the 2021-2027 period.But the overall spending under the EU budget must be biodiversity-proof. We must make sure that the overall EU spending has no negative impacts on biodiversity and supports the achievement of our biodiversity targets.

Tracking biodiversity expenditure in the EU budget

We need to track how much is spent on biodiversity objectives to ensure that our efforts and spending have the desired positive outcomes for biodiversity and human well-being. As a party to the UN Convention on Biological Diversity, the EU also needs to report on its domestic and international biodiversity-related financial flows.

The Commission developed a methodology to track biodiversity in the 2014-2020 EU budget through a study. The fund-specific tracking methodology provides an approach to tracking biodiversity-related expenditure under the EU funding instruments based on the OECD Rio markers (Common Agricultural Policy, Cohesion Policy, European Maritime and Fisheries Fund, Horizon 2020, LIFE programme, etc.) The markers reflect the specific features of each policy area and assign a weighting to activities based on their contribution towards biodiversity objectives: principal (100%), significant (40%) or insignificant (0%). The assessment is based on the programme statements in the context of the annual budget procedure.

The biodiversity tracking methodology was further updated in 2017 through a follow-up study. The report also reviewed opportunities for biodiversity funding in the EU 2014-2020 budget as well as in the private sector, in particular through payments for ecosystem services.

The Commission has implemented this tracking methodology until 2020, including through providing ex ante estimates of how much different instruments contribute to biodiversity objectives in the forthcoming EU budgets.

In May 2022, the Commission released a study on biodiversity financing and tracking, which:

• presents the proposed new tracking methodology for biodiversity in the 2021-2027 MFF;
• provides an assessment of the funding needs to implement the EU Biodiversity Strategy for 2030, current levels of funding, and the remaining finance gap. The study finds that the scale of financing needs to deliver the Strategy, including baseline expenditure, is estimated at around EUR 48 billion annually between 2021 and 2030, i.e. a significantly higher amount than the EUR 20 billion/year highlighted in the Biodiversity Strategy. It also estimates expenditure on biodiversity at ca. EUR 29 billion annually over 2021-2030 including from the MFF and Member States national budgets and private financing. The remaining financing gap is estimated at ca. EUR 19 billion per year from 2021 to 2030.

The new biodiversity tracking methodology is also available under this link.

Biodiversity proofing the EU budget

The Commission developed a practical framework including general and fund-specific guidelines to be used by national and regional authorities as well as by Commission services under the 2014-2020 Multiannual Financial Framework.

The common framework (general guidance) can be applied to most EU funds by national and regional authorities in Member States. It does not apply to centrally managed non-programmed funds such as Pillar 1 of the Common Agricultural Policy. This document also includes guidance on proofing the policy cycle, which targets Commission services.

• Common Framework for Biodiversity-Proofing of the EU Budget – General Guidance

The fund-specific guidance documents focus mainly on biodiversity proofing the project cycle, i.e. calls for proposals, project development and selection, project execution and project monitoring and evaluation. These guidance documents target national and regional authorities in Member States.

• Proofing Guidance for the Cohesion Policy Funds
• Proofing Guidance for the Common Agricultural Policy funds (EAGF and EAFRD)
• Proofing Guidance for the Connecting Europe Facility (TEN-E and TEN-T)
• Proofing Guidance for the European Maritime and Fisheries Fund

The above guidance documents are a follow up to an earlier study: Background Study towards biodiversity proofing of the EU budget.

The funding instruments of the 2021-2027 Multiannual Financial Framework and Next Generation EU - mainly the Recovery and Resilience Facility - include specific requirements aiming to ensure that EU co-financing takes into account biodiversity considerations, such as the obligation to comply with EU environmental legislation, the compliance with the ‘do no significant harm’ principle, as well as the application of sustainability proofing.

Natural Capital Financing Facility

Halting the loss of biodiversity and adapting to climate change requires increasing investment in natural capital to complement the more traditional grant-based funding. The NCFF financial instrument developed by the LIFE programme aims to support natural capital projects that can generate revenues or save costs, whilst delivering on biodiversity and climate adaptation objectives.

The NCFF has developed a pipeline of replicable, bankable operations serving as a "proof of concept" and demonstrating to investors the attractiveness of such operations. The available funding under the NCFF should support putting biodiversity on a path to recovery by 2030 and while proofing the concept of revenue generating bankable natural capital investments finance some 9-12 projects over the period to 2021.

Find out more about the LIFE Natural Capital Financing Facility implemented by the European Investment Bank.

Under the Invest EU programme, a dedicated natural-capital and circular-economy initiative will be established to mobilize at least €10 billion over the next 10 years, based on public/private blended finance.

Sustainable Finance and Taxonomy and criteria defining environmentally sustainable activities

The EU adopted a Taxonomy Regulation, which entered into force on 12 July 2020, and will help create the world's first-ever “green list” - a classification system for sustainable economic activities – that will create a common language that investors and businesses can use when investing in projects and economic activities that have a substantial positive impact on the climate and the environment.

As part of the Taxonomy Regulation, the Commission is tasked with coming forward with technical screening criteria (through ‘delegated acts') to develop the taxonomy further. The activities and criteria to be adopted in a first delegated act are based on the recommendations of the Technical Expert Group on Sustainable Finance (TEG) published in March 2020. Since October 2020, the Platform on Sustainable Finance has taken over the role of advising the Commission on the technical screening criteria for the EU taxonomy, to be adopted in subsequent delegated acts.

Recovery and Resilience Facility: Commission adopts ‘do no significant harm' technical guidance to protect the environment

On Friday 12 February 2021 the European Commission presented its guidance on the implementation of ‘do no significant harm' in the context of the Recovery and Resilience Facility (RRF). The RRF, the key instrument at the heart of NextGenerationEU, will make € 672.5 billion in loans and grants available to support reforms and investments in Member States. This guidance aims to support Member States in ensuring that all investments and reforms they propose for financing under the RRF do no significant harm to the EU's environmental objectives, within the meaning set out in the Taxonomy Regulation. The presentation of this guidance follows the European Parliament's approval of Recovery and Resilience Facility.