EU Strikes Deal on Green Bonds Standard

Negotiators of the European Council and Parliament have reached an agreement on a voluntary standard for EU green bonds (EuGB). The agreed terms of the standard will require issuers of bonds that wish for the EuGB label to ensure all proceeds are invested in economic activities which are aligned with the EU taxonomy, provided the sectors concerned are already covered by it. “The new standard which we are setting will be useful for both issuers and investors of green bonds,” said Elisabeth Svantesson, Sweden’s Minister for Finance, noting that investors buying the bonds “will be able to more easily assess, compare and trust that their investments are sustainable, thereby reducing the risks posed by greenwashing”. In instances where a sector is not yet covered by the taxonomy, issuers will be allowed a “flexibility pocket” of 15%; this will be re-evaluated as and when the taxonomy is expanded. Oliver Moullin, Sustainable Finance General Counsel for the Association for Financial Markets in Europe (AFME), said: “We believe that the establishment of an EU standard for green bonds based on the Taxonomy Regulation should complement existing market standards, further developing the market for environmentally sustainable bonds. The usability of the standard will largely depend on the degree of flexibility with the taxonomy-alignment of proceeds, the treatment of green securitisation, and the grandfathering provisions.” 

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