IEEFA – Europe's New Standard Help or Hindrance for Green Bond Market

The European Green Bond Standard (EUGBS) aims to benefit both issuers and investors in the green bond market. Issuers can reduce transition risks by meeting commitments, maintaining capex pipelines, delivering green assets, and implementing good governance practices. Investors can rely on the EUGBS for transparency and credibility, encouraging more investment in climate-friendly projects. However, the readiness of EU-issued green bonds to align with the EUGBS is currently low, leading to concerns about usability. The IEEFA suggests conducting post-implementation reviews of the standard in line with the EU's sustainable finance strategy to improve green bond practices. The EUGBS regulation was adopted in October 2023 and will come into effect one year later, allowing issuers to use the "European Green Bond" or “EuGB” label if they comply with the standard. The regulation outlines criteria for using the label based on proceeds, transparency, and external review. Independent entities will assess compliance with the standards, and reviews will be publicly available.