From bright to olive green, the EU shifts its focus

These days, Brussels’ political priorities are increasingly shifting from green transition efforts to bolstering our defences. As the EU institutions go into election mode, the focus of the past four years on making Europe the global leader of green and sustainable business and society, seems to be paid less attention in recent weeks. Instead, the talk of the town now revolves around how much ammunition can be produced for Ukraine and how to deal with a NATO possibly led by an isolationist Trump in the White House.

Such questions are undoubtedly valid, given the escalating global tensions, but since all the green transition models were based on an almost exponential increase in funding and priority in order to achieve their goals, a quickly shifting political focus does not bode well for the future of the project. Balancing acts are inherently difficult, and with Ursula Von der Leyen now looking apt to get another term as head of the Commission, she will have another difficult four years ahead of her. The recent farmers’ protests have certainly played a role, reminding politicians that their decisions have tangible impacts on real people. As the smoke and noise from the protests faded, national governments looked less sure in their conviction of wanting to go along with the green priorities coming from the EU.

For a year, France’s President Macron has already been talking about how we need to avoid hampering European competitive power by focusing too much on sustainability. Then, in recent weeks, the German and Italian governments walked away from the Corporate Sustainability Due Diligence Directive, which, after lengthy discussions in Trilogue, was finally ready for approval by Member States. Meanwhile, as the Munich Security Conference is underway, EU Member States are increasingly concerned about their depleting ammunition stocks and wonder how they can produce more.

Yet this costs money, and with the recently adopted green taxonomy, funding weapons production is complicated. Hence why there’s now talk of creating EU bonds specifically for funding the reconstruction of Europe’s armament sector. These individual issues are, of course, not going to reverse the sustainable agenda completely, but they do point to the increasingly difficult balancing act that the EU will have to perform in coming years.

Morten Clausen, Director of Financial Regulation