Today, the European Commission is proposing a European Green Bond Standard to encourage issuing and investing in green bonds to fund the green transition.
The JRC’s research provides evidence to help inform the design of the European Green Bond Standard, and is referenced in its underlying impact assessment.
The JRC’s analyses shed light on how best to unlock the potential of green bonds to finance the transition to a greener economy and society.
Green bonds play a key role in directing funding towards the activities and innovations that are needed for Europe to meet its ambitious climate targets. Setting this evidence based, EU-wide standard will ensure that green bonds are fit for purpose, by enhancing the effectiveness, transparency, comparability and credibility of the green bond market.
In support of these aims, JRC research on green bonds shows:
- The key role of external review in maximising green bonds’ credibility: this important aspect of the European Green Bond Standard is supported by JRC research and included in the Commission’s impact assessment. The research shows that green bonds are likely to attract higher demand from investors if issuers submit their securities and investment processes to external, independent review;
- The cost-effectiveness of green bonds for issuers:JRC research (also in the Commission’s impact assessment) shows that green bonds may be a cheaper source of finance than ordinary bonds, although this depends on the issuer of the bond;
- Green bonds’ resilience for investors:new JRC research shows that, in the face of the financial turmoil caused by the coronavirus pandemic, there was no great ‘sell-off’ of green bonds and that they had a stabilising effect on the market. This suggests that green bonds can be a competitive instrument for long-term investment strategies. It also gives an encouraging sign that investors do not need to sacrifice performance to invest in the green transition.
You can read more about the JRC’s work on green bonds, including links to the latest research and events, on Green Bonds page.
Climate action is incorporated in the recovery plan for Europe, which has the European Green Deal at its core. To finance the green recovery, the Commission intends to raise 30% of NextGenerationEU, the EU’s instrument to achieve a green, digital and resilient recovery, through the issuance of green bonds.
In this way, the EU will issue up to €250 billion of green bonds in the coming years, making the EU one of the biggest green bond issuers globally and reinforcing the EU’s policy and market leadership in sustainable finance.
The European Green Bond Standard proposal will now go to the European Parliament and the Council as part of the co-legislative process, in view of the adoption of an EU Regulation on European green bonds.
The pricing of green bonds: are financial institutions special? (JRC report in Journal of Financial Stability)
Green bonds as a tool against climate change? (JRC report in Business Strategy and the Environment)
Sustainable finance: investors have a taste for green stocks, but want firms to be transparent
- Publication date
- 6 July 2021