EU Adopts New Standards for Green Bonds Labelling

• 11 Oct 2023

Recently, European Union lawmakers have granted approval for fresh regulations designed to set standards for companies issuing "green" bonds.

Key Points

• Europe Leads in Green Bonds Issuance: Europe stands out as the world's largest issuer of green bonds, contributing to over half of the global volume in 2021.
• However, it's important to note that green bond issuance constitutes only 3% to 3.5% of the overall bond market.
• Boosting Investor Confidence: The parliament's economic affairs committee highlighted that these standards will not only enhance the confidence of companies issuing green bonds but also assure investors that these bonds align with sustainable goals.
• Promoting Sustainable Usage of Proceeds: Companies aiming to label their bonds as "green" in the EU will be required to provide detailed information on how the bond proceeds will be utilized.
• Specifically, a minimum of 85% of the funds raised must be allocated to activities in accordance with the EU's "taxonomy" of sustainable endeavours.
• Transitioning to a Net Zero Carbon Emissions Economy: Furthermore, companies must demonstrate how these investments align with their strategies to achieve a net-zero carbon emissions economy.
• Establishing Oversight and Review Mechanisms: The newly introduced standards establish a registration system and supervisory framework for external reviewers responsible for evaluating European green bonds.