EU green bonds will reduce 55 MTS of CO₂ annually

The document NextGenerationEU Green Bonds Allocation and Impact Report 2024 informs investors and stakeholders about the allocation of proceeds from the issue of NextGenerationEU green bonds and their estimated realized and expected impact on the climate. The report focuses on data with a cut-off date of 1 August 2024. As in previous editions, this report has been subject to a limited assurance review by an independent auditor regarding information related to the allocation of NextGenerationEU Green Bond proceeds and the realized impact.

NextGenerationEU (NGEU) is a tool within which at least 37 % expenses in the recovery and resilience plans of the Member States must use for sustainable investments and reforms in areas that deal with climate change. Proceeds from NGEU's green bonds are used to finance these investments.

Green bonds NGEU

• Use of proceeds: Proceeds from the NGEU Green Bonds are used for nine pre-defined broad spending categories, including "energy efficiency", "clean energy and the grid" and "climate change adaptation" as defined under the NGEU Green Bonds.
• The process of evaluating expenses and selecting investments: Investments are primarily identified based on the 37 % Climate Expenditure Recovery and Resilience Plans – spending plans under the Recovery and Resilience Support Mechanism, which is the core of the NGEU recovery tool.
• Revenue Management: The Commission monitors the net proceeds of the NGEU Green Bonds and related payments, which are based on data submitted by EU Member States.
• Reporting: The Commission provides investors and the general public with transparent information on the allocation of revenues and the impact of expenditure financed by NGEU Green Bonds, including through annual reports on allocation and impact and the regularly updated online NGEU Green Bond Panel.

NGEU Green Bond Framework is compliant with the International Capital Markets Association (ICMA) Green Bond Guidelines and reviewed by a second-party opinion provider, Vigeo Eiris, now part of Moody's ESG Solutions.

Eligible expenses

When determining individual measures that are eligible for financing from NGEU green bonds, the Commission applies a multi-level framework of control and evaluation procedures. This evaluation and selection process begins with a thorough review of the climate-related spending that Member States have announced as part of their National Recovery and Resilience Plans. Screening is reinforced by a second level of internal due diligence measures aimed at ensuring that only measures that meet the conservative standards of the NGEU Green Bond Framework are included in the pool of eligible measures. Only measures that pass this due diligence are considered eligible for NGEU Green Bond funding. In accordance with this control framework no nuclear or natural gas power generation measures are included in the set of eligible NGEU green bond measures.

Revenue Allocation

Under the Recovery and Resilience Mechanism, Member States may twice a year after meeting their respective milestones and goals accept payments – in accordance with the performance nature of the program. Member States are also obliged to report to the Commission each request for payment total cumulative expenditure spent on implementing each reform and investment s a positive climate indicator. This requirement is set out in the financing and loan agreements between the Commission and the Member States and enables the Commission reconcile returns obtained from NGEU green bonds s specific expenditure on measures related to the climate.

As of August 1, 2024, the member states have received EUR 253.7 billion in the form of grants and loans under the Recovery and Resilience Mechanism. From that EUR 101.8 billion represents the proportion of disbursements expected to they will support measures eligible for NGEU green bonds, based on the share of expenditure eligible for NGEU green bonds in the respective recovery and resilience plans.

Impact on the climate

On approximating the impact of investments financed by NGEU green climate bonds is applied three-step approach based on milestones and targets included in national recovery and resilience plans.

• Step 1: Analysis of all milestones and goals to find metrics - referred to as output indicators – which can be used to assess progress in the implementation of certain measures. Examples of such output indicators are MW of installed capacity of solar panels, km of modernized or built railway or the number of renovated apartments. Although multiple output indicators could be viable for some measures, the final decision on the chosen output indicator is based on its applicability to climate impact translation. Milestones and targets and their respective target values are counted for only one outcome to avoid double-counting issues. Output indicators are assigned to the area of intervention to which they apply.
• Step 2: For each output indicator (and the corresponding area of intervention) is determined methodology for translating output indicators into reduced greenhouse gas emissions. These methodologies have been developed with the support of Carbone 4, a specialist consultant in this field, and their creation relies heavily on the available academic literature. After completing these two steps, the theoretical basis for translating investments into concrete measures for reduced greenhouse gas emissions is established.
• Step 3: Tracking actual fulfillment of milestones and goals. Milestones and targets are considered to have been met and are therefore taken into account when calculating the realized climate impact only after the Commission confirms that the target has indeed been successfully achieved.

The Commission aims to provide a broad overview of the climate impact achievements of NGEU Green Bonds. However, the analysis in this report is subject to several methodological limitations. In future reports, the Commission will continue to try to include as many investments as possible. Spring