The European Council has adopted a regulation to create a standard for bonds designated as European green bonds, or EuGB. Issuers of environmentally sustainable bonds that wish to use the label will now have to meet a set of uniform requirements. In its press release, the council states the expectation that “the new standard will foster consistency and comparability in the green bond market, benefitting both issuers and investors of green bonds”.
The regulation is described as “a further step in implementing the EU’s strategy on financing sustainable growth and the transition to a climate-neutral, resource-efficient economy”. European green bonds will be “aligned with the EU taxonomy for sustainable activities and made available to investors globally”.
The regulation includes a registration system and supervisory framework for external reviewers of European green bonds. In a bid to prevent greenwashing, it also provides voluntary disclosure requirements for “other environmentally sustainable bonds and sustainability-linked bonds issued in the EU”.
All proceeds of European green bonds are required to be invested in projects that are aligned with the EU taxonomy for sustainable activities, as long as they are in sectors already covered by the taxonomy. For projects in sectors not yet covered by the taxonomy, a flexibility pocket of 15 percent may be applied.