EU Parliament Ready to Negotiate Green Bond Standards

    Stockholm (NordSIP) – Following the proposal of the European Commission for a regulation on European green bonds in July 2021, the members of the European Parliament (MEPs) in the Economic and Monetary Affairs Committee announced their negotiation position on the Regulation on European green bonds.

    The text, prepared by rapporteur Paul Tang, a Dutch member of the European Parliament affiliated with the Group of the Progressive Alliance of Socialists and Democrats, introduced numerous changes to the Commission’s proposal. The new position of the Committee was adopted by 44 votes in favour, 12 against and 3 abstentions, on Monday, May 16th.

    “Parliament is giving a clear signal before negotiations with Council. The European Green Bond Standard needs to be fully aligned with the EU taxonomy for it to become the gold standard in the international green bond market. And with transition plans, we put European Green Bonds at the heart of companies’ transitions to a sustainable economy. We are serious about ending greenwashing. When this regulation becomes law, simply saying your firm’s bond is green will no longer be good enough,” Tang said.

    The regulation seeks to better regulate the green bond market, improve its supervision, reduce greenwashing, and add clarity when money goes to gas or nuclear. In the hope of reduce green washing the proposals add a wider scope by proposing to better regulate the entire green bond market, rather than only establishing the European Green Bond label (EuGB).

    The European Parliament highlights seven amendments it believes are particularly important for the future integrity of the green bond market. The Committee, introduced transparency requirements for alignment with the taxonomy legislation on the use of proceeds derived from the bond issuance, particularly for nuclear energy or fossil gas-related activities, where a statement must appear prominently on the first page of the EuGB Factsheet. The European Parliament also added safeguards in place to ensure the green bonds do not harm people or planet, that companies have to provide verified transition plans to avoid green washing from from highly polluting industries. Under the amended plan, issuers would also have to implement processes in place to identify and limit the principal adverse impacts of their activity.

    Moreover, the European Parliament, also added a prohibition for all issuers from countries that are on the EU’s grey or blacklist of tax havens from issuing EuGBs and legal recourse if the issuer’s failure to comply leads to the depreciation of a green bond. Provisions are included to ensure that the authorities could ban companies from issuing EUGBs if they fail to follow the rules. Finally, measures were included to push external reviewers of European green bonds to have fewer conflicts of interest.

    Following this adoption of a negotiating position by the European Parliament on the European Green Bonds Standards regulation proposed by the Europe Commission, the Member States of the EU will enter the negotiation before an agreement is reached between the European institutions. Talks between the European Parliament and the European Council will begin in the coming weeks.

    Image courtesy of Udo Pohlmann via Pixabay
    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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