December 2016

Eunomia Recommends Green Bond Standardisation

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Eunomia recently recommended the European Commission develop common EU standards for Green Bonds as part of a report which looked at the potential of green bond finance for resource-efficient investments.

Led by consulting group COWI and in partnership with Adelphi and EnergyPro, the report showed that green bonds have enjoyed extraordinary growth since they were first issued in 2007. The study identified key bottlenecks and measures to overcome them so green bonds can fulfil their huge potential.

In the report, Eunomia looked at existing market driven and national standardisation initiatives, their key components, key bottlenecks due to the lack of common standards, possible EU policy measures on developing a common European Green Bond standard, and analysis of these EU policy measures.

Eunomia Consultant Tanzir Chowdhury who worked on the project said:

“Our research has shown that confidence in the green credentials of green bonds could accelerate the green bond market growth. A common European evidence-based classification of what is green could be beneficial. Credible guidelines and standards about what should or not be considered a qualifying green investment, which are accepted by the market, could help guide investors towards bonds with sound environmental credentials where this is what they seek.”

Eunomia identified two of the five bottlenecks identified as barriers to further growth in the green bond market that could be reduced by various green bond standardisation measures. The report also details six key standardisation measures that could be considered as policy options for the EU and the effects of these policy measures on liquidity and growth of the European green bond market.

This European Commission study came out two days after the Commission’s “Clean Energy for All Europeans” package which finds that an extra EUR 177 billion is needed annually from 2021 onwards to reach the 2030 climate and energy goals. New innovative funding and investment mechanisms will be essential to achieve this. Green bonds will also be on the agenda of the High Level Expert Group on sustainable finance that the Commission established on 28 Oct 2016.

The full report can be downloaded for free here.