Strict EU sustainable finance rules deter emerging market investment

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🗞️ Driving the news: Stringent EU sustainable finance rules are discouraging investments in emerging markets, warns Michael Jongeneel, CEO of Dutch development finance institution FMO
• Chinese and Middle Eastern investors are stepping in to fill the gap left by European financiers

🔭 The context: The EU’s sustainable finance regulations, part of the Green Deal, classify overseas investments as non-sustainable under the “green asset ratio.”
• This deters European banks from investing abroad due to potential reputational risks and regulatory penalties

🌍 Why it matters for the planet: The current rules hinder the EU’s ability to support global green transition projects, such as solar farms and battery development, potentially slowing down climate action in developing regions

⏭️ What's next: European development finance institutions are urging Brussels to revise the rules to facilitate more foreign investments
• The EU commission is in discussions about recognizing third-country investments under the green asset ratio

💬 One quote: "The requirements are so strict for the moment that the chances of potential clients in emerging markets moving to other financiers, for instance from east Asia, is really serious," said Michael Jongeneel, CEO of FMO

📈 One stat: Gulf countries announced over $53bn of foreign direct investment in Africa last year, while China invested about $80bn in more than 40 countries in 2023

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