By Lynn L. Bergeson and Ligia Duarte Botelho, M.A.
In June 2019, the European Commission (EC) Technical Expert Group (TEG) on Sustainable Finance, published its Report on EU Green Bond Standard. The report proposes the creation of a European Union (EU) Green Bond Standard (EU-GBS) to address barriers to market development of green financial products. Also proposing the establishment of a framework to facilitate sustainable investment -- “Taxonomy Regulation” -- TEG makes ten recommendations in its GBS Report to:
- Create a voluntary EU-GBS;
- EU-GBS should have four core components -- (1) alignment of Green Projects with the EU Taxonomy, (2) Green Bond Framework, (3) reporting, and (4) verification by accredited verifiers;
- Encourage set-up of a voluntary interim registration process for verifiers of EU Green Bonds for an estimated transition period of up to three years;
- Encourage investors to use EU-GBS requirements in their green fixed-income investment strategies and communicate their preference actively to green bond issuers and underwriters;
- Welcome political compromise on the sustainability-related disclosure regulation;
- Consider promoting greening the financial system;
- Consider development of financial incentives supporting the EU Green Bond market;
- Encourage bond issuers to issue their green bonds in accordance with EU-GBS requirements;
- Promote adoption of EU-GBS through the EU Ecolabel for financial products; and
- Monitor impact on the alignment of financial flows with the EU Taxonomy’s Environmental Objectives, considering further supporting action.