EU Green Bond Standard Needs to Adequately Reflect Corporate Practice
On the agreement in the European Parliament on the proposed EU standard for green bonds: Deutsches Aktieninstitut welcomes to a large part the changes proposed by the European Parliament and the Council. They are welcome step forward towards establishing a new gold standard for the sustainable bond market. We a very concernd however that some amendments will have the opposite effect. Among other things we take a critical view of two proposals of the EU Parliament.
All bonds marketed as "sustainable" are to be included in the regulatory framework. This contains, for example, ESG-linked bonds, which are fundamentally different products with different objectives. We are concerned that this approach would adversely impact the EU green and sustainable bonds market and undermine the progress in developing sustainable finance in the EU. The additional disclosure requirements for such products would increase complexity and overlaps. As a result, issuing environmentally sustainable bonds in the EU would become by far less attractive and issuers might then prefer other traditional way of financing.
In addition, the Parliament proposes to also consider whether the Standard should be made mandatory after two years from its entry into force. We wish to emphasise the importance of maintaining the EU GBS as a voluntary framework as this will ensure the Standard continues to benefit issuers and investors.