The EU Commission has presented the eagerly awaited draft regulation for the EU Green Bond (EuGB) standard as part of its Sustainable Finance strategy. The EU Green Bond (EuGB) standard will also be open to issuers of green bonds outside the EU. There are four main requirements in the proposed draft:
- The funds raised by the bond should be used entirely for projects that comply with the taxonomy or help to bring an economic activity into line with the EU taxonomy in the long term (“use-of-proceeds”).
- There must be complete transparency on how bond proceeds are allocated through detailed reporting requirements.
- All green bonds according to EuGB standard have to be controlled by an external auditor. This is to ensure compliance with the regulation and that the projects funded are in line with the taxonomy. Special but limited flexibility is provided here for government issuers.
- External auditors providing services to issuers in accordance with the EuGB standard must be registered with and supervised by the European Securities and Markets Authority (ESMA). This is to ensure the quality and reliability of their services and audits to protect investors and ensure market integrity. Again, special, limited flexibility is provided for government issuers.
The draft provides for a voluntary “gold standard.” In this respect, one can continue to assume a coexistence of different ESG or green labels. However, anyone wishing to use the EuGB standard for their emissions must meet demanding and uniform requirements. A uniform approach to all bond issues, such as government bonds, covered bonds, corporate bonds, and securitizations, is welcome, as is the use-of-proceeds approach: this means a greater focus on financing companies and economic activities toward sustainable transformation rather than solely on existing green assets.
More information:
to the press release of the EU Commission
to the annexes of the draft law
Further articles on TSI kompakt on the topic of sustainability regulation