The next European Budget – the Multi-Annual Financial Framework (MFF) for 2028-2034 – is under trialogue negotiations. Following the Commission’s proposed reform of the EU funds structure in summer 2025, the Parliament and the European Council have launched negotiations to set the spending, architecture and approach of the 2028-2034 budget. In that context, the Commission has published a concept paper on the application of the Do No Significant Harm (DNSH) principle under the next 2028-2034 MFF, serving as a starting point for targeted consultations.
Our experts have led numerous technical assistance projects supporting the implementation of the DNSH principle at a national level. With funding from the EU, we have supported ten EU Member States in integrating the DNSH principle into their budgeting and programming for the EU Cohesion policy funds, the Recovery and Resilience Facility (RRF), as well as national funding programmes and investment strategies. We have seen EU Member States’ varied approaches for integrating the DNSH principle into their investments along the investment lifecycle. Against this experience, the simplification proposed in the consultation paper appears to address most of the key difficulties that EU Member States and decentral governments have faced between 2021-2027. Our team has witnessed numerous challenges related to the imprecise definition of key terms (e.g., “proportionality”, “implementation period”, “significant”) and of inconsistencies across EU funds, which the proposed approach could help resolve. Yet, it is likely that the new approach creates a new significant risk, and that it does not address one of the largest issues witnessed in the 2021-2027 MFF. In this blog post, we share our impressions on the risks posed by Commission’s proposed approach.
Initially, the DNSH principle was created with the aim to prevent environmental harm from occurring in investments that support specific climate and environmental objectives by categorizing what are considered sustainable (green) investments. For example, experience and controversies in the 2010s showed that investing in decarbonized infrastructure did not systematically ensure environmental protection – typically, investments in renewables could have a harm impact on biodiversity and ecosystems. The DNSH principle thus set out qualitative and quantitative criteria to help investors ensure that their support of one environmental objective does not harm other environmental objectives as defined by the Taxonomy Regulation. The DNSH principle was then added as an environmental requirement to a majority of EU funds in the 2021-2027 MFF, including to the Cohesion policy funds and to the Recovery and Resilience Facility. While this integration reflected positive progress towards EU objectives, it also took a highly administrative approach that revealed complex to implement. For instance, each investment was subject to a DNSH assessment to gauge the risks that environmental objectives are significantly harmed by the projects; yet, the rules defining the depth of the DNSH assessments were deemed unclear by several EU Member States. The monitoring requirements to prove the implementation of the DNSH principle also proved to be unclear, thus creating a significant legal uncertainty for authorities in charge of selecting, disbursing, and monitoring investments.
The Commission’s new proposed approach aims to address these issues. It consists of:
- Three general principles:
- The reduction of administrative burden and greater proportionality. The DNSH principle will focus on areas where the EU funds require additional safeguards. For those funds, it will consist of “a single set of DNSH criteria applicable to the entire EU budget” and of a dedicated approach for financial instruments. Proportionality is defined more specifically than in the previous MFF, with due consideration for the size of investments, their climate and environmental impacts, and their territorial characteristics.
- The application of the DNSH principle where it is “feasible or appropriate”. Exemptions shall be granted where the DNSH principle “would impede achieving the objectives of the programmes or instruments under the MFF, or, more generally, the Union’s policy priorities” – typically in crisis situations, situations of overriding public interest, and investments in defence and security.
- The mainstreaming of adaptation and resilience objectives. The Commission proposes exploring additional climate adaptation criteria for certain infrastructure categories, particularly large-scale or critical infrastructure exposed to climate risks.
- A list of activities on which DNSH criteria must systematically apply. The proposed list focuses on fossil fuels, construction, manufacturing, waste, transport and water management. In addition, specific criteria could be considered for investments in third countries, building on existing safeguards used by development finance institutions. Facilitations may also be considered for SMEs.
The proposed approach appears to advance harmonised rules and exemptions. Yet, as we outline below, this approach to DNSH could create risks for the attainment of European objectives for decarbonization and resilience.
First, the list of economic activities subject to DNSH criteria and the criteria themselves appear insufficient in light of the European environmental objectives. The number and scope of exceptions allowing investments into fossil fuel-related activities[1] is in contrast with the state of science and with European legal decarbonization objectives. Similarly, the criteria for certain activities do not cover some of the most harmful practices. For instance, investments in fishing vessels and fishing gear may be supported by European funding even when they rely on practices that have been scientifically recognized as highly harmful to the environment, such as deep-sea trawling.
Secondly, the consultation paper does not mention how monitoring will be simplified or clarified, despite the fact that monitoring and verification of the DNSH principle have posed major issues under the 2021-2027 MFF. Our experience with the 2021-2027 MFF clearly shows that monitoring obligations that are not supported by explicit and exhaustive guidance creates significant legal uncertainty, with a disproportionate impact on smaller authorities and SMEs.
The targeted consultation, closing on the 16th of September 2026, will allow stakeholders to raise these risks. Our experts support managing authorities, public institutions and financial actors in translating DNSH requirements into workable assessment criteria, implementation guidance and monitoring systems.
If you are preparing for the next MFF or reviewing how the proposed approach could affect your programmes and investments, reach out to our Green Finance team: Jeroen van der Laan and Rachel Lamothe!
[1] Exceptions to be carved out include decommissioning of fossil fuel infrastructure and rehabilitation of sites, low-carbon fuels, and fossil fuels use for hydrogen conversion, essential services, space industry, transport infrastructure, and forestry and agriculture in rural areas, special purpose vehicles, and several types of vessels.
This post has been written without AI tools.
