Green bond issuers will have to have a strategy for the transition and demonstrate how the use of funds collected is aligned with both the plans of the emitter and the European green taxonomy. Stricter rules for independent external auditors, especially on conflicts of interest
The EU Parliament has given the green light with 418 yes, 79 no and 72 abstentions
(sustainabilityenvironment.com) – The EU has approved the world’s first regulatory framework for the voluntary use of the “green bond” brand, green bonds. Three pillars: more rules for those who issue them, more certainty for investors who buy them, and more controls by external auditors.
Green bonds are financial instruments that benefit the environment and the climate. These are debt securities that can be issued by different actors, from companies to banks, from public bodies to supranational institutions. Unlike other bonds, green bonds collect funding that is tied to both new and existing environmental or climate projects.
What are the new EU green bonds?
Thanks to the new legislation, approved by the EU Parliament with 418 votes in favor, 79 against and 72 abstentions, companies that want to use the brand “European Green Bond” will have new obligations. The main is to equip yourself with a strategy for the green transition of the company. But they will also have to demonstrate how investments contribute to its implementation. There is an obligation for investors to be more transparent, especially as regards the use of funds raised through green bonds.
The new rules will allow investors to target their funds towards sustainable technologies and businesses with greater confidence. Also, there will be more checks on what is declared by the emitters. The EU measure establishes a Community registration system and a supervisory framework for all independent external auditors. One of the pins is the obligation to declare and manage in a more transparent manner any conflict of interest between auditors and emitters.
As a first step, all these obligations will benefit from flexibility. This is because European green bonds are constructed in such a way that they remain part of the EU’s green taxonomy. But it is not yet fully defined. For this reason, until it is 100% operational, those issuing green bonds will have to commit themselves so that at least 85% of the funds actually go to fuel activities in line with taxonomy.
