sustainability bonds

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Recent developments show how innovative sustainable finance instruments can help the transition to greener financial markets.

By Paul A. Davies and Edward R. Kempson

The EU Taxonomy Regulation[1] (the Regulation), which entered into force in July 2020, is one of the most significant developments in sustainable finance. The Regulation creates a classification system for green and sustainable economic activities (the Taxonomy) that is intended to be used by market participants in the EU and beyond to navigate the transition to a low-carbon, resilient, and resource-efficient economy. Under the Taxonomy, in order for an economic activity to be classified as “green”, it must (i) substantially contribute to one of six environmental objectives,[2] (ii) do no significant harm to the other five objectives, (iii) comply with certain governance safeguards,[3] and (iv) comply with specific science-based performance thresholds (or “technical screening criteria”).

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).

Three new publications provide issuers with key guidance on Green, Social, and Sustainability Bonds.

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

The Executive Committee for the Green Bond Principles recently published three documents providing key guidance complementing the Green Bond Principles (GBPs), the Social Bond Principles (SBPs), and the Sustainability Bond Guidelines (SBGs). The guidance documents include the Green Project Mapping document, the Guidance Handbook, and the Impact Reporting Handbook.

The 2018 revisions of the GBPs, SBPs, and SBGs remain unchanged and applicable. However, the new publications offer complementary guidance, consolidating existing information and incorporating new information based on market feedback and information requests from market participants.