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Nearly three-fifths of the green and sustainability bond frameworks published since the start of 2023 ‘could claim alignment’ with the rigorous requirements under the EU Green Bond Standard (EU GBS), according to MainStreet Partners.
MainStreet Partners green, social and sustainability bond research director Pietro Sette said this is a significantly higher share than for the overall sustainable bond market to date, suggesting that the market is responding to the ground-breaking bond standard and its linked EU sustainable finance regulations.
“Based on our research, only 23% of the [total] current stock of green and sustainability bonds could claim accordance with the EU GBS,” Sette said. This is equivalent to around $700 billion worth of bonds.
“This is expected to increase as both issuers and investors progressively realise the added benefits of the label, such as smoother compliance with regulation and lower reputational risks,” he added.
Sette said greater alignment was already being seen in the market. In 2023 and the first half of 2024, around one-third of total issuance was assessed as being EU GBS eligible by MainStreet. Similarly, a record 58% of the sustainable bond frameworks published in 2023 were judged as EU GBS eligible by MainStreet – up from just over 50% in 2022 and less than 30% in the preceding three years.
The EU GBS – which comes into force in December 2024, after being agreed in 2023 – introduces a new ‘EU Green Bond’ label intended to be the “gold standard” for sustainable bonds in terms of disclosure and transparency.
MainStreet research suggests that 83% of the EU GBS-eligible bonds are issued by European issuers, led by German and French issuers.
Bonds were judged as EU GBS eligible if at least 85% of their use of proceeds are aligned with the EU Taxonomy, the issuer has set quantitative environmental targets at issuance, and the issuer had committed to publishing at least one post-issuance bond report.
The report follows expectations that uptake of the ‘EU Green Bond’ label is expected to be slow to begin with amid challenges and concerns among issuers. This is despite investors indicating there could be strong demand for those issuers who do take this route.
Published by Environmental Finance
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