The European Commission adopted a proposal to raise €250bn in green bonds between now and the end of 2026 – with around €80bn planned for this year to support Europe’s economic recovery from the coronavirus pandemic. Bonds will be sold by monthly auctions, providing sustainable investors with a predictable investment calendar. The current bond scheme is aligned with the International Capital Market Association (ICMA), a market standard for green bonds. Compliance will, in part, be handed over to Vigeo Eiris, which is part of Moody’s ESG Solutions, a private rating agency. So while the commission aims to “set a gold standard for how companies and governments can use green bonds to finance large scale sustainable projects,” for now, it largely follows standard green bond market practices.
While the International Energy Agency (IEA) has reported that new investment in gas projects is not commensurate with the 2030 climate goals, the financing of new natural gas infrastructure with green bonds will be possible in some cases. On top of these regulatory limitations, member states must prove that at least 37 percent of the recovery funds are used to finance green projects. The commission will then publish a yearly report showing investors and the public how the proceeds have been used to finance the green transition. This report will be verified by an external auditor, which will be Vigeo Eiris, the private rating agency. By current market standards large energy suppliers, or even gas and oil companies, might use green bond financing for wind or solar projects, while at the same time maintaining or even increasing their investments in fossil infrastructure. In this way, green funding might exacerbate reliance on fossil fuels.