EU lawmakers clear new standards for green bonds

The European Union has approved new standards for companies' issuance of green bonds in a move to thwart potential "greenwashing" in the market.

Lawmakers voted to adopt the new voluntary standard using the "European Green Bond" or "EuGB" label, which the European Parliament said was a world first. This will allow investors to ensure their money is used in "more sustainable technologies and businesses," parliament said Oct. 5.

Companies that adopt the standards and label must disclose enough information on how bond proceeds will be used, as well as demonstrate how investments will be used in their transition plans. The EU will also establish a registration system and supervisory framework for external reviewers who will examine if standards are being met.

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European companies account for the biggest portion of global green bond issuance. Yet, the adoption of the new standards follows a recent RepRisk report that found that European banks were responsible for most of the 70% increase in instances of greenwashing — misleading investors or customers about sustainability-related claims — by financial institutions over the last year. Much of the greenwashing involved claims about fossil fuels, Reuters reported.

In response, the European Banking Federation said the RepRisk report comprised allegations rather than verified claims of greenwashing, according to Reuters.