The European Association of Co-operative Banks (EACB) considers the work on the establishment of an EU Green Bond Standard (GBS) pivotal to ensure the creation of a common EU framework for the EU Green Bond Market. While having contributed to the developments of the proposals as member of the TEG (in the work stream on GBS), the EACB welcomes the possibility to comment on the EC targeted consultation on the establishment of an EU Green Bond Standard.
EACB members believe that a standardized definition of a bond being green and a standardized management process can provide greater transparency that will help the green bond market to grow and increase investors’ confidence about the environmental benefits of their investments.
The alignment of the EU GBS with the Taxonomy is of outmost importance and introduces a new significant conduct risk for issuers in terms of validating whether the underlying assets are eligible at all times – both in terms of minimum safeguards, DNSH-criteria but also the technical criteria on different actives that all requires a very high level of expertise and controlling systems at the issuers. The underlying borrowers will need to document their practices on a much more sophisticated level and issuers will potentially have to make ex ante controls of the different projects. This will cause a need for very significant investments in work force and IT support. Technical criteria should be defined to facilitate the verification that the DNSH condition is met.
For the first time, with this consultation the European Commisson is evaluating the possibility to take some mesures/actions on the social bond sphere. The EACB believes that a gradual approach should be guaranteed in taking new initiatives in this field. The creation of an EU Green Bond Standard could be a first step in developing useful and simple standards that work at European level, providing more transparency and clarity in the market. At the same time, the gradual implementation of the taxonomy regulation’s provisions (to better identify the activities that could be eligible for the purposes of the green and social bond standard) should be tested and eventually extended in the scope over the upcoming years.
Moreover, we believe that - from a retail, regional banking perspective- the activities of cooperative banks have a clear positive social impact. For this reason, we would in principle be inclined to favour an EU Social bond standard, following the process of the EU Green bond standard. However, developing a Sustainable bond standard is not a priority, due to the fact that once Green and Social bonds have been defined, Sustainable bonds will follow (as a mix of both) without the need of new definitions. In this sense, the ICMA procedures should be taken into account as they are currently market practices.
Finally, a European initiative for COVID bonds seems not quite relevant since there is a real urgency for the relaunch of the Economy; national initiatives will probably be quicker to set-up and more efficient.
At the same time, we believe that the Commission should start considering to take additional initiatives in the field of transition bonds that could help increasing the amount of investments in the transition of industries and sectors with high greenhouse gas emissions. This will allow to raise more capitals needed to take on board on the transition those sectors that would be excluded from the EU Green Bond Standard.
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