On
Monday, MEPs in the Economic and Monetary Affairs Committee adopted
their negotiation position on the Regulation on European green bonds.
The text, prepared by Paul Tang (S&D, NL), introduces numerous
changes to the Commission’s proposal and was approved by 44 votes in
favour, 12 against and 3 abstentions.
Wider scope
The amended proposal seeks to better
regulate the entire green bond market, rather than only establishing the
European Green Bond label (EuGB), and reduce so-called “green washing”.
For all bonds that are marketed as green, transparency requirements are introduced, including being aligned with the taxonomy legislation
on the use of proceeds derived from the bond issuance. This would allow
investors to compare EUGBs with other existing green bonds. In
addition, all those issuing green bonds must have safeguards in place to
ensure they do not harm people or planet.
New requirements on benefitting entities
To avoid ‘brown’ companies (i.e. with
highly polluting industries) using the EuGB label to pretend to be
greener than they really are, the amended proposal requires that all
EuGBs have verified transition plans. The text also ensures that all
issuers of green bonds have processes in place to identify and limit the
principal adverse impacts of their activity. Finally, it prohibits all
issuers from countries that are on the EU’s grey or blacklist of tax
havens from issuing EuGBs.
Stronger supervision
Supervision is strengthened in various
ways. External reviewers who review the EuGB should have fewer conflicts
of interest and provisions are included to ensure that the authorities
could ban companies from issuing EUGBs if they fail to follow the rules.
The adopted text also ensures stronger market-pressure to comply with
the rules by ensuring investors have legal recourse if the issuer’s
failure to comply leads to the depreciation of a green bond.
Increased transparency for gas and nuclear
The adopted text requires stronger
transparency requirements so that when a green bond issuer intends to
allocate proceeds to nuclear energy or fossil gas related activities, a
statement must appear prominently on the first page of the EuGB
Factsheet.
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After the vote, the rapporteur Paul Tang
(S&D, NL) said, “Parliament is giving a clear signal before
negotiations with Council. The European Green Bond Standard needs to be
fully aligned with the EU taxonomy for it to become the gold standard in
the international green bond market. And with transition plans, we put
European Green Bonds at the heart of companies’ transitions to a
sustainable economy. We are serious about ending greenwashing. When this
regulation becomes law, simply saying your firm’s bond is green will no
longer be good enough.”
Next Steps
The committee also voted to proceed with
negotiations with the member states to hammer out a deal. These talks
will begin in the coming weeks.
Background
Green bonds play an increasingly
important role in financing assets needed for the low-carbon transition.
However, there is no uniform green bond standard within the EU. The new
European Green Bond Standard aims to ensure that European companies can
benefit from green financing and that investors will find the green
investments they wish.