One step closer to establishing a European Green Bond Standard

On the 1 March 2023, EU lawmakers announced an agreement on the creation of a European Green Bond Standard (EuGB). The proposed standard (having been in limbo since its original publication in July 2021) has been described as the ‘gold standard’ for the issuance of green bonds, and sets out specific investment and transparency criteria which issuers will need to abide by – including, quite interestingly, a commitment to engage in a general ‘green transition’ plan.

The new standard is fully aligned with the EU’s taxonomy (subject to certain initial concessions), which in itself meticulously sets out which economic activities may be considered as environmentally sustainable – thereby reducing the risk of greenwashing. Additionally, the new standard includes a voluntary framework for green bonds and sustainability-linked bonds which are not issued with an EuGB designation. This latter framework will likely dovetail with other existing frameworks / principles within the market – namely, ICMA’s green bond and sustainability-linked bond principles.

The proposed standard will now be considered by the European Parliament and Council prior to formal adoption. It is expected that the new standard will start applying twelve (12) months after coming into force.