EU approves “first world rules” on green bonds

He European Parliament approved on Thursday new rules for companies that issue bonds “green”in order to help investors choose sustainable companies and avoid the “greenwashing” or misleading claims that they are climate-friendly.

The European Parliament voted in favor of the new voluntary standard for the use of a “European green bond”calling it the first of its kind in the world.

Europe is the world’s largest issuer of green bonds, with more than half of the global volume in 2021, although issuance remains only 3% to the 3.5% of the global bond market.

“It will also give the company issuing the bond more confidence that its bond will be suitable for investors who want to add green bonds to their portfolio,” Parliament’s Economic Affairs Committee said in a statement.

“This will increase interest in this type of financial product and support the EU’s transition towards climate neutrality.”

Companies that want to label their bonds as “green” in the EU would have to disclose information on how the proceeds from the bonds would be used. At least the 85% of the funds raised would have to be allocated to activities in line with the “taxonomy” of EU sustainable activities.

Companies would also have to demonstrate how these investments contribute to their plans to transition to a net-zero carbon economy. The rules establish a registration system and supervisory framework for external reviewers of European green bonds.

EU Member States, which have a say in the rules, gave their approval at the beginning of the year.

Source: Reuters