The European Commission has outlined a new European Green Bond standard to help steer money toward projects that help the region achieve its mid-century climate goal of net zero carbon missions.
The proposal tries to create a “gold standard” for companies and governments raising money for environmentally friendly projects and programs, part of the second step of the EU’s Sustainable Finance plans, Reuters reports. The standard will be completely based on the bloc’s taxonomy, or list of activities the EU deems to be green, which will help companies further align investments with the bloc’s climate goals.
As the global green bond market continues to gain momentum, surpassing $1 trillion in assets under management, the standard is also seen as away to stop “greenwashing,” or environmental claims that are green in name only.
“Our EU Green Bond Standard proposal will set a gold standard in the market, and responds to the needs of investors for a trusted, robust tool when investing sustainably,” Mairead McGuinness, Commissioner in charge of Financial Services, Financial Stability, and Capital Markets Union, told Reuters.
While the segment is fast-growing, green bonds issuance only makes up a tiny 2-4% of the global bond market.
While there will be no obligation to implement the new standard, more oversight of those which follow the framework will help push other companies to adopt the guidelines, especially within the Eurozone region. Issuers from outside the bloc can also utilize the framework as well.
However, the EU officials warned that issuers offering a bond under the EU guidelines can be fined by the national regulator if they aren’t fully compliant with the disclosure rules.
The bloc is trying to reduce emissions to “net zero,” balancing the amount of greenhouse gases produced against the amount removed from the atmosphere.
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