The EU must establish an investment fund to secure ambitious transition goals

In a new set of recommendations adopted in September, the European Economic and Social Committee (EESC) called for pressing action to address the critical funding shortfall threatening the EU’s climate and digital transformation goals. By establishing an EU investment fund with a focus on strategic, future-oriented investments, Europe can secure its competitiveness, reduce external dependencies, and create a more resilient single market.

The lack of adequate funding is a major obstacle to the EU’s climate, digitalisation, and competitiveness goals. The European Commission estimates that achieving the 2030 climate targets will require annual investments amounting to 4% of GDP. Additional needs in relation to digital transformation, economic resilience, and social investments are likely to widen the funding gap further.

EESC rapporteur Dominika Biegon stresses the importance of mobilising private sector investment by advancing key financial reforms, including the completion of the Capital Markets Union, the integration of the European energy market, and simplification of regulatory frameworks. "While private investment is essential, public funding remains crucial, especially in sectors that are not yet commercially viable and where strategic infrastructure is needed," Ms. Biegon explains.

A call for a dedicated EU investment fund

To close this investment gap, the EESC recommends establishing an EU investment fund as part of the next Multiannual Financial Framework (MFF), the EU’s seven-year budget plan. This fund could be made up of contributions from the Member States, new EU own resources, and joint debt issuance. Importantly, the allocation of funds should follow clear social criteria to ensure that public funding for the transformation is consistently geared towards creating and maintaining decent jobs, thus increasing acceptance of the green transition.

Public funding as a catalyst for private investment

A central message from the EESC is the vital role of public funding in unlocking private investment, particularly in sectors where green solutions are not yet profitable. Key industries, which might otherwise relocate to competing regions, need targeted public support to maintain Europe’s competitive edge. In the EESC’s view, public funds are also crucial for financing essential infrastructure projects, such as energy grids, hydrogen pipelines, and other public goods that are unlikely to attract private investment on their own.

Balancing fiscal policy and investment

While the EU’s Stability and Growth Pact – its framework for fiscal and macroeconomic governance – prioritises the control of debt and deficit levels, the EESC believes that these rules should be complemented by a robust investment strategy at EU level. By doing so, the EU can ensure sustainable economic development that aligns with its long-term climate and digital goals without compromising fiscal sustainability.

A blueprint for strategic investment

To meet the ambitious objectives of the green and digital transitions, the proposed EU investment fund would focus on projects of strategic European interest. The EESC has identified four key areas that require targeted investment:

1.        Cross-border infrastructure projects.

2.        Completion of the EU energy union.

3.        Strengthening European industrial competitiveness.

4.        Investments in education, training, and upskilling initiatives.

Financing mechanisms

The fund could adopt a diversified approach to financing, combining Member State contributions, new EU own resources, and joint EU debt issuance. It could offer financial instruments such as low-interest loans, guarantees, subsidies, public equity investments, and grants. This mix would ensure that both public and private players have access to the necessary financial tools to support transformative projects.

Social responsibility and inclusive growth

A key feature of the fund should be its commitment to social responsibility. The EESC recommends that funding allocations be tied to specific social criteria, such as commitments to job retention, training programmes, and worker participation. This approach would ensure that investments not only drive green and digital innovation but also promote inclusive and equitable growth across the EU.

A critical moment for the EU's future

The green and digital transitions represent a critical opportunity for Europe to reshape its economy and lead on global sustainability. However, without a dedicated EU investment fund, the EU may fall short on these ambitions due to inadequate financial resources. The EESC’s recommendations provide a clear roadmap for creating the financial capacity needed to drive Europe’s transformation, while fostering economic resilience, social equity, and industrial competitiveness.