The European Commission has approved the final adoption of the Net-Zero Industry Act (NZIA) to put European Union (EU) companies on track to strengthen their manufacturing capacities of clean technologies. The approval for the NZIA Act was passed on 27 May 2024 to create a unified and predictable business environment for the tech manufacturing sector. 

The NZIA Act presents potential opportunities for private credit and private equity firms to identify companies that prioritize decarbonization in their manufacturing processes. It is expected to spur significant private investment needs by €90 billion or more by 2030. 

Additionally, the NZIA guidance recommends the use of sustainability-linked loans (SLLs) or climate-related margin ratchets as tools for private credit investors to incentivize portfolio companies to adopt net-zero practices.

Let's discuss the NZIA Act and its approval in detail. 

What is the NZIA Act?

The NZIA is legislation proposed by the European Commission in March 2023 as part of the European Green Deal Industrial Plan to promote the manufacturing of key decarbonization technologies in Europe. The aim of this legislation is to reduce the EU's reliance on Russian fossil fuels and other imports that might hinder access to key technologies. 

Primary measures of the NZIA Act

The NZIA: 

• sets a goal for the manufacturing capacity of strategic net-zero technologies (wind turbines, batteries, heat pumps, etc.) to meet at least 40% of the EU's annual deployment needs by 2030 and also capture 15% of the global market value of technologies by 2040. 
  
  

• establishes a target of 50 million tonnes of yearly injection capacity in EU geological CO2 storage sites by 2030 to boost carbon capture and increase the availability of CO2 in European storage sites. 
  
  

• includes measures for investment in training, education, and innovation, including the establishment of Net-Zero Industry Academy to train 100,000 workers within three years and support mutual recognition of professional qualifications. 
  
  

• establishes acceleration "valleys" or areas concentrating several companies involved in specific technologies to create clusters of net-zero industrial activity in the EU. 
  
  

• supports energy-intensive industries such as cement, steel, or chemicals, that invest in decarbonization or produce components that are used in these net-zero technologies. 

What’s next for NZIA? 

In order to refine the final implementation, the commission and EU nations will communicate, exchange information, and solicit opinions from stakeholders through the Net-Zero Europe platform which will serve as the central coordination hub.

While you’re here…

Regulatory guidelines like this can present new deal flow opportunities for impact investors and lenders in private markets, as many entities using carbon credits may seek additional capital to take advantage of new rules. However, identifying opportunities before their competitors is a major data challenge for private credit and equity firms. This is an area where Auquan can help. 

Auquan uses advanced AI to generate material insights on any entity worldwide — public or private — and fine-tuned for your individual workflows. 

Let’s explore how Auquan can help you and your team eliminate tedious and time-consuming manual data work and focus more on what you do best.