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The new green bond standard aims to hit EU Green Deal targets, address environmental challenges, and increase investment in sustainable activities. 

By Paul Davies and Edward Kempson

The European Commission (the Commission) recently issued two key announcements relating to the newly published EU Sustainable Finance Strategy (the Strategy) and the new EU Green Bond Standard (the EUGBS). This blog will highlight key areas of focus in the Strategy and will explore anticipated dynamics in the green bond market and between the EUGBS and the International Capital Market Association’s (the ICMA’s) Green Bond Principles (the GBPs).

The plan promises 250,000 jobs and emphasises a “green industrial revolution” to stimulate a post-pandemic economic recovery.

By Paul A. Davies and Michael D. Green

On 17 November 2020, UK Prime Minister Boris Johnson announced a ten-point plan as part of the government’s initiative to “build back better”. The plan aims to bolster the economy and “turn the UK into the world’s number one centre for green technology and finance, creating the foundations for decades of economic growth”. The ten-point plan will mobilise £12 billion of government investment — and potentially three times as much from the private sector — while aiming to create 250,000 jobs in the UK.

Making Europe greener, fairer, and more sustainable is at the heart of the European Commission’s new work programme.

By Paul Davies, David Little, Michael D. Green, and Pierre Bichet

On 19 October 2020, the European Commission (Commission) published its Work Programme (Programme) for 2021. The Programme — “A Union of vitality in a world of fragility” — provides an overview of the Commission’s legislative priorities for the upcoming year and a timeline on when legislative initiatives will likely be published.

The initiatives for 2021 have been revised to support the economic recovery given the COVID-19 pandemic. The Programme makes clear that the recovery should be both green and sustainable.

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.

Recent developments concern the EU taxonomy, the EU green bond standard, and new sustainability-linked bonds

By Paul A. Davies and Michael D. Green

Earlier this month (June 2020), the EU released answers to frequently asked questions (FAQs) about the work of the European Commission (the Commission) and the Technical Expert Group on Sustainable Finance (TEG) regarding the sustainable finance taxonomy (the Taxonomy) and the EU Green Bond Standard (EU GBS).

Additionally, the Commission released an impact assessment and consultation on how to best translate the EU GBS initiative into legislation. Meanwhile, the International Capital Market Association (ICMA) also announced the launch of new Sustainability-Linked Bond Principles (SLBP).

The proposal signals continued convergence of international standards as the green bond market further matures.

By Paul Davies, Michael Green, and Aaron Franklin

On 29 May 2020, Chinese regulators published a draft of their 2020 revision to the Green Bond-supported Project Catalogue (Green Project Catalogue) for comments. The Green Project Catalogue comprises a list of projects that are eligible to be included as green projects in a green bond framework approved by Chinese regulators — with the 2020 version marking the first revision to the list since 2015. Perhaps the most eye-catching development in the new Green Project Catalogue is the exclusion of “clean fossil fuels”, a previously included project category that had led to a notable divergence between the projects that are eligible for green financing in China, and those that meet generally accepted market standards in other parts of the world.

How companies that are unable to issue green bonds can still participate in sustainable finance.

By Paul A. Davies, Aaron E. Franklin, and Kristina S. Wyatt

If the 2010s were the decade in which green bonds took hold, the 2020s will be the decade in which sustainable finance hits the broader marketplace. The green bond market has hit its stride, with issuances reaching well over US$200 billion in 2019. Attaining that figure is quite an accomplishment, considering that the first green bond appeared in 2007. While the green bond market will likely continue to grow, sustainable finance is expected to extend well beyond the strictures of traditional green bonds to embrace sustainability priorities beyond environmentalism and products other than bonds.

Initiative will advance the UK’s Paris Agreement targets by serving as a “one-stop shop for world-leading climate science, and for capital.”

By Paul A. Davies and Michael D. Green

UK Chancellor, Philip Hammond, has announced plans to launch a Green Finance Institute (GFI), through funding from both the UK government and the City of London Corporation. The initiative aims to help the UK reach its climate targets under the Paris Agreement by developing and promoting investment in the green finance market, while bolstering the future of the UK’s financial services sector. According to the Chancellor, the establishment of the GFI will mean that “firms from across the world can access our one-stop-shop for world-leading climate science, and for capital.”

The move reflects recommendations from the Green Financial Taskforce that were published in a March 2018 report. In the report, the Green Financial Taskforce suggested establishing a specific institute with the purpose of promoting green finance in order to expedite and enhance sustainable finance in the UK.

By Paul Davies and Michael Green

The Vice-President of the European Investment Bank, Jonathan Taylor called for “a renewed effort from the world’s financial institutions to make the Paris Agreement a reality” at the COP 22 Conference, held last month in Marrakesh.

Green finance will have an instrumental role to play in the transition of countries to a low carbon economy. Indeed, sovereign green bonds have been described by financial analysts as “the perfect financial vehicle” and “missing link” to enable signatories to finance their sustainable infrastructure.

There have been a number of notable developments in green finance in recent months, sustaining its momentum.