EU delivers plan for financing of €1trn Green Deal
The European Commission has revealed its plans for the financing of the €1 trillion so-called “Green Deal”, which aims to make the continent climate neutral by the year 2050. In the newly published investment plan, the greatest requirement for capital is in the building sector, which is itself a “daunting task” according to Zentraler Immobilien Ausschuss (ZIA) vice president Jochen Schenk. (Schenk, in his day job, is the CEO of Munich-based Real I.S, the real estate investing arm of BayernLB).
In the Sustainable Europe Investment Plan, the EC outlines where the huge amounts of capital of around €1 trillion for a climate neutral Europe will come from. Just under half will be sourced from the EU’s own internal budget, the idea then being to drive incentives for the mobilisation of public sector and private investments.
The paper indicates that additional investments of €260 billion p.a. will be required in the period up to 2030 in the areas of energy, buildings and mobility. However the EU sees the largest investment requirement in the real estate sector: extra investments in the order of around €120 billion p.a. are necessary to achieve energy efficiency targets in the residential sector and a further €75 billion are required for public sector buildings and the service sector.
According to a report by Spiegel magazine, the German government is not yet prepared to provide greater financial support for the Green Deal as outlined by the president of the European Commission Ursula von der Leyen.
“Private commitment is the key”: the ZIA has estimated an annual requirement for around €100 billion for buildings and technical services until the year 2030 plus additional costs in the order of €34 billion p.a. depending on scenario and CO2 reduction targets.
“The objectives of the Green Deal in terms of the building sector…require all participants to pull their weight” said Jochen Schenk. Private commitment is the key to achieving results in terms of climate change and it is logical that the European Commission recognises the importance of private investments to the project.
The executive vice president for the European Green Deal Frans Timmermans says: “The necessary transition to climate neutrality will improve the quality of life for everyone and make Europe more competitive. This will require even greater efforts by individual citizens, sectors and regions, which use greater levels of fossil fuels than others”.
In order to prepare the capital market for this change of direction, the ZIA says this requires intelligent and market-orientated regulations, which must remain in the forefront compared to all other political initiatives “in particular in view of the upcoming review of current capital market regulation and also the introduction of new banking regulations under Basel guidelines” said Schenk.