Sustainable Finance: Commission consults on EU Green Bond Standard

The European Commission has today launched a targeted consultation on the establishment of an EU Green Bond Standard (GBS), which will be open until Friday 2 October 2020. Green bonds have become increasingly popular as investors look for ways to help finance the transition to an environmentally sustainable economy. As such, they will be instrumental in reaching the objectives of the European Green Deal. Green bonds will play an even larger role in unlocking the private sector’s potential to address climate change and foster a sustainable economic recovery after the pandemic. Given the euro is already the main currency used for the issuance of green bonds worldwide, an official EU Green Bond Standard could also bolster the international role of the euro, and help to consolidate the EU as a global hub for green finance. Executive Vice-President Valdis Dombrovskis, responsible for Financial Stability, Financial Services and Capital Markets Union said: “Green bonds will help boost the wider private sector buy-in that we need to jumpstart a sustainable economic recovery that is in line with the European Green Deal. This consultation is about finding out what the EU and its Member States can do to support and incentivise the emergence of a large-scale and high quality green bond market.”  To date, no uniform standard exists within the EU. The Commission’s Technical Expert Group on sustainable finance (TEG) was tasked with preparing a report on an EU Green Bond Standard. The TEG published its first report in June 2019 with 10 recommendations for the establishment of such a standard, which would be based on the EU’s “taxonomy” – an EU-wide classification system for sustainable investments. The TEG provided further guidance in March 2020, together with an updated proposed standard. Today’s consultation builds on the work of the TEG and focuses on the added value of an official EU Green Bond Standard. A decision on this will be taken in the context of the Renewed Sustainable Finance Strategy, for which there is an ongoing consultation until July 15. This strategy is expected to be proposed in Q4 2020.