Legal & Regulatory News

European Commission sets out sustainable finance strategy and proposes new EU Green Bond Standard

On 6 July 2021, the European Commission (the Commission) adopted a package of measures aimed at enhancing the flow of capital towards financing the transition to a stronger, sustainable European economy, with the intention of making the EU a global leader in the setting of standards for sustainable finance.

Amongst the measures announced by the Commission is the new sustainable finance strategy (SFS). The SFS builds upon the 2018 action plan on financing sustainable growth and identifies four main areas where additional action is required for the financial system to fully support the transition of the economy towards sustainability, namely:

1. financing the transition of the real economy towards sustainability;
2. working towards a more inclusive sustainable finance framework;
3. improving the financial sector’s resilience and contribution to sustainability; and
4. fostering global ambition.

Within these overarching areas, a number of specific action points for the Commission are identified under the SFS including, but not limited to:

• considering legislation to support the financing of certain economic activities, mainly in the energy sector, that help to reduce greenhouse gas emissions;
• considering options for extending the EU Taxonomy framework to recognise economic activities performing at an intermediate level;
• adopting a complementary EU Taxonomy Climate Delegated Act covering new sectors including agriculture and certain energy activities;
• adopting a delegated act under the EU Taxonomy covering the remaining four environmental goals, i.e. water, biodiversity, pollution prevention and circular economy by Q2-2022; and
• proposing amendments in the Capital Requirements Regulation and Capital Requirements Directive to ensure the consistent integration of sustainability risks in risk management systems of banks, including climate change stress tests by banks (2021).

At the same time, the Commission also published its proposal for a new EU Green Bond Standard (EUGBS) with the intention to create a gold standard for green bonds that other market standards can be compared with and to seek alignment with this harmonised standard. The EUGBS would aim to reduce the risk of greenwashing and would be open to any green bond issuer including those outside the EU.

Click here for the full publication of the SFS and EUGBS.