Green bonds have an important role to play in helping the EU raise the investment that we need to build a low‑carbon future. Some well‑established market standards for such instruments already exist, but from 21 December of this year, issuers seeking to tap capital markets to help them become more sustainable will have an additional option: they will be able to issue European green bonds under a voluntary new standard that the EU is introducing.
What makes the European green bond standard different is that it builds on the definitions of the EU taxonomy. Proceeds will have to be used for activities that are aligned with the taxonomy. And issuers will have to be transparent about this.
This means that investors will know exactly what makes a European green bond “green”. Disclosures, to be published both before issuance and afterwards, will need to be assessed by independent external reviewers. This will build transparency and trust, empowering investors to hold issuers to account.
Importantly, with the new standard, the firms providing external reviews will for the first time be supervised at EU level. The European Securities and Markets Authority (ESMA) has been entrusted with this task. This presents a real opportunity to build a vibrant market that is open to a wide range of different companies – including smaller players and new entrants.
We believe that European green bonds have great potential to set a new “gold standard”. They will enable businesses, financial players and public and supranational entities to show their commitment to building a greener future while raising fresh money for their green projects.
And it is worth noting that European green bonds will not only be suitable for entities whose activities are already sustainable. On the contrary, European green bonds can support those issuers that are still working to transition towards becoming greener.
They can do so in several ways: for example, by enabling a company to fund multi‑year taxonomy‑alignment projects such as converting production facilities to reduce emissions. Or by making it possible to acquire or build a taxonomy‑aligned asset, a new energy‑efficient building for example.
Moreover, European green bonds can support issuers in financing transitional activities as defined by the taxonomy, such as steel, cement or aluminium. Companies active in these sectors have an important role in our economy but can find it hard to transition and tend to refrain from issuing green bonds. Yet they need investment to move to a low‑carbon future.
European green bonds can be the tool that supports them in accessing this kind of investment. In this way, we believe that these bonds will contribute to the transition – an area that the Commission will continue to focus on over the coming years.
To support the use and implementation of the European green bond standard, DG Financial Stability, Financial Services and Capital Markets Union (DG FISMA) recently organised a stakeholder workshop. Prospective issuers, investors, other market participants as well as the supervisory community took the opportunity to raise questions and flag practical and legal issues. Key topics included the requirements linked to the EU taxonomy and the interaction between the new standard and the Prospectus Regulation. We are now reflecting on how to take this feedback forward to potentially provide more guidance to stakeholders.
Moreover, we will soon complement the European green bond standard with new tools for issuers of other types of green or sustainability‑linked bonds. Issuers of these bonds will be able to use new pre- and post‑issuance templates to voluntarily disclose the taxonomy‑alignment of these securities – helping to improve transparency and standardisation in the green bond market and making it easier for investors to compare ambitions across different instruments.
Have a look at our website if you want to find out more about European green bonds or watch the recording of the workshop.
Meanwhile, ESMA is currently working to put in place the new registration and supervision system for external reviewers. From 21 December 2024 until 21 June 2026, these firms will operate under a transitional regime, which requires them to notify ESMA. ESMA will publish on its website and keep up to date a list of the firms that have submitted such a notification and provided the necessary information – so that investors and issuers of European green bonds can see who the firms are that can provide services as external reviewers of European green bonds during the transitional period.
If you are interested in finding out more about ESMA’s work, the requirements for external reviewers and more detailed information about the transitional rules, check out ESMA’s website dedicated to external reviewers of European green bonds where you will also find a contact address in case you have questions on the registration process.
Related links
The European green bond standard – Supporting the transition
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