The European Council has adopted the European green bond standard regulation, laying down requirements for bond issuers to voluntarily use the ‘European green bond’ or ‘EuGB’ designation. This move is aimed at tackling greenwashing and helping advance the EU’s sustainable finance market.
Following the EU’s sustainable taxonomy, European green bonds will be accessible to global investors. This regulation is part of the EU’s strategy for financing sustainability and transition to a climate-neutral, resource-efficient economy. It aims to enhance consistency and comparability in the green bond market, benefiting issuers and investors.
“Issuers will be able to demonstrate that they are funding legitimate green projects aligned with the EU taxonomy,” stated the Council. The regulation establishes a registration system and supervisory framework for external reviewers of European green bonds.
The regulation introduces voluntary disclosure requirements for other environmentally sustainable and sustainability-linked bonds issued in the EU to combat greenwashing.
A 15% flexibility provision for uncovered sectors and specific activities would ensure practicality from the start. This will be subject to review as Europe progresses towards climate neutrality and new green investment opportunities arise in the future.
The European Commission proposed the regulation for European green bonds on July 6, 2021. The European Parliament adopted the agreement on October 5, 2023, and the Council approved it on October 23, 2023. After signing and publication in the EU’s official journal, it will enter into force in 20 days and start applying 12 months later.
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