Insurers welcome first European ‘green bond’ standard

MEPs in Strasbourg have adopted a new voluntary standard for the use of a ‘European Green Bond’ label, the first of its kind in the world. The regulation, adopted by 418 votes in favour, 79 against and 72 abstentions, lays down uniform standards for issuers who wish to use the designation European green bond (EuGB) for the marketing of their bond, said the European Parliament (EP) in a statement. The German insurance association (GDV) welcomed the adoption of the standard for sustainable investments. “The new standard can provide a boost for the development of sustainable finance. The sustainable transformation of the economy is making further progress,” it said in response to the news. “The standards will enable investors to direct their money more confidently towards more sustainable technologies and businesses,” said the EP following the vote. “It will also give the company issuing the bond more certainty that their bond will be suitable to investors who want to add green bonds to their portfolio. This will increase interest for this kind of financial product and support the EU’s transition to climate neutrality,” it added. The EP said the new standards align with the EU’s taxonomy framework that defines which economic activities the EU considers environmentally sustainable. “All companies choosing to adopt the standards and therefore also the EuGB label when marketing a green bond will be required to disclose considerable information about how the bond’s proceeds will be used. They would also be obliged to show how these investments feed into the transition plans of the company as a whole. The standard therefore requires companies to be engaging in a general green transition,” it explained. The disclosure requirements, set out in template formats, can also be used by companies issuing bonds that are not yet able to adhere to all the strict standards of the EuGB but still wish to signal their green aspirations, added the EP. Rapporteur Paul Tang said: “Businesses want to make the green transition. And the European Green Bond gives them the best tool yet to help them finance this shift. It provides a transparent and trustworthy tool to drive a company’s transition plan. “Today’s vote is the starting shot for businesses to get serious about their green bond issuances. Investors are eager to invest in European Green Bonds and from today onwards business can start developing them. This way European Green Bonds can boost Europe’s transition to a sustainable economy.” German insurers at least applauded the progress of the standard. “The income from issuing green bonds can be used, for example, for investments in sustainable energy production such as wind or hydropower plants, clean transport infrastructure or energy-efficient, sustainable construction. However, companies in the real economy can also align their own activities with the European taxonomy, i.e. transform them. As large institutional investors, insurers are ready for increased investments in sustainable transformation,” said the GDV. “A uniform standard can give a boost to the sustainable bonds market. A lack of transparency and unclear standards have often prevented investments. There were also legal problems with the declaration of sustainable bonds, which can even lead to accusations of greenwashing,” added the German insurance association. The EP said the green bond market has seen “exponential” growth since 2007, with annual green bond issuance breaking through the $500bn mark for the first time in 2021, a 75% increase compared to 2020. Europe is the most prolific issuance region, accounting for 51% of the global volume of green bonds in 2020. Green bonds represent about 3-3.5% of overall bond issuance, said the EP.

Insurers welcome first European ‘green bond’ standard

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