Dr. Hanne Böckem
Partner, Audit, DPP
KPMG AG Wirtschaftsprüfungsgesellschaft
The negotiators of the European Council and the European Parliament agreed on the contents of the EU Green Bonds Regulation ("EuGB") on 28 February 2023.
The EU Commission had presented its draft regulation on the introduction of EU Green Bonds on 6 July 2021. The EuGB proposal aims to regulate the use of the designation "EU Green Bond" for bonds that pursue environmentally sustainable objectives. The Council presented its position on the proposal on 13 April 2022. The trilogue negotiations started on 12 July 2022 and ended with the provisional agreement reached yesterday.
According to the press releases of the European Council and the European Parliament, the regulation establishes uniform requirements for bond issuers who want to use the designation "EU Green Bond" or "EuGB" for their environmentally sustainable bonds. According to the provisional agreement, all proceeds from EuGBs must be invested in economic activities that comply with the EU taxonomy, provided the sectors concerned are already covered by it. For those sectors not yet covered by the EU taxonomy and for certain very specific activities, there will be a flexibility reserve of 15%. This is to ensure that the European green bond standard can be used from the outset.
A registration system and a supervisory framework for external auditors of European green bonds will also be introduced. To prevent greenwashing in the green bond market in general, the regulation also provides for some voluntary disclosure requirements for other environmentally sustainable bonds and sustainability-linked bonds issued in the EU.
The agreement is provisional as it still needs to be confirmed by the Council and the European Parliament and adopted by both institutions before it becomes final. The regulation will be applicable twelve months after its entry into force.