The green bond market, both globally and at EU level, grew by an average of 50% per year in the period 2015-2020. Green bond issuance is, however, small compared to total bond issuance (3 to 3.5%). This results in potential for green bond growth.
To reduce the risk of greenwashing in the green bonds market and to help channel more money into carbon neutral and lower polluting technologies and production processes, the European Council adopted, on 23 October 2023, a regulation creating a European green bond standard, the first of its kind in the world.
The regulation defines uniform requirements for issuers of bonds who wish to use the “European green bond” or “EuGB” label for their environmentally sustainable bonds that are made available to investors in the EU.
Green bonds are one of the main fixed-income instruments for financing investments related to green technologies, energy efficiency and resource efficiency. The new standard will increase transparency to improve market efficiency and drive more investments. In addition, the new regulation will also stimulate consistency and comparability in the market, which benefits issuers as well as investors.
Consequently, issuers will have to demonstrate that they are funding green projects aligned with the EU taxonomy in order to be awarded the EuGB label. Investors will be able to assess and compare sustainable investments more easily, which is expected to ultimately stimulate capital flows into environmentally sustainable projects. In addition, the regulation establishes a system to register and supervise external reviewers of European green bonds.
Before the maturity of a European green bond, the proceeds of such a bond will need to be allocated in full, in accordance with the taxonomy requirements, to sustainable economic activities, provided the sectors concerned are already covered by it. For those sectors not yet covered by the EU taxonomy and for certain very specific activities, issuers will be allowed to allocate up to 15% of the proceeds to economic activities, which are aligned with the EU taxonomy, with more flexibility. The regulation aims, with this regime, to enable the usability of the green bond standard from the beginning of its application.
Furthermore, the regulation also provides for optional disclosure templates for bonds marketed as environmentally sustainable and for sustainability-linked bonds issued in the EU.
Next steps
The regulation will be signed, and published in the EU's Official Journal before entering into force 20 days after its adoption on 23 October 2023. It will start being applicable 12 months after its entry into force.
Key contacts
Laurent Godts
Laurent is a key member of the Banking and Finance department at Deloitte Legal, where he has been instrumental in leading the practice since 2021. Promoted to Senior Director in 2024, he has consistently demonstrated exceptional expertise in the legal aspects of transactional finance, including syndicated finance, project finance, and structured finance. His practice also extends to high-end financial regulation assignments within the banking, insurance, and funds sectors. Laurent's experience is further enriched by a nine-month secondment in 2010 with a London-based international financial institution, providing him with invaluable insight into the global financial landscape. He advises clients on a comprehensive range of banking and finance-related matters, with a particular emphasis on the emerging Fintech sector. His work includes structuring peer-to-peer lending platforms and advising on Initial Coin Offerings (ICOs). Recognized as a "Rising Star" and consistently recommended as a "Next Generation Lawyer" since 2017 by Legal 500, Laurent has built a reputation for his pragmatic and commercial approach to legal challenges. The most recent Chambers feedback on his team reflects this excellence, describing Deloitte Legal's services as highly reactive, proactive, and precise.
Jolien Bradt
Jolien is a Senior Managing Associate in the Banking & Finance team at Deloitte Legal in Brussels. Before joining Deloitte Legal, Jolien was an investment banker for almost 3 years, which helped her to grasp the financial and commercial reasoning behind transactions. Before being an investment banker, Jolien worked as a banking & finance legal counsel (either in law firms or in-house) for 7 years. Jolien holds a LL.M in Banking & Finance law from Queen Mary, University of London, a master of laws from Ghent University and a postgraduate degree in corporate finance from the Catholic University Leuven.
