2023-10-05 11:07:00
The text, adopted by 418 votes in favor, 79 votes against and 72 abstentions, establishes uniform rules for issuers who wish to use the name “European green bond” or EuGB for the marketing of their bond.
The rules will allow investors to direct their money with confidence towards more sustainable technologies and businesses. This will also provide the company issuing the bond with confidence that its product is suitable for investors who want to add green bonds to their portfolio. This will increase interest in this type of financial product and support the EU’s transition to climate neutrality.
The rules align with the taxonomy framework European Union which defines economic activities that the EU considers environmentally sustainable.
Transparency
All companies that choose to adopt these standards and therefore also the EuGB label when marketing a green bond will be required to communicate extensive information on how the bond proceeds will be used. They will also be required to show how these investments feed into the company’s transition plans as a whole. The standard therefore requires companies to commit to a global ecological transition.
Publication obligations, set out in so-called model formats, can also be used by bond issuing companies that are not yet able to adhere to all of the strict EuGB standards but wish to report their green aspirations.
External examiners
The regulation establishes a registration system and monitoring framework for external reviewers of European green bonds — the independent entities responsible for assessing whether standards are being met. It also stipulates that all actual or potential conflicts of interest that external reviewers may face are properly identified, eliminated or managed and communicated in a transparent manner.
Flexibility
Until the taxonomy framework is fully operational, issuers of a European Green Bond will have to ensure that at least 85% of the funds raised by the bond are allocated to economic activities compliant with the Green Bond Regulation. EU on taxonomy. The remaining 15% can be allocated to other economic activities, provided the issuer complies with requirements to clearly explain where this investment will take place.
Citation
Rapporteur Paul Tang (S&D, NL) said: “Businesses want to go green. And the European Green Bond gives them the best tool to help them finance this change. It offers a transparent and trustworthy tool to manage a company’s transition plan.
Today’s vote is a starting point for companies to become credible about their green bond issuances. Investors are keen to invest in European green bonds and, from today, companies can start developing them. In this way, European green bonds can encourage Europe’s transition to a sustainable economy.”
Context
The green bond market has grown exponentially since 2007 with annual green bond issuance crossing the $500 billion mark for the first time in 2021, an increase of 75% compared to 2020. Europe is the largest issuance region, with 51% of global green bond volume in 2020. Green bonds represent approximately 3 to 3.5% of all bond issuance.
Respond to citizen concerns
With the adoption of this legislation, Parliament responds to the demands of citizens made in the conclusions of the Conference on the Future of Europenotably in propositions 3(9), 11(1) and 11(8).
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