16 December 2021

Proposal for a regulation on European Green Bonds: EBF position

The EBF welcomes the European Commission’s proposal for the development of a voluntary EU Bond Standard (EU GBS), which will provide a common language and serve as a ‘gold standard’ for green bonds by ensuring that proceeds of the bond are allocated according to what is defined as ‘green’ by the Taxonomy.

•  The development of a coherent and uniform framework will significantly facilitate the ability to raise large-scale financing that will encourage economic activity contributing to the achievement of the European Green Deal.

To ensure the success and large-scale market uptake of the standard, the EBF proposes to take into account the following considerations:

• While the dynamic nature of the Taxonomy is merited, the implications of evolving Taxonomy Technical Screening Criteria (TSC) on the attractiveness of the proposed EU GBS must be carefully considered. We would strongly support a full grandfathering provision guaranteeing that despite evolving TSC a bond may maintain the EU GBS designation until maturity.
• Considering the significant difficulties linked to the proper application of the Taxonomy Framework, there would be benefit in allowing additional and temporary flexibility concerning the requirement that proceeds be fully aligned with the Taxonomy. Any initial and temporary flexibility should be granted to all issuers, both sovereign and corporate, as to ensure a level playing field and avoid that the standard result in two qualitatively different categories of EU Green Bonds.
• Given the significant costs connected to issuance (including fees for underwriting, prospectus approval, listing, external reviews, and legal advisors), and the additional costs related to EU green bonds in particular (e.g., collection of non-readily available data), we would propose a net use of proceeds after the deduction of commissions and costs related to the issuance.
• We encourage the European Commission to carefully consider the use of private-public guarantee schemes as well as fiscal incentives as supporting tools, particularly during the initial phase of the application of the standard as the issuance of EU Green Bonds will entail additional costs, which could be burdensome (especially in the case of SMEs).

EBF

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