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The final text of the regulation establishing a European Green Bond Standard

The Council officially approved the regulation on October 23, 2023. Following approval, the regulation will undergo the processes of signing and publication in the EU's Official Journal. Once these steps are completed, the regulation will come into force after a period of 20 days. Subsequently, its application will commence 12 months after the official entry into force.

  • Council adopts new regulation to promote sustainable finance

The regulation establishes standardized criteria for bond issuers who intend to label their environmentally sustainable bonds as ‘European green bonds’ or ‘EuGB’. European green bonds will adhere to the EU taxonomy for sustainable activities and will be accessible to investors worldwide. 

The regulation represents an additional stride in realizing the EU's strategy for financing sustainable growth and achieving a climate-neutral, resource-efficient economy. This new standard aims to promote consistency and comparability within the green bond market, offering advantages to both issuers and investors involved in green bonds.

Issuers will have the capability to showcase their commitment to funding genuine green projects that align with the EU taxonomy. The framework enables issuers to demonstrate transparency and credibility, bolstering investors' confidence in green investments. This approach mitigates the risks associated with greenwashing, fostering increased capital flow into environmentally sustainable projects.

The regulation establishes a comprehensive framework encompassing a registration system and supervisory guidelines for external reviewers of European green bonds.

To safeguard against greenwashing within the broader green bonds market, the regulation introduces voluntary disclosure requirements for other environmentally sustainable bonds and sustainability-linked bonds issued within the EU.

Furthermore, all proceeds from European green bonds must be directed towards economic activities aligned with the EU taxonomy for sustainable activities, as long as the relevant sectors are already covered by it.

For sectors not currently addressed by the EU taxonomy and for specific activities, a flexibility pocket of 15% is provided. This allowance is designed to ensure the immediate applicability and effectiveness of the European green bond standard upon its inception.

The utilization and necessity of this flexibility pocket will be subject to periodic reassessment, particularly as Europe progresses toward climate neutrality. This evaluation will consider the evolving landscape of green investment opportunities expected to emerge in the years ahead.

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