What is there to know about the new European green bonds?
Green economy - green bond
Posted by MoneyController on 14.08.2024
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Within a few months, it will be possible to invest in a green bond product that will have to comply with a set of well-defined rules, according to the European Union.
Bonds intended for specific sustainable purposes are called 'green bonds': in general, they do not differ in anything from normal bonds, except for the 'green' destination of the capital. As Vitaliano D'Angerio recalls in 'Il Sole 24 Ore', to get an idea of the volume of these products, it is useful to consult the Climate Bonds Initiative. In total, the volume of green bonds amounts to USD 3,250 billion.
In the varied landscape of green bonds, D'Angerio points out an important novelty: as of 21 December, European Union Regulation 2023/2631 will introduce a new product, the European green bond. What are the consequences for those who want to issue products in line with the European regulation? As we go on to read in 'Il Sole 24 Ore', an important difference is that the European regulation provides for the payment of a penalty if one contravenes one of the rules laid down in the regulation.
As D'Angerio points out, the regulation also provides for restrictions on the assets that can be financed by issuing European green bonds, namely assets that are aligned with the European Union's so-called 'taxonomy'. This is an important difference with another industry benchmark text, the Green Bond Principles, drawn up by the International Capital Market Association. But the differences do not end there.
D'Angerio also talks about the disclosure requirements, which must precede and accompany the bond issue, and which provide for the publication of an impact report. In addition, certification by third-party entities listed in the registers of the European Securities and Markets Authority is envisaged. The counterpart of this system of controls and guarantees, D'Angerio points out, is a higher average cost (due to bureaucratic expenses) of these instruments.
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