European Commission announces new European green bond standard

“The publication of the new green bond standards lays the foundation for rules regarding the use of the label ‘European green bond’ or ‘EuGB’. This is a potentially important step towards more stringent regulation of green bond issuances. 

“The rules apply if issuers voluntarily decide to attach the new labels to their bonds. Issuers can though continue to sell bonds in the EU that comply with the existing voluntary standards, in particular the ICMA's Green Bond Principles. It remains to be seen whether this new standard will supplement or supersede the established (but less strict) ICMA in offerings in the EU.

“The new EuGB standard is part of the EU action plan for sustainable finance and is anchored to the EU Taxonomy Regulation – the centrepiece legislation under that plan. The Taxonomy Regulation sets out a classification of economic activities as environmentally sustainable.

“The standards introduce a new regime for regulating external reviewers which will need to be registered with ESMA. UK-based reviewers will note that third-country reviewers will only be registered with ESMA where there is an established EC equivalence decision and cooperation arrangements with the relevant country’s regulator, or if the third country reviewer is endorsed by a registered EU reviewer. There is currently no such decision and no UK regulator for reviewers.”