Green Bond Standard (EU GBS)
The European Green Bond Standard (EU GBS – Regulation (EU) 2023/2631) is a voluntary standard developed by the European Commission to foster the growth of a transparent and resilient green bond market within the EU. The EU GBS Regulation was published in the Official Journal of the EU on 30 November 2023, and following its entry into force on 20 December 2023, its provisions will apply from 21 December 2024. The Regulation establishes a set of standards that bond issuers – companies and public authorities – can choose to follow for issuing bonds labelled as EU Green Bonds (EU GBs).
An EU Green Bond is defined as any type of bond or capital market debt instrument whose proceeds will be exclusively used to finance or refinance in part or in full new and/or existing green projects meeting environmental objectives as per the EU Taxonomy. Visit the EU Taxonomy section for further information.
The EU GBS establishes four key requirements to be fulfilled:
- Taxonomy-alignment: all the funds an EU GB raises must be fully allocated to projects aligned with the EU Taxonomy. For those sectors not yet covered by the EU taxonomy and certain very specific activities, a flexibility pocket of 15% is foreseen;
- Transparency: full transparency on how the bond proceeds are allocated through detailed reporting requirements including, i) pre-issuance of a green bond factsheet, ii) post-issuance of an allocation, and iii) impact report, as well as iv) pre-issuance and v) post-issuance performance of external reviews;
- External review: an external registered reviewer must check all EU GBs 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 EU GBs 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.
The EU GBS aims to help scale up and raise the environmental ambitions of the green bond market. It also aims to foster environmentally sustainable investments, while increasing investor protection.
In this regard, it also has the objective of helping investors find and finance environmentally sustainable investments while relying on a trustworthy standard. Once in place, investors can invest in a bond segment that ensures a high degree of market integrity, transparency, and comparability as this segment provides a common definition of environmentally sustainable or “green”, aligned with the EU Taxonomy. Additionally, assurance and credibility are ensured by requiring issuers to prepare pre-issuance and post-issuance reports which are subject to review by an external reviewer and the possibility of obtaining an external review of post-allocation impact reports.
The EU GBS has been developed in response to the growing demand for green bonds financing assets needed for the low-carbon transition.
The EU GBS applies to all types of bond issuers, including public and private issuers, and provides them with a voluntary standard. These bond issuers can be financial or non-financial companies located within and outside the EU.
Financial market participants (FMPs) investing in bonds that comply with the EU GBS will benefit from a standardised set of information the issuers must provide.
Considering the link with the EU Taxonomy, the GBS will enable financial market participants to acquire reliable information on the taxonomy alignment of a specific bond, making it a financial instrument designed to increase the overall taxonomy alignment of other financial products, such as investment funds.
The EU GBS is part of the European Green Deal.
The EU GBS is also linked to the EU Taxonomy as the raised proceeds must be used to finance projects that qualify as environmentally sustainable as defined in Article 3 of the EU Taxonomy.
Visit the EU Taxonomy section for further information.
- 05 October 2023: The EU GBS has been adopted by the European Parliament;
- 23 October 2023: The text has been formally adopted by the Council;
- 30 November 2023: Publication of the Regulation (EU) 2023/2631 (EU GBS) in the Official Journal of the European Union;
- 20 December 2023: Entry into force of the EU GBS Regulation;
- 21 December 2024: Application date of the EU GBS Regulation.
- 06 March 2019: The Technical Expert Group (TEG) published the “Interim Report on EU Green Bond Standard”;
- 18 June 2019: The TEG published the final “Report on EU Green Bond Standard”;
- 06 July 2021: After a consultation period, the European Commission presented its proposal for a Regulation on EU Green Bond Standard;
- 28 February 2023: After inter-institutional negotiations, co-legislators reached a provisional agreement regarding the above-mentioned regulation;
- 05 October 2023: The European Parliament adopted the Regulation in its Plenary session;
- 23 October 2023: The Council has formally approved the Regulation, which will be published in the Official Journal of the EU and enter into force 20 days after publication;
- 30 November 2023: Publication of the Regulation (EU) 2023/2631 (EU GBS) in the Official Journal of the European Union;
- 20 December 2023: Entry into force of the EU GBS Regulation;
- 21 December 2024: Application date of the EU GBS Regulation.
On 26 March 2024 ESMA launched a consultation on Draft Regulatory Technical Standards (RTS) related to the registration and supervision of external reviewers under the EU GBS.
ESMA intends to publish two consultation packages in Q1 2024 and Q1 2025, with this being the first one.
ESMA will consider the feedback received from this consultation and expects to publish a final report in Q4 2024 and submit the Draft Technical Standards to the European Commission for endorsement by 21 December 2024 at the latest. ESMA will consider all comments received by 14 June 2024.
- European Green Bonds: Council adopts new regulation to promote sustainable finance
- EU Green Bond Standard – Usability Guide
- Interim Report on an EU green bond standard of the Technical Expert Group
- Final Report on EU Green Bond Standard of the Technical Expert Group
- EU Green Bond Standard – Regulation (EU) 2023/2631
- ESMA Consultation of 26 March 2024 on rules for External Reviewers of EU Green Bonds
