European Green Bonds Regulation

Green bonds, European Green Deal, Greenwashing…? These are terms we hear a lot currently. But what do they mean, and above all, how do we see them in the European legal landscape?

Green bonds differ from conventional bonds in that they exclusively finance environmentally friendly projects. In this sense, they represent one major instrument for financing investments in green technologies and sustainable projects.

Recently, a new European Regulation entered into force, namely 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 (“EU Green Bond Regulation”).

This Regulation is aimed at promoting sustainable finance by establishing a set of uniform requirements for green bonds and, more specifically, for the use of the label European green bond.

Conditions to issue a European Green Bond

Title II of the EU Green Bond Regulation lays down various conditions for the use of the term “European green bond” (“EuGB” in abbreviated form).

The first relates to the use of European green bonds proceeds, which must be allocated in their entirety to an environmentally sustainable activity. As defined in the Taxonomy Regulation, an activity is considered sustainable when it (i) contributes substantially to one or more of the environmental objectives, (ii) does not significantly harm any of the environmental objectives, (iii) is carried out in compliance with the minimum safeguards, or (iv) complies with technical screening criteria that have been established by the Commission.

Those proceeds must be allocated to one or more of the following categories:

  • Fixed assets that are not financial assets;
  • Certain capital expenditure;
  • Certain operating expenditure that were incurred no more than three years before the issuance of the European green bond;
  • Financial assets that were created no more than five years after the issuance of the European green bond;
  • Assets and expenditure of households.

However, the EU Green Bond Regulation is flexible on this use, as it provides for a margin of 15% of the proceeds to be allocated to activities that meet the definition of environmentally sustainable activity, but which are not yet covered by the Taxonomy Regulation.

To meet, notably, the general objectives set by the European Green Deal, the aim of the EU Green Bond Regulation is to make it easier for both investors and companies to identify environmentally sustainable investments and to guarantee their credibility. In this respect, the second requirement for using the “European green bond” label is transparency and external review.

The text provides for a number of formalities to be completed before and after the bond issuance. Before issuing the European green bond, the issuer needs to complete an EuGB factsheet and undertake a pre-issuance review, involving the prior examination by an external reviewer which must result in a positive decision.

Once a European green bond has been issued, the issuer first draws up a CapEx plan, which specifies the deadline by which all the capital and operating expenditure funded by the European green bond are to be taxonomy aligned. Secondly, every twelve months, the issuer must draw up an allocation report proving that the proceeds of its bond have been allocated in accordance with the requirements of Title II, including a statement on the progress made in implementing the CapEx plan. Thirdly, after the bond proceeds have been fully allocated, the issuer draws up an EuGB impact report on the environmental impact of the use of the proceeds.

In the interests of transparency and information, it is also required to publish a prospectus in accordance with Regulation 2017/1129 (“Prospectus Regulation”), in which the issuer shall state that its bond is a “European green bond” and that it is issued in accordance with the EU Green Bond Regulation. In order to enable anyone to obtain information concerning the bonds, the issuer must publish on its website all the aforementioned documents and information and notify both the competent supervisory authorities (in Belgium: FSMA) and the European Securities and Markets Authority (“ESMA”) of such publication.


 Parallel control ESMA – FSMA?

The Regulation introduces a new system for recording, controlling and communicating information. For the sake of efficiency, these controls are carried out at national level, for instance in Belgium, by the FSMA.

These authorities have supervisory and investigative powers. In short, the FSMA will, as the case may be in collaboration with or by delegation to other authorities, ensure compliance with the requirements of the EU Green Bond Regulation. In order to increase investor trust, they may but not exclusively :

  • Require the issuer to publish various information and documents;
  • Require the issuer to notify the competent authority of this publication;
  • Suspend or prohibit the offer or admission to trading on a regulated market of European green bonds that it suspects do not comply with the requirements of the Regulation;
  • Suspend or prohibit promotional communications where it suspects greenwashing;
  • Temporarily prohibit the issuer from issuing European green bonds.

In parallel, the ESMA granted specific competences regarding the role and capacity of the external reviewers which can make requests for information, general enquiries and inspections. To a certain extent, the ESMA also detains sanctioning powers.

The road is not yet over for this EU Green Bond Regulation. It was brought into force on 20 December 2023, but its provisions will only apply as from 21 December 2024.

Moreover, the EU Green Bond Regulation relies to a large extent on the classification of business sectors under the Taxonomy Regulation. Such Regulation continues to provoke debate within the EU Member States, particularly with regard to the nuclear issue. By way of an example, Germany supports the view that nuclear power should not be considered as a sustainable energy source, while it is currently classified as such under the Taxonomy Regulation. Austria has also issued a statement where it considers that treating nuclear power as a green energy is tantamount to greenwashing.

In conclusion, although it is reliant on other existing instruments such as the Taxonomy Regulation, the EU Green Bond Regulation sets out a fairly precise framework for the issuance of European green bonds. However, it must be borne in mind that the real challenges of this Regulation will begin to arise when it will be applied and implemented in practice.


The present MLI is based on current information updated until May 2024, The present contribution is based on current information updated until May 2024, and it is, of course, subject to change.

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