The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has responded to the European Commission’s (EC) targeted consultation on the establishment of the EU green bond standard (GBS). ESMA highlighted that the success of the EU GBS will be determined by whether it is seen as a reliable indicator of investment in sustainable economic activities.
Building on its response to the EC’s consultation on the Renewed Sustainable Finance Strategy from July 2020, where specific points in relation to the EU GBS framework were raised, ESMA highlights the following key messages:
- The success of the EU GBS will, to a large extent, be determined by whether it is seen as a reliable indicator of investment in sustainable economic activities. In order to ensure reliability and alignment with the Taxonomy, the GBS will require external reviewers conducting rigorous assessments of an issuer’s green bond framework;
- The best way of ensuring high quality assessments is to introduce a formal EU registration and supervision regime of these external reviewers. This will ensure that the entities conducting such assessments have adequate resources, are using robust methodologies and have measures in place to protect against conflicts of interest;
- It is important to ensure that the final regime will not result in market concentration of external reviewers which may disadvantage issuers, especially SMEs, as well as smaller external reviewers, while still ensuring that the market develops in a properly regulated and supervised way at EU level; and
- It supports the development of a social EU Taxonomy as a prerequisite for reliable standards for social bonds.