In addition to the existing framework rules for “green” bonds, the EU Commission wants to create its own EU standard.
It builds on the existing taxonomy for green financial products, but should be much more detailed than this.
The Brussels authority wants to define a catalog of criteria that must be met in order for a bond issuer to be able to classify its paper as a “European Green Bond (EuGB)”.
Werner Mussler
Business correspondent in Brussels.
Follow I follow
This emerges from a draft ordinance which the FAZ has received. Financial market commissioner Mairead McGuinness wants to present her legislative proposal in early July. It is intended to affect corporate and government bonds alike. However, the standard should remain voluntary. This means that a bond can be described as environmentally friendly even if it does not meet the EuGB criteria.
According to the Commission's ideas, the principle of “taxonomy” should be retained for green financial products.
Accordingly, a paper must support certain environmental goals and, above all, not damage them significantly.
In April, the Commission presented a list of criteria that ignored the particularly controversial question of whether gas-fired power plants and nuclear power should be considered sustainable.
Companies issuing the bond must also comply with the “non-financial” reporting requirements that McGuinness also proposed in April.
Too much and too little
The EU Commission considers a special EuGB standard to be necessary in order to ensure the ecologically high quality of bonds in the EU. The existing voluntary standards - such as those of the international industry association for capital market participants (ICMA) - do not adequately meet this requirement, according to the draft. They are not in a position to provide potential investors with enough information about the products. In addition, there are too many different standards internationally. Anyone who currently wants to evaluate certain bonds from an ecological point of view does not have any clear criteria.
The CSU MEP Markus Ferber criticized the draft as "inconclusive". On the one hand, the Commission complains about too many standards, but on the other hand it exacerbates the problem by creating an additional voluntary standard. This is characterized by a lack of flexibility and "excessive reporting requirements". It is therefore not attractive for many issuers. The proposal also does little to classify government bonds as “green” and “not green”.
It is piquant that the EU Commission will not adhere to the standards it has advocated for the time being. The Brussels authority plans to start issuing its own bonds to finance its reconstruction program shortly. The share of green bonds in the package, which will comprise 806 billion in current prices by 2026, is expected to be 30 percent or up to 250 billion euros. To achieve this goal, the Commission must start issuing well before the EuGB standards come into force. For the time being, the EU authority wants to orient itself towards the ICMA standards.