The European Commission adopted today an ambitious and comprehensive package of measures to help improve the flow of money towards financing the transition to a sustainable economy.

By enabling investors to re-orient investments towards more sustainable technologies and businesses, these measures will be instrumental in reaching our climate and environmental targets.

They will make the EU a global leader in setting standards for sustainable finance.

Strategy for financing the transition to a sustainable economy

The new sustainable finance strategy aims to support the financing of the transition to a sustainable economy by proposing action in four number of areas: transition finance, inclusiveness, resilience and contribution of the financial system and global ambition.

It builds on the 2018 action plan on financing sustainable growth, the transition finance report by the Platform on Sustainable Finance and a consultation held from April to July 2020.

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Proposal for a standard for European green bonds

The European green bond standard (EUGBS) is a voluntary standard to help scale up and raise the environmental ambitions of the green bond market. Establishing this standard was an action in the Commission’s 2018 action plan on financing sustainable growth and is part of the European green deal. It is based on the recommendations of the Technical Expert Group on Sustainable Finance.

Once it is adopted by co-legislators, this proposed Regulation will set a gold standard for how companies and public authorities can use green bonds to raise funds on capital markets to finance such ambitious large-scale investments, while meeting tough sustainability requirements and protecting investors.

This will be useful for both issuers and investors of green bonds. For example, issuers will have a robust tool to demonstrate that they are funding legitimate green projects aligned with the EU taxonomy. And investors buying the bonds will be able to more easily assess, compare and trust that their investments are sustainable, thereby reducing the risks posed by greenwashing.

The new EUGBS will be open to any issuer of green bonds, including companies, public authorities, and also issuers located outside of the EU.

There are four key requirements under the proposed framework

  • Taxonomy-alignment: The funds raised by the bond should be allocated fully to projects that are aligned with the EU taxonomy
  • Transparency: Full transparency on how the bond proceeds are allocated through detailed reporting requirements
  • External review: All European green bonds must be checked by an external reviewer to ensure compliance with the Regulation and taxonomy alignment of the funded projects
  • Supervision by the European Securities Markets Authority (ESMA) of reviewers: External reviewers providing services to issuers of European green bonds must be registered with and supervised by the ESMA. This will ensure the quality of their services and the reliability of their reviews to protect investors and ensure market integrity

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Delegated act supplementing Article 8 of the Taxonomy Regulation

The European Commission also adopted today the delegated act supplementing Article 8 of the Taxonomy Regulation for scrutiny by co-legislators. This delegated act specifies the content, methodology and presentation of information to be disclosed by financial and non-financial undertakings concerning the proportion of environmentally sustainable economic activities in their business, investments or lending activities.

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Related information

  • Sustainable finance

    The EU is examining how to make sustainability considerations an integral part of its financial policy in order to support the European green deal

  • Sustainable finance

    The Commission wants to boost the role of finance in achieving a greener and more sustainable economy.