European Parliament publishes report on the EU Green Bond Standard
The Committee on Economic and Monetary Affairs (the "ECON") published its long-awaited report (the "Report") on the European Commission's proposal on the EU Green Bond Standard (the "Proposal") on 17 May 2022.
The report contains numerous changes compared to the European Commission's proposal:
- Extended scope
- Regulation should be introduced for the entire green bond market.
- From ECON's point of view, all issuers of bonds marketed in the European Union as environmentally sustainable or sustainability-linked bonds (the "Sustainability-Linked Bonds, SLB") should comply with the minimum disclosure requirements, even if they are not labelled with the European Green Bond Label (the "EU-GBS").
- EU Taxonomy
- The ECON provides for the introduction of transparency requirements for all bonds labelled as "EuGBs" in the European Union, as well as alignment with EU taxonomy rules.
- The proposal, on the other hand, is to weaken the requirements to allow 20% more flexibility for other investments.
- The classification of nuclear power and gas as "green" in the light of the EU Taxonomy Regulation. The ECON foresees a tightening of transparency requirements:
- There must be a statement on the first page of the"EuGBs" factsheet if an issuer of green bonds intends to use the proceeds for nuclear or gas related activities.
- If a European green bond is used for securitisation purposes, the same requirements of Article 6 of the proposal should apply.
- Transition plan
- To avoid greenwashing, it is required that "EuGBs" and SLBs develop verified transition plans in accordance with Directive 2013/34/EU, with the aim of achieving carbon neutrality by 2050 at the latest, (cf. Regulation 2021/1119/EU).
- The proposal provides for a "factsheet" and the inclusion of the relevant information in the prospectus.
- ECON, on the other hand, calls for the full integration of an "EUGBs factsheet" into the prospectus in accordance with Article 8 of the proposal.
- Equivalent rules for taxonomies
The report includes rules for the recognition of taxonomies from third countries to facilitate sustainable investments if they are substantially equivalent to the EU taxonomy.
- Strengthened oversight
The report provides, in contrast to the proposal, that national competent authorities should have the power to more effectively prohibit an issuer from issuing a bond if it does not comply with transparency requirements and external verification.
- Civil liability
ECON calls on member states to ensure that their laws provide for civil liability for breaches of the main provisions of the proposal.