Shearman & Sterling LLP | FinReg | Report of the Technical Expert Group Subgroup of the European Commission on Green Bond Standard: Proposal for an EU Green Bond Standard
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  • Report of the Technical Expert Group Subgroup of the European Commission on Green Bond Standard: Proposal for an EU Green Bond Standard
    03/06/2019
    In its Interim Report on green bonds, the Technical Expert Group has made a proposal for an EU Green Bond Standard. Green bonds are bonds specifically earmarked to be used for climate-related and environmental projects. The aim of the consultation was, in light of the European Commission’s Action Plan on Financing Sustainable Growth published in March 2018, to create a standard that would further improve the credibility of green bonds and help the EU market mature.

    The preliminary recommendations for the creation of a Green Bond Standard include:
    • creating a voluntary EU Green Bond Standard;
    • monitoring the impact of the use of a new voluntary standard;
    • considering further action including possible legislation after an estimated period of three years;
    • developing a legislative proposal for a centralized accreditation regime, potentially operated by the European Securities and Markets Authority, for external green bond verifiers; and
    • setting up a market-based voluntary Accreditation Committee for external verifiers of green bonds during any transition period.

    The preliminary recommendations to support the adoption of the EU Green Bond Standard include:
    • that investors, in particular, institutional investors, should adopt the requirements of the EU Green Bond Standard when designing their green fixed-income investment strategies and communicate their commitment and expectations actively to green bond issuers and underwriters;
    • adopting an ambitious disclosure regime for institutional investors;
    • considering promotion of the "greening" of the financial system by expressing and implementing a preference for EU Green Bonds;
    • developing credit enhancement guarantees for sub-investment grade green bonds;
    • that all types of bond issuers should issue their future green bonds in compliance with the requirements of the EU Green Bond Standard;
    • that the European Commission should consider setting up a grant scheme to offset the additional cost of external verification for issuers; and
    • promoting adoption of the EU Green Bond Standard through the EU eco-label for financial products.

    View the interim report and proposed EU Green Bond Standard

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    TOPIC: Securities