Sustainable Finance for Energy Efficiency and Innovation

1. Diana Barglazan DG Energy, European Commission Sustainable finance for energy efficiency and innovation

2. The Case for Sustainable Finance The EU committedtoambitousclimate and energytargetsfor 2030 in linewiththe UN 2030 Agenda, the SDGs and the Paris Agreement. In itslong-term strategy, the EU strivesfornet-zero GHG emissionsby 2050. At least 32,5% energy savings compared with the business-as-usual scenario Minimum40%cut in greenhouse gas emissions compared to 1990 levels At least a 32% share of renewables in final energy consumption Private money Public money The yearlyinvestmentgaptomeetthesetargetsisestimatedtobe between€ 175 to 290 billion. Public supportingschemesalone will not besufficienttomeetthoseinvestmentneeds. The private sector will havetoplay a hugeroleand a smart policyframeworkisneededtoincentivise private investment. Sources: EIB: Restoring EU competitiveness (2016) European Commission: A clean planet for all (2018) European Commission: Commission Work Programme 2019.

3. EU SustainabilityPolicies Climate and Energy Environment Investment and Growth Sustainable Finance • 2030 Climate and Energy Framework • Energy Union Package • EU Strategy on Adaptation to Climate Change • Circular Economy Package (Action Plan) • Clean Air Policy • 7th Environmental Action Programme • Sustainable Finance within the Capital Markets Union • Investment Plan for Europe (EFSI); InvestEU; EU cohesion policy funds • Externalinvestment plan • Horizon 2020 • Long-term strategy to reach carbon neutrality by 2050 Sustainable Finance isoneofthe EU SustainabilityPolicyPillars.

4. The “Smart Finance for Smart Buildings” initiative Assistance and aggregation • De-risking • De-RiskingEnergyEfficiecny Platform (DEEP) • EEFIG UnderwritingToolkit • SFSB guarantee facility • Energy performance contracting • SEI Forums • One-Stop-Shops (OSS) • Project Development Assistance (PDA) More effective use of public funds

5. Action Plan on Financing Sustainable Growth Onecomprehensivestrategy | Threemainobjectives | Ten Actions 1 2 3 Reorienting capital flows towards sustainable investment Mainstreaming Sustainability into risk Management Fostering transparency and Long-termism Integrate ESG in Ratings and Market Research Establish EU SustainableTaxonomy 1 6 2 7 Create Standards and Labels Clarify institutional investors and asset managers duties 3 Foster Investment in Sustainable Projects 8 Clarify institutional investors and asset managers duties 4 Incorporate Sustainability in Investment Advice 9 Strengthen Sustainability Disclosure & Accounting 5 Develop Sustainability Benchmarks 10 Clarify institutional investors and asset managers duties Source: European Commission: Action Plan on Financing Sustainable Growth (2018).

6. The Technical Expert Group on SustainableFinance The TEG was established in June 2018 to assist the Commission in the implementation of the Action Plan. In particular in the development of: Technical screening criteria for environmentally sustainable economic activities under the EU taxonomy; An EU Green Bond Standard; Minimum standards for the methodology of "low carbon" and "positive carbon impact" indices; and Metrics allowing improving disclosure on climate-related information. Its mandate was initially set until June 2019, but was recently extended until December 2019. On 18 June 2019, the TEG published 3 reports, and it will present its findings on 24 June.

7. The Taxonomyproposal The framework to develop the taxonomy. For an economic activity to be on the list, it has to comply with four conditions: Whatisset out in the EU TaxonomyProposal? (a) Substantiallycontributeto at least oneofthesix environmental objectivesasdefined in theproposed Regulation* (b) Do nosignificantharmtoanyoftheothersix environmental objectiesasdefined in theproposed Regulation* (c) Complywithminimum social safeguards (d) Complywith quantitative or qualitative Technical Screening Criteria *The six environmental objectives as defined in the proposed Regulation are: (1) climate change mitigation; (2) climate change adaptation; (3) sustainable use and protection of water and marine resources; (4) transition to a circular economy, waste prevention and recycling; (5) pollution prevention and control; (6) protection of healthy ecosystems. Source: European Commission: Proposal on the establishment of a framework to facilitate sustainable investment (2018).

8. Key featuresoftheTaxonomy Reflectingtechnological and policy developments: The Taxonomy will be updated regularly by the Platform on Sustainable Finance which will replace the TEG after its mandate. Building on market practices and existing initiatives What’s not green is not necessarily brown. Activities that are not on the list, are not necessarily polluting activities. The focus is simply on activities that contribute substantially to environmental objectives. Facilitating transition of polluting sectors Technology neutral The “spotlight on taxonomy” provides a useful summary of the taxonomy and its features . 8

9. Water collection, treatment and supply Electricity, gas, steam and air conditioning supply Manufacturing Water, waste and sewerage remediation Buildings Transport ICT Production of Electricity Low carbon technologies Data processing, hosting and related activities Construction of new buildings Passenger Rail Transport (Interurban) Agriculture and forestry Data-driven solutions for GHG emissions reductions Transmission and distribution of electricity Centralised wastewater treatment systems Cement Renovation of existing buildings Freight Rail Transport Growing of perennial crops Storage of energy Aluminium Sewage sludge treatment Public transport Growing of non-perennial crops Acquisition of buildings Iron and steel Collection and transport of non-hazardous waste Infrastructure for low carbon transport Individual renovation measures Livestock production Hydrogen Anaerobic digestion of bio-waste Passenger cars and commercial vehicles Afforestation Other inorganic basic chemicals Composting of bio-waste Freight transport services by road Rehabilitation/restoration Material recovery from waste Interurban scheduled road transport Reforestation Manufacture of biomass, biogas and biofuels Cogeneration of heating/cooling and power Fertilizers and nitrogen compounds Landfill gas capture and energetic utilization Inland passenger water transport Existing forest management Plastics in primary form Production of heating/cooling Inland freight water transport • Direct air capture of CO2 Construction of water projects Retrofit of gas transmission and distribution networks District heating/cooling distribution Installation and operation of electric heat pumps Other organic basic chemicals • Capture of anthropogenic emissions • Transport of CO2 • Sequestration of captured CO2

10. Climate mitigation – supporting economic transition Three types of activities that substantially contribute to climate change mitigation: Already low carbon (very low, zero or net negative emissions). Compatible with net zero carbon economy by 2050. Contribute to a transition to a zero net emissions economy in 2050 or shortly thereafter, but are not currently close to a net zero carbon emission level; Activities that enable emissions reductions in either (1) or (2). Activities that undermine mitigation objectives are not included.

11. Climate mitigation – example criteria 11

12. Energyefficiencytagging • One of the specific obstacles related to energy efficiency financing is that such investments and loans are rarely identified, or tagged as energy efficiency-related. • There is a need to develop standardised tagging approaches for energy efficiency financing. • Tagging methodologies should be applicable to new loans as well as existing portfolios. • They should be built on existing research and experiences, and on the unified EU classification system ('taxonomy').

13. Thankyoufor your attention! Contact: diana.barglazan@ec.europa.eu #EnergyUnion