DNSH in practice – what can the financing institution demand?

DNSH

“Failure to cause serious harm” (English. DNSH – Do Not Significant Harm) to any of the established environmental goals is one of the principles that projects must meet if they are to be financed with European Union funds. With regard to the possibilities envisaged in the NIP, in terms of its specific objectives, investments and successively developed instruments for their implementation, work is underway to define the documentation necessary for the call for proposals. It will establish the requirements for applicants, including in terms of demonstrating compliance with the DNSH rule.

What do DNSH regulations and guidelines require?

What might be the expectations of institutions implementing investments from the NIP on behalf of responsible parties? Certainly in line with EU law and with existing guidelines and manuals on the DNSH topic, but also, as it turns out, with a completely different level of detail.

The general requirements for fulfilling the DNSH rule assume a two-tier analysis being conducted, i.e. A preliminary assessment (so-called screening) and a substantive assessment, supported by evidence. Not all projects will require both stages. This depends on the nature of the activity, translating into possible impacts on the environmental objectives being assessed. Thus, in the case of small-scale projects, often by design aimed at improving the condition of certain environmental elements, based on ecosystem solutions, implemented without excessive environmental nuisance , the assessment may end at screening, or even at its initial stage. For advanced investments, more detailed information will be required, supported by evidence in the form of prepared analyses, documents and certificates. This will translate into labor-intensive preparation of additional documents for the application, and often the need to obtain decisions in environmental proceedings.

The rules for DNSH compliance in the context of planned projects are not explicitly stated. The provisions of Regulation (EU) 2021/241 of the European Parliament and of the Council establishing the Instrument for Reconstruction and Increasing Resilience, as well as the so-called “European Union”. taxonomy regulations (EP and Council Regulation (EU) 2020/852) define rather ambiguously the basic concepts and requirements of the DNSH issue and other related ones, leaving much room for interpretation. In most cases, they do not indicate specific criteria or values. To define them, the provisions of the Delegated Taxonomy Regulation have begun to be used, specifying in sumptuous annexes a number of issues that should be considered when verifying the impact on individual environmental objectives.

These are the requirements specified for sustainable operations. At this point, the most extensive coverage has been given to the topic in relation to the requirements for not harming the two environmental goals of climate change mitigation and climate change adaptation. However, more standards are under development and consultation, relating to the other four environmental goals: sustainable use and protection of water and marine resources, a closed-loop economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. After their approval, it would be advisable to supplement the rules for the application of DNSH in individual procedures for instruments implementing investments from the NIP.

How are DNSH requirements determined in the documentation being developed?

The general rule seems to be to adopt the declarative nature of the information presented, often in the form of a statement. The applicant must ensure in the documents submitted that the projects implemented with the support of the funding received will comply with current environmental legislation and that the DNSH principle will be met. At this point, one can boldly pose the question: does the applicant realize what he is declaring?

Whether such a method of assurance will guarantee the proper targeting of EU funds will probably become clear as a result of the audit activities carried out. Therefore, it is necessary to clarify, if possible in view of the Commission’s enigmatic guidelines, what standards and criteria the planned projects should maintain.

It is also recommended, before planning the scope of the project and applying for funding, to carefully check the eligibility criterion and requirements for projects specified in the documentation. Interpretation of the records may prove crucial.

Work is currently underway on the approach that would be taken to require planned projects to comply with the DNSH rule. The first deficiencies and problems in specifying information and criteria for selecting projects are also being recognized.

DNSH assessments carried out to date have mostly focused on policies, strategies and programs, or planning documents. Working out the requirements that determine the acceptance or rejection of a particular project is a challenge on a completely different scale.

Based on the experience gained in this regard, it can be pointed out that the requirements that cause the greatest difficulties may be projects in which there will be an investment that may always have a significant impact on the environment or that may potentially have a significant impact on the environment. In this case, the implementing institution should request, in accordance with the requirements under the Taxonomy Delegated Regulation, a decision on environmental conditions for the implementation of the project or a decision of the competent authority to waive the assessment. Such a situation, in view of the ongoing procedures for the development of requirements and the postponement of the launch of the various NIP instruments, provides a potential opportunity to obtain the relevant documents. It is worth mentioning that receipt of a decision on the environmental conditions of the project does not exempt the DNSH analysis.

Another example is the complex investments, taking into account many disparate objectives and scopes of activities, planned for implementation in seminatural areas, especially in naturally valuable areas. Describing the possible impacts on all of the analyzed environmental objectives can be quite a challenge, not only for the preparer of the study, but also for the person verifying it on the part of the responsible institution. Therefore, if possible, it is advisable to choose the area where the project will be located prudently, especially in terms of the presence of protected areas, including Natura2000.

Any doubts that arise on the part of the reviewer, in the case of too general a description of the project and the argumentation indicated, are likely to be a reason to call and submit explanations. Therefore, it is worth reading the extensive annexes of the Delegated Regulation on Taxonomy (Commission Regulation (EU) 2021/2139), unless the responsible institution has made them available as additional instrument-specific material. It is expedient to use the possible options indicated there to justify the lack of negative impact on environmental objectives and/or significant positive contribution to their achievement.

It is also worth entrusting the development of the documentation to professionals, so that the protracted process of completing the application does not prevent you from obtaining funds because the pool has been exhausted.

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