The EuGB Regulation aims to ensure transparency regarding the use of funds obtained from investors with the issuance of bonds qualified as “green”, allow comparability between financial instruments, reinforce investor confidence and, therefore, increase investment in securities labeled as “green”, thereby contributing to the fulfillment of environmental goals and, ultimately, reduce greenwashing.

The EuGB Regulation lays down uniform requirements for issuers that want to distribute bonds labeled as “European Green Bonds” or “EuGBs” in the European Union. Moreover, this regulation establishes a system to register and supervise a new professional category of the financial market: the External Reviewers, whose role is essential to the new green bond standard. In addition, the regulation foresees that optional disclosure templates are prepared for other classes of bonds, such as bonds marketed as environmentally sustainable and for sustainability-linked bonds.

As regards the uniform requirements for the issuance of European Green Bonds, the EuGB Regulation provides that the proceeds of a EuGB shall be allocated in full, in accordance with the criteria for environmentally sustainable economic activities set out in the Regulation (EU) 2020/852, of the European Parliament and of the Council, of 18 June 2020, on the establishment of a framework to facilitate sustainable investment, known as the Taxonomy Regulation.

Therefore, proceeds from the issuance of European Green Bonds must be used in activities/projects that, cumulatively, contribute substantially to one or more of the environmental objectives set out in the Taxonomy Regulation, do not significantly harm any of the (other) environmental objectives, are carried out in compliance with the minimum safeguards laid down in the regulation (for example, compliance with principles and workers' rights), and comply with technical screening criteria that have been established by the Commission for the activity at stake.

The EuGB Regulation also includes rules on the type and content of information that shall be made available to investors regarding the use of proceeds from European Green Bonds, as well as the mandatory assessment of such information by independent entities (the External Reviewers).

The new european standard for green bonds will coexist with the Green Bond Principles of the Internacional Capital Market Association - ICMA, that has yesterday published its updated guidance handbook, and with the standard and certification proposed under the Climate Bonds Initiative. It will be interesting to see how this competition between green bond standards will evolve. Still, we may anticipate that the market will tend to choose the system that combines greater credibility with less bureaucracy and costs. In this regard, the complexity and difficulties in applying the criteria of the Taxonomy Regulation as well as the pending implementation of the new registration system for External Reviewers do not facilitate, for now, the use of the European Green Bond label.

The EuGB Regulation shall enter into force on the twentieth day following its publication and shall apply from 21 December 2024.