The EU Green Bonds Regulation Is (Almost) Live
In a watershed moment for green and sustainability-linked bonds, on November 30, 2023, the Regulation on European Green Bonds ("EuGB Regulation") was published in the Official Journal of the European Union ("EU").
The EuGB Regulation creates: (i) a voluntary EuGB standard and uniform requirements for issuers (whether EU or non-EU) using such designation; and (ii) optional disclosure templates for environmentally sustainable bonds and sustainability-linked bonds in the EU (i.e., those not meeting the EuGB standard).
For additional information, see our Commentary, "Adoption of Final Version of European Green Bond Standard: A New Landmark Tool for Sustainable Finance," on the EuGB Regulation (November 2023).
Key Features
Documentation. For issuers opting for the EuGB designation, the EuGB Regulation provides standardized disclosure templates (EuGB factsheet, EuGB annual allocation report, EuGB impact report) to be completed pre- or post-issuance.
External Reviewers. The EuGB Regulation establishes a centralized registration and supervision system for external reviewers of EuGBs.
Environmentally Sustainable and Sustainability-Linked Bonds. The EuGB Regulation provides optional disclosure templates for bonds marketed as environmentally sustainable and for sustainability-linked bonds.
National Competent Authorities. The EuGB Regulation will ensure enforcement of proper disclosure and external review, including empowering National Competent Authorities to impose penalties.
Timing
The EuGB Regulation will apply as from December 21, 2024, and from that date:
- Issuers may start issuing bonds under the EuGB designation.
- Issuers may use the optional disclosure templates for environmentally sustainable and sustainability-linked bonds in the EU.
- External reviewers must notify the European Securities and Markets Authority during a transitional period from December 21, 2024, until June 21, 2026, of their intention to provide services to EuGB issuers and comply with certain EuGB Regulation provisions on a best-efforts basis.
- After the above transitional period, only registered external reviewers can provide review services.
Takeaway
Various challenges may arise when implementing the EuGB Regulation, whose regulatory changes become effective as of December 2024, such as questions of extraterritoriality and the risk of "dual standards and dual speeds" raised by multiple coexisting green bond labels. Prospective issuers of EuGB bonds are advised to seek legal advice to anticipate the new regime's repercussions.
