Lawmakers in the European Parliament and the European Council have unveiled an agreement on the creation of standards for European Green Bonds.
According to ESG Today, under the new proposed standard, issuers wishing to use the EuGB designation – described as the ‘gold standard’ for green bonds – will need to follow a strict set of investment and transparency criteria. These include ensuring all proceeds are invested in activities aligned with the EU Taxonomy.
The European Commission launched its EuGB regulation proposal in July 2021, as part of a series of initiatives by the group aimed at promoting a more sustainable financial system and helping to facilitate the necessary investments to advance the EU’s and global climate goals.
ESG Today remarked that the proposed green bond rules were created to help facilitate the financing of sustainable investments through the creation of a gold standard for how firms and public authorities can use green bonds to raise funds on capital markets, while meeting detailed sustainability requirements and protecting investors from greenwashing.
Issuers choosing to use the EuGB designation would ensure that funds raised would be fully allocated to EU Taxonomy-aligned projects, provide full transparency through detailed reporting, and use external reviewers to ensure compliance.
For EuGBs, the agreement confirms, ESG Today outlined, that all proceeds will need to be invested in economic activities that are aligned with the EU Taxonomy, while adding flexibility enabling 15% to be invested in economic activities that comply with the taxonomy requirements, but in sectors that don’t yet have established taxonomy criteria.
The new rules also establish a registration system and supervisory framework for external reviewers of European green bonds, aimed at standardizing reviewers’ verification work and improving trust in the review process.
European Parliament negotiator Paul Tang said, “With EUR 100 trillion in annual trades, the European bond market is the single most popular option for businesses and governments to raise finances. Tonight the EU has taken a big step to green this massive market by adopting the first regulation in the world on green bonds. But we have also gone further by tying green bonds to the overall green transition of the company as a whole.”
The rules will now be sent for official confirmation by the Council and the European Parliament and will apply 12 months after entering into force.
Earlier this year, the Reserve Bank of India said it plans to raise $2bn in its first-ever green bond offering to support green infrastructure projects in the country.
Copyright © 2023 FinTech Global
Copyright © 2018 RegTech Analyst
