Last Wednesday, the European Parliament and European Union (EU) Member States agreed on a new set of standards for issuing green bonds (Reuters). There is currently variation in national practices for green bond issuance throughout the bloc, making it hard for investors to distinguish bonds that are high quality from greenwashing. The new standards, the first in the world, will help investors identify and invest in high-quality green businesses and technology. 

Under the new rules, companies that want to issue a "European green bond” must demonstrate how the company contributes to net zero emission goals (Reuters). To further increase transparency, the standards stipulate that companies must disclose how the bond sale proceeds are used, and establish a standardized way for external reviewers to verify bonds as green (European Parliament). The bloc has stated it will release guidance on how to apply the new legislation in practice. 

While the green bond market has grown dramatically in the last 15 years, only 3% to 3.5% of the total bonds issued are green bonds. European lawmakers hope that these new standards will encourage greater investment in environmentally friendly companies. Commented lawmaker Paul Tang, "the EU has taken a big step to green this massive market" (European Parliament).