Analysis of the amendments to the EuGB Regulation proposed by the Rapporteur of the EU Parliament


5 January 2022 ICMA analysis of the amendments to the EuGB Regulation proposed by the Rapporteur of the EU Parliament 

The Rapporteur of the EuGB Regulation at the European Parliament released proposed amendments on 2 December 2021. We believe these amendments reflect a fundamental shift from the Commission’s proposal. They add new requirements for bonds aligned with the EuGB and propose that it become mandatory for all green bonds between 2025 and 2028. Very significantly, they aim to regulate the entire European sustainable bond market via the EuGB Regulation and introduce comprehensive mandatory requirements for all sustainable bonds and their issuers.

It is our view that these amendments would lead to an unsustainable level of additional cost and liability for issuers, which would hinder the uptake of the label. They would also undermine the inclusive, voluntary and aspirational nature of the European sustainable bond market replacing it with a mandatory framework lacking any form of incentive to counterbalance the additional cost and liability being required from issuers.

Should the draft amendments be adopted in the final legislation, we expect that only organisations that feel compelled to access the European sustainable bond market would do so and these would very likely come from the official sector. Other issuers would simply switch to other sources of European market or bank finance, or access sustainable finance from other jurisdictions. The ensuing contraction of the European sustainable bond market and issuer flight would effectively end the current undisputed leadership of the EU in the international sustainable capital markets.

This outcome would especially conflict with the original intentions of the legislation to further develop “the market for high quality green bonds, thereby contributing to the Capital Markets Union, while minimising disruption to existing green bond markets…” and support the growth of sustainable finance to fund the European Green Deal.

We otherwise remain supportive of the Commission’s EuGB proposal subject to the comments summarized in our note of 8 July 2021.

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