World's first standard for green bonds: EU adopts European Green Bond Standard
On Thursday, Oct. 5, the EU Parliament voted 418 to 79 in favor of adopting the first green bond standard: The European Green Bond Standard (EuGB). The regulation provides a uniform standard for issuers to bring bonds to market as "European Green Bonds" or "EuGB". Now only the EU member states have to approve it.
As the world's first standard for green bonds, the EuGB standard is a further step by the EU in the fight against greenwashing. Bonds issued under this label are to be assessed by external bodies to give investors certainty about sustainable investments.
Transparency
Accordingly, companies can voluntarily issue bonds with the EuGB label, subject to compliance with various criteria. These include disclosure of the use of the bond proceeds and a description of how the company intends to use the investments from the bonds for long-term ecological change. The standard thus requires issuers to aim for sustainable transformation. The increased transparency is intended to give investors in particular more certainty when selecting suitable bonds for their portfolio.
The EuGB standard is in line with the EU taxonomy, but offers some flexibility. For example, issuers that issue a bond under the EuGB must use 85% of the proceeds for economic activities that comply with the EU taxonomy. 15% can be used for other economic activities.
Background
Since 2007, the market for green bonds has developed exponentially. As early as 2021, annual investments in green bonds have exceeded the half-trillion US dollar mark for the first time. The European Union is the market leader with a 51% share of all green bonds worldwide (2020). The recently adopted EuGB offers issuers and investors another tool to finance the sustainable transformation. A further increase in investment volume in sustainable bonds is therefore to be expected.
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