UNEP FI and the European Banking Federation (EBF) have published a joint policy brief outlining how Europe’s chemical sector is evolving under the EU’s sustainability and industrial transition agenda, and what this means for investors and financial institutions.
Titled Transforming the EU Chemical Sector, the brief examines key policy developments affecting the sector and identifies practical levers to improve its investment viability as it decarbonises and shifts towards circular production. The chemical industry is the EU’s fourth-largest manufacturing sector and a significant source of emissions, accounting for around 5% of the bloc’s greenhouse gas output, making it a priority hard-to-abate sector.
The brief highlights mounting pressures on the industry, including high energy and feedstock costs, weak demand and global competition, which have constrained profitability and investment. At the same time, it points to substantial opportunities linked to circular economy models and low-carbon technologies.
UNEP FI and EBF identify seven policy levers across three areas to support the sector’s transition: de-risking mechanisms to improve project bankability, measures to strengthen the enabling environment for investment, and greater coherence and stability across EU policy frameworks. These include expanding blended finance tools and carbon contracts for difference, scaling circular business models, improving data transparency, reducing administrative burdens for SMEs, and ensuring long-term policy certainty.
The brief situates these recommendations within upcoming EU initiatives, including the 2025 EU Chemicals Industry Package, the Clean Industrial Deal and the Industrial Decarbonisation Bank, which are expected to shape investment conditions over the next two years.
UNEP FI and EBF said continued dialogue between policymakers, banks and industry will be critical to mobilising capital for the chemical sector’s transition, as the EU refines its regulatory framework and advances its climate, competitiveness and circular economy objectives.
