By adopting the Paris Agreement on climate change and the UN 2030 Agenda for Sustainable Development in 2015, governments from around the world committed to pursuing a more sustainable path for the planet and the economy. As current levels of investment are not enough to support an environmentally and socially sustainable economic system, the financial system has a key role to play. The EU is taking an active part in this commitment, and in March 2018, the European Commission announced an action plan on financing sustainable growth. As part of this project, the Commission’s technical expert group (see interview with member Nathan Fabian) is looking at the potential offered by green bonds and the feasibility of an EU green bond standard.

‘Green’ investments

Part of the Commission’s action plan focuses on creating standards and labels for green financial products, building on the future EU sustainability taxonomy. One of the financial instruments addressed are green bonds, which allow issuers (for instance companies, banks, governmental organisations, etc.) to borrow money from investors in order to finance 'green' investments. While the green bond market has been expanding rapidly in recent years, it still accounts for less than 1% of total bonds outstanding worldwide. Drawing on current best practices, an EU standard accessible to market participants would make it easier to channel more investments into green projects. It would also constitute a basis for the development of reliable labelling for certain financial products within the EU Ecolabel framework.

An EU green bond standard

Part of the work of the technical expert group, which was set up in July 2018, focuses on setting out principles and recommendations for an EU green bond standard. Such a standard could further improve the credibility of green bonds and help the EU market mature. The overall aim of the expert group is to determine what the desirable features of a potential green bond standard would be. In its final report, the technical expert group will:

• Define the key elements of a potential EU green bond standard based on existing market standards;
• Put in place a strong verification and accreditation system to further enhance credibility;
• Provide for systematic reporting including on impact;
• Develop possible incentives to enhance the growth of green bond issuance.

The technical expert group will release a draft EU green bond standard for public feedback and comments in March 2019 and will present its final report in June 2019. On that basis, the European Commission will decide what the next steps should be.

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