European green bond standard is debuted by A2A with a €500m issuance
European Green Bond Standard Sets a New Standard for Sustainable Finance
The European Union (EU) has introduced a new regulatory framework called the European Green Bond Standard (EuGBS), aimed at standardizing green bonds and ensuring that funds are exclusively used for projects with verified environmental benefits. This standard, which goes beyond the voluntary Green Bond Principles (GBP), provides clear, enforceable criteria and is supervised by the European Securities and Markets Authority (ESMA).
The EuGBS is significant as it aims to increase transparency, accountability, and investor confidence in green bonds, reducing greenwashing risks and boosting capital flows into the low-carbon transition. It serves as a "clear gold standard" for green bonds, unifying the fragmented green bond market in Europe and globally.
The success of A2A's compliant bond, a €500m 10-year green bond issued under the new EuGBS, demonstrates the practical applicability and market acceptance of the standard. The issuance was met with strong investor demand, with the order books exceeding €3.7bn, making it more than four times oversubscribed. The bond was priced slightly below fair value at ms+125 and was rated AA2A by Moody's and BBB by Standard & Poor's.
The success of A2A's bond sets a precedent encouraging more issuances to adopt the EuGBS, which is expected to drive the future growth and credibility of the green bond market in Europe and beyond. The EU hopes to cement its position as the biggest issuer of sustainable debt, with Ile de France Mobilité expected to issue green bonds soon.
The EuGBS establishes a mandatory regulatory foundation that complements voluntary guidelines, ensuring strict compliance with EU sustainability goals, supporting more reliable reporting, and ultimately fostering the scaling of green finance critical for the climate transition. The A2A bond illustrates the standard’s practical benefits and market potential.
In 2021, the European Commission has set a target of issuing €250bn of Green Bonds by 2026. Most corporate issuances have seen strong demand this year, leading to the disappearance of new issue premiums. The Climate Bonds Initiative and the Green Bond Principles are criteria set for voluntary green bond initiatives.
As the EuGBS gains traction, it is expected to play a crucial role in the EU's ambition to lead the way in sustainable finance. The strong demand for A2A's compliant bond suggests that investor confidence in the EuGBS is high, boding well for future issuances under this new standard.
- The European Green Bond Standard (EuGBS) has integrated environmental-science principles into the finance sector by ensuring that funds are used exclusively for projects with verified environmental benefits.
- The A2A's compliant bond, issued under the EuGBS, not only demonstrated the practical applicability and market acceptance of the standard in business but also increased investor confidence in sustainable finance, especially in the context of climate-change mitigation.
