Marcus Björkstén’s thoughts on EU channelling massive funds into “green initiatives” during the coming years

Sustainable Europe

2021-03-18

In February, the EU passed a 672,5 billion EUR recovery fund to help the union to recover from the COVID-19 pandemic by boosting environmental initiatives and digital transformation. According to the EU, at least 37 % (249 billion EUR) of these funds are to be invested into environmentally sustainable projects. Some countries are setting the bar even higher than that and are aiming for 50%. The investments are planned to take place during 2021-2023.

There has naturally been a heated debate regarding the fairness of who is a net payer and who is a net receiver in a mechanism like this. This is however an example of how the EU can distribute collected funds and channel them towards investments that contribute to certain ambitions, in this case primarily the environment and digitalization. In Finland´s case 50 % of the 2,1 billion EUR Finland is being allocated, is planned for “green” investments such as Hydrogen technology, energy distribution, energy efficient buildings etc. Other EU countries are taking similar investment decisions and including them in their budgets. The idea is also to attract private investments in parallel to the funds allocated from the recovery fund, which makes the potential capital to be invested even larger.

This goes to show the magnitude of funds that the EU channels into projects that are perceived as enabling us to reach the set environmental goals in the future.

In addition to this, there is the EU budget for 2021-2027 of which 30% is earmarked for various climate smart investments. That budget is approx. 1,1 trillion EUR which means that 330 billion EUR is heading for investments aligned with environmental goals and ambitions.

It is not far-fetched to presume that this could be positive in the long run for companies that have products and services well aligned with the ambitions of the EU and other geographies with similar priorities. These are the types of companies Fondita Sustainable Europe primarily invests in, therefore these political initiatives should support the markets they are active in. However, one must keep in mind that these are just big plans at this stage and are yet to be put into real action. We will have to wait and see how this “Green Deal – business” plays out in the end.

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Marcus Björkstén 

Portfolio Manager

 

 

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