Legal & Regulatory News

European Green Bond Standard rules to enter into force after text is adopted by the European Council

On 23 October 2023, the European Council adopted a regulation creating a European Green Bond Standard (EUGBS). This regulation is intended to encourage greater alignment in the green bond market and increase the ease of assessment for investors, with the intention of directing more capital towards sustainable activities.  

The EUGBS requires that companies using the green bond label, ‘European green bond’ or ‘EuGB’, disclose how the proceeds of the bond will be allocated. In order to do so, companies will be required to complete the European Green Bond factsheet before issuance, followed by an allocation report for every 12-month period commencing from the issuance date.

The proceeds of European green bonds will need to be allocated to economic activities which comply with the EU taxonomy for sustainable activities. However, issuers may allocate up to 15% of the proceeds to economic activities that do not comply with the technical screening criteria, providing that certain conditions are met. This flexibility is likely to be reconsidered over the next few years.

The EUGBS also establishes a registration system and a supervisory framework for external reviewers of European Green Bonds, requiring that external reviewers register and are supervised by the European Securities and Markets Authority. This is important because under the EUGBS it is necessary for the green bond to be assessed by external reviewers.

In order to mitigate against risks of greenwashing, a disclosure template for bonds marketed as environmentally sustainable or sustainability-linked is included in the regulation, alongside definitions of environmentally sustainable and sustainability-linked bonds.

The regulation will be published in the Official Journal of the European Union and will enter into force twenty days later. It will apply from twelve months after its entry into force.  

Click here to read ‘Regulation on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds’.

Click here to read the press release.