Dictionary of Next Generation EU recovery fund

GLP

Green Loan Principles issued by the LMA and LSTA.

Green IT

"Green IT" refers to sustainable technology practices and solutions that seek to minimise the environmental impact of IT operations. This includes optimising energy use, reducing electronic waste and promoting efficiency in data centres.

Greenwashing

"Greenwashing", a combination of the words "green" and "washing", refers to the "whitewashing" performed by certain corporates or organisations to present themselves as environmentally friendly and conceal the harmful environmental impacts caused by the practices they carry out. Synonyms of greenwashing include "environmental whitewashing", "eco-branding" and "green sheen".

Grant

Money or goods and services offered by a government to an individual or natural or legal person, with no obligation to reimburse it. The purpose is to help carry out an activity that requires a high investment or activities considered to be of public interest.

Next Generation EU Funds

After the crisis caused by COVID-19, in July 2020 the European Council approved the Next Generation EU Funds (NGEU), a European Recovery Plan endowed with 750 billion euros that will be used to reactivate the European economy and promote its transformation, especially in the areas of digitisation and sustainability. Of which, 390 billions will be in grants, which do not have to be repaid nor will they be included capital deficit or debt calculations, and 360 billion more in loans.

Net zero

"Net zero" refers to reducing greenhouse gas emissions (GHGs) to as close to zero as possible. The Paris Agreement underlines the need to reach a state of net zero. It is a long-term commitment that seeks to reduce emissions to as low as possible. The word “net”“” is important because it will be very difficult to reduce all GHG emissions to zero by 2050. In most cases, there will be remaining GHG emissions that cannot be reduced and will therefore have to be offset.

Carbon footprint

"Carbon footprint" refers to the amount of greenhouse gases (GHG) emitted due to human activities. It represents the environmental impact of the production and consumption of goods and services. These GHGs, such as carbon dioxide (CO₂), contribute to climate change by trapping heat in the atmosphere. Organisations use carbon footprints to quantify their emissions and demonstrate their efforts to mitigate climate change through more sustainable practices.

Climate risks

"Climate risks" refer to threats arising from climate change that affect human systems and natural regions. These risks fall into two main categories:

• Physical risks: Related to extreme weather events such as floods, droughts, storms and sea level rise. These events can damage infrastructure and affect agricultural production and human health.
• Transition risks: Arise from changes in policies, technologies and markets to address climate change. For example, the transition to a low-carbon economy can impact investment in traditional sectors such as fossil fuels and generate opportunities in renewable energy and clean technologies.
• Other important indices include the MSCI Global Sustainability Index, the CDP (Carbon Disclosure Project) and the STOXX Global ESG Leaders.

Sustainability-Linked Financing

Financing that incentivises the achievement of sustainability objectives by the customer and meets the requirements set in the Criteria, this Guide and the Sustainability Linked Loan Principles.

Sustainability indices

"Sustainability indices" are tools that evaluate and classify corporates according to their performance on environmental, social and good governance criteria. Two of the most important ones are:

• Dow Jones Sustainability Index (DJSI): Recognises the best practices of corporates listed on the stock exchange globally. To be included in this index, corporates must pass a rigorous analysis based on 600 indicators.
• FTSE4Good Index: Brings together corporates that carry out robust ESG (environmental, social and corporate governance) practices. The assessment is based on more than 14 themes and 300 indicators.
• Other important indices include the MSCI Global Sustainability Index, the CDP (Carbon Disclosure Project) and the STOXX Global ESG Leaders.

Sustainable Development Goals

The "Sustainable Development Goals (SDGs)", also known as the "Global Goals", were adopted by the United Nations in 2015 as a universal call to end poverty, protect the planet and ensure that by 2030 all people enjoy peace and prosperity. These interrelated goals address global challenges such as poverty, inequality, climate change, environmental degradation, prosperity, peace and justice. Each SDG has specific objectives.

Second Party Opinion (SPO)

In the analysis and evaluation document prepared by an independent entity on the specific characteristics for a sustainability-linked loan project, ensuring it complies with the characteristics and criteria established, and verifying that the defined and selected Key Performance Indicators and Performance Objectives are consistent with the requirements and standards defined in the Sustainability-Linked Loan Principles.

Sustainability Performance Targets (SPT)

All the specific measurable objectives established in agreements for the granting of Sustainability-Linked Loans to improve and verify the customer's sustainability performance, and to avoid operational, environmental-impact and transparency risks.

Sustainability-Linked Loan Principles (SSLP)

The Sustainability-Linked Loan Principles defined by the LMA and LSTA, and the Sustainability-Linked Bond Principles defined by ICMA.

SURE

European Instrument for Temporary Support to Mitigate Unemployment Risks in an Emergency (SURE). It is intended to help protect employment and workers affected by the coronavirus pandemic.

EAFRD

European Agricultural Fund for Rural Development (EAFRD). It finances the European rural development policy. This involves funding rural development programmes in all EU Member States and regions. The European Commission and the Member States jointly design the programmes according to the strategic guidelines of the rural development policy adopted by the Council and the priorities established in the national strategic plans.

European Taxonomy

It is a classification system established by the European Union (EU), which determines whether an economic activity can be considered sustainable. Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 establishes a framework to facilitate sustainable investments by defining the criteria that an economic activity must meet to be considered sustainable.

The above-mentioned regulation was subsequently completed through the Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021, in which the technical selection criteria for the climate objectives of mitigation and climate change adaptation are established. The criteria of not causing significant harm to all other objectives are also included.

The appendices of the above-mentioned regulation complete the selection criteria related to the rest of the climate objectives.

In addition to the climate change mitigation and adaptation objectives, there are four other objectives included in the European Taxonomy known as non-climate objectives. These objectives and their technical criteria have been included in Delegated Regulation 2023/2486. These objectives are as follows: Sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and finally the objective of protecting and restoring biodiversity and ecosystems.

Subsequently, Delegated Regulation 2021/2178 and its appendices define the key performance indicators (KPIs) and how they should be calculated. These vary depending on the type of company, whether financial or non-financial.

FOCIT

State Financial Fund for Tourist Competitiveness (FOCIT). The self-employed and companies that work in the tourism industry will be able to apply for loans under the State Financial Fund for Tourist Competitiveness (fund without legal personality) for projects that contribute to digitalisation in tourist destinations, and the innovation and modernisation of services. The loans will have long repayment terms, and will feature grace periods and low interest rates. Royal Decree 1072/2021, of 7 December, is the regulation that applies to this Fund, which is aimed at improving competitiveness in the tourism sector.