EU gives nod to “world’s first” green bond standards

Published on October 6, 2023

European Union lawmakers on Thursday approved new standards for companies issuing “green” bonds to help investors pick sustainable companies and avoid greenwashing or misleading climate-friendly claims.

The European Parliament voted in favour of the new voluntary standard for the use of a “European Green Bond” label, calling it the first of its kind in the world.

Europe is the world’s biggest issuer of green bonds, accounting for more than half of global volume in 2021, though issuance is still only 3% to 3.5% of the overall bond market.

“It will also give the company issuing the bond more certainty that their bond will be suitable to investors who want to add green bonds to their portfolio,” parliament’s economic affairs committee said in a statement.

“This will increase interest for this kind of financial product and support the EU’s transition to climate neutrality.”

Companies who want to label their bonds as “green” in the EU would have to disclose information about how the bond’s proceeds would be used.

At least 85% of funds raised would have to be allocated to activities in line with the EU’s “taxonomy” of sustainable activities.

Firms would also have to show how these investments feed into their plans to transition to a net zero carbon emissions economy.

The standards set up a registration system and supervisory framework for external reviewers of European green bonds.

EU states, which have a joint say on the standards, gave the nod earlier this year.

Source: Reuters (Reporting by Huw Jones; Editing by Kirsten Donovan)