The consultation aims to gather technical input from stakeholders in the green bond market before finalising an EU GBS.

By Paul A. Davies, Michael D. Green, and Aaron E. Franklin

On 12 June 2020, the European Commission (the Commission) published a targeted consultation document on the establishment of an EU Green Bond Standard (EU GBS). The Commission has committed to the establishment of an EU GBS as part of its broader Action Plan on Financing Sustainable Growth (the Action Plan), and hopes that the promulgation of an official EU standard will help address some of the barriers it has identified in the current green bond market.

Latest iteration of popular guidelines continue with voluntary, market-driven approach.

By Paul A. Davies and Aaron E. Franklin

The annual update of the Green Bond Principles (now also including the Social Bond Principles, and the Sustainability Bond Guidelines, collectively, the Principles) on June 14, 2018 created few surprises. The Principles, highly influential in the sustainable finance space, are subject to annual revision by an executive committee comprised of a set of underwriters, issuers and investors (with the support of the International Capital Market Association (ICMA) as secretariat). Each year, members and observers of the Principles (including Latham & Watkins) submit proposals for amendments to the Principles, with the final amendments formally announced at an annual conference. This year’s conference was held in Hong Kong, in a move to highlight the importance of Asian markets for sustainable finance and the global reach of the Principles.

As has been the case since the inception of the Principles in 2014, the bedrock idea behind the Principles is that the market decides what counts as a green bond. Third-party assurance or review is “encouraged”, but the emphasis remains on issuer communication to enable informed decision-making by investors. This emphasis takes the form of four core components that an issuer should disclose as part of its offering documents: (i) the use of the bond’s proceeds (i.e., what are the eligible green projects?); (ii) the process for project evaluation and selection; (iii) management of proceeds and (iv) reporting. As they have in prior editions, the Principles continue to discourage the green bond label on green bonds that do not otherwise follow the core components (including “pure play” green bonds).

By Aaron Franklin

Green Bonds have led a tremendous growth in environmental finance over the past five years, but that growth has been heavily-weighted towards investment grade credits with their accompanying risk/return.  The predominance of investment-grade credits partially results from the all-or-nothing approach of Green Bonds – the bond is either 100% green or 0% green.  The 100% green requirement shuts out many issuers seeking to finance environmentally-sustainable projects because a company needs to be sufficiently large and well-capitalized to