In February 2025, the European Commission (EC) announced the Clean Industrial Deal (CID), the EU’s main industrial strategy and a key part of its climate policy. It aims to mobilize the public and banking sectors to make decarbonization a growth driver for European industry.
The EC estimates a total annual investment need of €1.24 billion (1.45 billion USD) to reach 2030 targets, and leveraging private capital will be key to the CID’s success. Since banks finance approximately 70% of Europe’s economy, their active involvement is indispensable.
To date, the existence of 27 national industrial policy approaches across the EU has led to cross-border confusion—hindering innovation, slowing down projects and deterring private capital. By creating an EU-wide clean industrial policy, the CID can create certainty for project developers, companies, banks and financial institutions and in turn accelerate clean industry development.
Over the next two years, the EC will further develop a set of industrial policy initiatives to support the CID’s implementation, making this an important time for conversations among policymakers, banks and industry on where related policies are working, where they are falling short and what’s needed to align capital with net zero.
The European Banking Federation (EBF), UNEP Finance Initiative and the Net-Zero Banking Alliance (NZBA) recently convened EU policymakers, banks and industry representatives to discuss these issues. They made the following six recommendations to help the CID achieve its transformative potential.
- Provide innovative support for small- and medium-sized enterprises (SMEs): Banks can enable greater, more inclusive market participation by developing simpler, more scalable green loans and sustainability-linked products for SMEs, and by providing more targeted advisory services to help them design credible transition plans. Aggregated project financing platforms and simplified voluntary reporting can also help SMEs increase their participation. In addition, venture debt can play an important role in providing growth capital for scaling innovative cleantech companies.
- Create secure revenue streams to help address the “green premium” for less mature technologies. Strong, predictable carbon pricing through the EU Emissions Trading System (ETS) and EU Carbon Border Adjustment Mechanism (CBAM) will be important to the CID’s success, along with stable incentives and consistent rules that build investor confidence in new technologies. Carbon contracts for difference (CCfDs) can provide revenue certainty and build market demand by guaranteeing a fixed carbon price over time while supporting the transition to more sustainable production methods. Long-term corporate power purchasing agreements (PPAs) are also important tools to help close the “green premium” gap—the incremental cost of building/manufacturing sustainably with some maturing technologies.
- Expand guarantee and blended finance schemes to help banks take on more project and technology risk. The perceived technological and market risks of first-of-a-kind projects like hydrogen and green steel can limit banks’ ability to finance these projects without compromising prudential standards. By scaling up guarantees, counter-guarantees and blended finance tools, Europe can de-risk investments in clean industry and unlock large pools of private capital. For example, the new Industrial Decarbonisation Bank aims to channel €100 billion (117 billion USD) in funding, combining grants, guarantees and contracts for difference.
- Streamline development processes to lower financing costs. Streamlining reporting, permitting and procurement processes to achieve shorter and more predictable project timelines can improve debt profitability and lower financing costs. The Decarbonisation Accelerator Act, anticipated to be released in Q4 2025 as a complementary policy to the CID, is expected to streamline permitting for industrial access to energy and industrial decarbonization, which could speed clean tech development by reducing project construction timelines and their related risks and costs.
- Integrate industrial and energy policy. Coordinating energy market reforms and initiatives, such as the Action Plan on Affordable Energy and the European Grids Package, renewable technology build-out and decarbonization incentives can help bring down energy costs and unlock investment at scale.
- Maintain a long-term focus on climate. The CID makes it clear that climate ambition is the foundation of Europe’s industrial renewal and strategic autonomy. Sustaining clarity of purpose in policy decisions, setting out clear net-zero pathways and avoiding sudden policy reversals will enhance confidence, positioning banks to support their clients to sustain ambition through political cycles.
“The Clean Industrial Deal has great potential to support the EU’s economic and climate goals, especially as it aims to de-risk investments for banks and financial institutions to scale financing for economy-wide low-carbon development.” – Eric Usher, Head of UNEP FI
“Bringing together key stakeholders from banking, business, and policymaking is key to develop understanding of how banks can maximize their participation in the Clean Industrial Deal.” – Wim Mijs, CEO, European Banking Federation
“Mobilizing private capital requires clean technologies and supportive industrial policies. With these in place, banks can play an important role in financing the EU’s industrial ambitions.” – Antoni Ballabriga, Net-Zero Banking Alliance (NZBA) Steering Group member and Global Head Sustainability Intelligence & Advocacy at BBVA
Creating a financing ecosystem with deep liquid capital markets, better venture funding and more scalable blended finance instruments can support long-term innovation. This can make the difference in moving from setting goals to taking the actions needed to achieve them.
UNEP FI, NZBA, and EBF will continue to support banks, financial institutions and policymakers with opportunities for exchange as the Clean Industrial Deal and its supporting policies are further developed.