EU green bonds will fall short of bloc’s high standards – POLITICO
Brussels may be considering raising € 250 billion in green bonds, but they won’t meet its own blue-chip standards.
The European Commission will present its sustainable finance strategy on Tuesday, which includes a voluntary green bond standard for companies and sovereigns, a draft of which was previously obtained by POLITICO, as part of an effort to attract more liquidity private sector towards its climate objectives. .
However, the Commission itself will not immediately use the new label for the climate-friendly bonds that finance the EU recovery fund – instead, he will try to incorporate his taxonomy of green investments within market standards.
Brussels’ decision to go ahead with its green bond issue may be for practical reasons, as its green list of climate-friendly investments was still on the agenda when it presented its plans. loan.
Yet this decision begs the question: if the Commission is not using the benchmark, why would someone else do it?
It may also be an indication of the decline in Brussels’ ambition for sustainable finance following heated debates over taxonomy – with criticism coming from both climate activists and countries with polluting industries – and a sign of the difficulty of reconfiguring the financial industry towards green. goals.
Sustainable finance has dominated the EU’s financial services agenda so far this year, both due to the fight over taxonomy and the far-reaching work on disclosures.
“The question is: will the renewed strategy of sustainable finance be a brake on the transition to sustainability or will it be a driving force? I’m not sure yet, ”said Paul Tang, a Dutch EU lawmaker.
The Socialist MEP, who signed a June letter calling for an ambitious strategy, said “reduced enthusiasm” within the EU executive could be reflected in a list of possible political actions with few concrete measures .
“Are you going to propose a law or not?” Tang added.
In addition to the green bond proposal, the strategy suggests eye-catching measures such as overhauling green credit ratings and considering capital relief for green loans – despite resistance from financial regulators – but on a number of years and without committing to make changes, according to a draft obtained by POLITICO.
Critics will also highlight the decision to make the green bond standard voluntary instead of mandatory.
Businesses or governments will only have to comply with the requirements if they want to call their bonds “European green bonds”.
“Making it mandatory would reduce greenwashing,” said Lara Cuvelier, activist for sustainable investment at the NGO Reclaim Finance.
“It’s a lack of ambition – and it’s not just for green bonds but for other aspects. It seems that the Commission originally wanted to be more ambitious, but that it faced many reactions from the private and financial sectors. “
Brussels nevertheless hopes that the standards will help the green bond market to take off by bringing more transparency and security to both investors and companies who opt for the green label.
The standard requires that the proceeds be used for investments that are 100% aligned with EU taxonomy, and issuing companies will have to undergo audits by external auditors to ensure that the money is actually channeled to them. good projects.
Governments are given a little more flexibility, as the checks will apply to all programs rather than projects and can be carried out by existing public auditors.
In addition, over time, the EU executive aims to link its current approach to the green bond standard once it is adopted by the co-legislators.
It is clear that the Commission will be faced with questions as to whether this is fast enough.
Louise Guillot contributed reporting.
This article has been updated.
You want more analyzes of POLITICS? POLITICS Pro is our premium intelligence service for professionals. From financial services to commerce, technology, cybersecurity and more, Pro delivers the real-time insights, in-depth insights and the scoops you need to stay ahead of the curve. E-mail [email protected] to request a free trial.