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European Commission proposes ‘gold standard’ for green bond market

A new green bond standard proposed by the European Commission will provide issuers with a robust tool to demonstrate they are funding legitimately green projects in line with net-zero targets.

The European Commission has proposed a regulation on a voluntary European Green Bond Standard (EUGBS) to address investor greenwashing concerns.

EC-President-Ursula-von-der-Leyen
European Commission President Ursula von der Leyen delivers a speech during a plenary session at the European Parliament in July 2021. (Photo by Patrick Hertzog/Pool/AFP via Getty Images)

Despite registering a total market value of $1.1trn (€930bn) in 2020, the green bond market has no universal standard within the EU, which makes it more difficult for investors to know whether their investments are truly climate friendly.

The standard will provide guidance on how companies and public authorities can use green bonds to finance ambitious investments while adhering to tough sustainability requirements, the Commission says.

The EUGBS will be open to any issuer of green bonds, including corporations and sovereign states, both inside and outside the EU. Under the standard, European green bonds can be used to fund projects of up to ten years that are aligned with a new EU taxonomy for green investments.

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The Commission has called for full transparency on how bond proceeds are allocated, via detailed reporting, and for all green bonds to be subject to external review, to ensure compliance with the EU taxonomy. All external reviewers must be registered with the European Securities Markets Authority.