Launch of the European Green Bonds Regulation


 Sergei Makarchuk, LL.M.


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In a landmark move, the European Union has unveiled a pioneering Green Bonds Regulation (Regulation (EU) 2023/2631 of the European Parliament and of the Council of 22 November 2023 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds) (the "Regulation"), signalling a major step forward in environmentally responsible financing. Published in the Official Journal of the European Union on 30 November 2023, the Regulation is set to become effective on 20 December 2023 and will apply from 21 December 2024.


Key highlights include:

1. Voluntary Designation for Green Financing

The Regulation introduces the "European Green Bond" or "EuGB" voluntary designation, providing issuers with a distinctive mark for bonds committed to the green use of proceeds. Certain flexibility is granted to the respective issuer, permitting the deduction of specific issuance costs from the proceeds.

2. Utilization of Proceeds

Issuers are permitted to allocate proceeds from bonds designated as EuGB to the direct or indirect financing of environmentally sustainable activities within the meaning of the Taxonomy Regulation (Regulation (EU) 2020/852). The Regulation outlines alternative methods for deploying proceeds, including the financing of one or more of the following:

  • fixed tangible or intangible assets (other than financial assets),
  • capital expenditure,
  • operating expenditure (incurred no more than three years before the issuance of the EuGB),
  • financial assets (created no later than 5 years after the issuance of the EuGB), and
  • assets and expenditures of households,


in each case provided that they relate to economic activities that meet the taxonomy requirements ("gradual approach"). Further, the allocation of the proceeds to a portfolio of fixed assets or financial assets is permissible ("portfolio approach").

3. Limited flexibility

The Regulation also allows some limited flexibility regarding the use of the proceeds: up to 15% of the proceeds of the European Green Bond may be allocated to non-taxonomy aligned activities (activities that meet the taxonomy requirements except for the technical screening criteria), provided that certain conditions are met (e.g. that the "do no significant harm" criteria are met).

4. Transparency and Reporting

Issuers of European Green Bonds are required to comply with rigorous transparency standards, both before and after issuance. These standards encompass the drawing up of a "factsheet" before the issuance of a European Green Bond, as well as the submission of "allocation reports" and environmental "impact reports" after the proceeds have been allocated.

5. Securitisation Bonds

Securitisation bonds designated as European Green Bonds are subject to strict additional disclosure requirements.

6. External Reviewers

Both the "factsheet" and the annual "allocation reports" for European Green Bonds must undergo a review by an independent external reviewer to evaluate the issuer's allocation of proceeds to ensure it is in line with the Regulation. A review of the environmental "impact report" is not mandatory, but is possible on a voluntary basis. The external reviewers will be supervised by the European Securities and Markets Authority (ESMA).

7. Prospectus

Issuers of European Green Bonds are obliged to publish a prospectus under the Prospectus Regulation (Regulation (EU) 2017/1129). This brings issuers within the scope of liability and under the supervision of a competent authority under the Prospectus Regulation.

The groundbreaking Regulation is a significant step forward in establishing standardized norms for global green finance. Through its emphasis on transparency, by adhering to taxonomy requirements, and with rigorous external reviews, the European Union is positioned to lead the way in shaping the future of sustainable and responsible financial practices.