With 44 votes in favour, 12 against and 3 abstentions, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted, on Monday 16 May, its negotiating position on the new rules for the European Green Bond (EuGB).
“These rules will bring order to the chaos in the green bond market. While the market doubles in size every 2 years, it is unclear how much of this money is actually used for the greening of our economy”, commented Paul Tang (S&D, Netherlands), rapporteur of the text, in a statement.
MEPs substantially amended the European Commission’s text to reduce ‘greenwashing’ by introducing transparency requirements, including bringing EuGBs into line with the EU taxonomy on the use of proceeds from the issuance of these bonds. According to the MEPs, all issuers of green bonds will have to put safeguards in place to ensure that they do not harm the planet or the public.
Shadow rapporteur Christophe Hansen (EPP, Luxembourg) welcomed this move to comply with the EU taxonomy. “We avoid a devastating market fragmentation which would have resulted from the cherry-picking to arbitrarily include or exclude certain activities”, he said.
The MEPs also raised the transparency requirements for gas and nuclear power. Where a green bond issuer intends to allocate proceeds to nuclear energy or fossil gas related activities, a statement must appear prominently on the first page of the EuGB Factsheet.
The proposal, as amended by MEPs, also requires that all EuGBs have verified transition plans. It ensures that all green bond issuers have processes in place to identify and mitigate the key negative impacts of their business. And it prohibits all issuers from countries on the EU’s ‘grey’ or ‘black’ list of non-cooperative tax jurisdictions from issuing EuGBs.
“Today, the Parliament is sending a clear signal to the EU Member States that are trying to weaken the European Green Bond Standard: You can’t have your cake and eat it too!”, warned Mr Tang.
MEPs also made sure to strengthen monitoring. The potential for conflicts of interest for external examiners will have to be reduced and provisions are included to ensure that competent authorities can prohibit companies from issuing EuGBs if they do not comply with the rules.
The adopted text also places greater pressure on the market to comply with the rules by guaranteeing investors legal recourse if the issuer’s failure to comply with the rules results in the depreciation of a green bond.
The Council of the EU adopted its position on the European Green Bonds in April (see EUROPE 12932/20). Interinstitutional negotiations will start in the coming weeks. (Original version in French by Anne Damiani)