Only 23% of EU green bond issuers will meet the ‘gold standard’ for the December deadline, according to a report.
The EU Green Bond Standard (EU GBS), a voluntary ‘gold standard’ for Green, Social, and Sustainability (GSS) bond issuers, aims to combat greenwashing and enhance the transparency and credibility of Green Bonds across the EU. This initiative aligns with the UK FCA’s new Sustainability Disclosure Regime.
MainStreet Partners, the London-based Sustainability and Impact data provider, has released a report on the upcoming EU GBS, set to take effect in December 2024.
European Green Bond Standard “a positive step” despite limitations, study finds
According to the analysis, only 23% of the current green and sustainability bonds will meet the EU GBS criteria, representing approximately $700 billion in assets. A key requirement of the EU GBS is that bond proceeds must be allocated to projects aligned with the EU Taxonomy, part of the EU’s sustainable finance framework. On average, 53% of these bonds align with the EU Taxonomy, with green bonds at 62% and sustainability bonds at 21%.
Pietro Sette, research director at MainStreet Partners, commented: “Based on our research, only 23% of the current stock of green and social bonds could claim accordance with the EU GBS. This is expected to increase as both issuers and investors progressively realise the added benefits of the label, such as smoother compliance with regulation and lower reputational risks. We are already seeing improvements, with eligibility for bonds issued in 2023 and 2024 globally jumping to 58%.”
The report has also offered insights into the geographical breakdown of EU GBS-eligible bonds. 83% of these bonds are issued by European entities, with Germany and France at the forefront. Asian issuers also show significant participation, contributing 9% of the eligible volume, aided by the partial overlap of local environmental taxonomies with the EU’s framework.
