The European Central Bank (the “ECB”) has provided an opinion following a request of the European Parliament and the Council in respect of the proposed regulation on European green bonds which will establish the EU Green Bond Standard (“EU GBS”). For further information on the EU GBS, see here.

Overall, the ECB welcomes the proposed EU GBS and recognises the rapid growth of green bonds and the role that private sector financing will have in the transition to a greener economy. The ECB emphasised throughout its opinion the importance, in its view, of the EU GBS becoming the “prime green bond standard in the Union”, pointing out shortcomings in the current market for green bonds, such as the absence of common definitions and a standardised framework.

A few points to note in particular:

  • The ECB acknowledges that introducing the EU GBS as a voluntary standard is the right approach in the short term but would like to see a “clear commitment” to making it mandatory within a “reasonable time period”. The ECB considers that the EU GBS should be mandatory for all green bonds issued in the EU or by issuers based in the EU. Although the ECB acknowledges that setting a “concrete time period” within which the EU GBS should become mandatory is challenging, it suggests mandatory adoption of the EU GBS within three to five years. The ECB therefore suggests introducing an amendment to the proposed regulation requiring the European Commission to review the EU GBS by 31 December 2023 and consider the time period and practicalities of making the EU GBS mandatory.


  • Prior to the EU GBS becoming mandatory, the ECB considers that the adoption of the EU GBS should be encouraged via public policy. The ECB highlighted that due to its link to the Taxonomy Regulation, it is only the EU GBS that can guarantee that activities financed by bond proceeds would contribute towards the EU’s environmental objectives.


  • The ECB expresses some concerns around the timeline for taxonomy alignment of activities funded by bond proceeds contained in the proposed regulation, where issuers have five, and in some cases, 10 years from the date of issuance to achieve alignment and points to the lack of sanctions or supervisory powers in this respect.


  • The ECB proposes that issuers only need apply delegated acts (i.e. technical screening criteria adopted by the European Commission pursuant to the Taxonomy Regulation) applicable at the point in time the bond is issued. The proposed regulation goes further than this and provides that where such acts are amended post-issuance, the issuer has five years within which to apply the amended act. The ECB considers that the consequences of this are unclear and as such recommends that the delegated acts apply as at the issue date for the life of the bond.  


  • The ECB puts forward amendments suggesting that each of the green bond factsheet, impact report and allocation report relate to one issuance only (i.e. each individual bond) and that the factsheet should be “fully integrated” into a bond prospectus.


  • The ECB raises concerns regarding a “double counting” of taxonomy aligned assets in green asset ratio calculations (indicating the proportion of exposures related to taxonomy-aligned activities as compared to the total assets) for credit institutions and requested clarification on this point.