The EU Green Bond Regulation was published in the Official Journal on 30 November 2023 (Regulation (EU) 2023/2631).

The key provisions of the Regulation are summarised in our June 2023 briefing here.

21 December 2024

The Regulation will be directly effective in Ireland from 21 December 2024.

Domestic Irish regulations will be needed regarding administrative penalties and other appropriate administrative measures for breaches of the Regulation.

Transitional Period

There will be a transitional period to facilitate the provision of services by external reviewers (ERs) while ESMA is putting its registration and supervision framework in place (that period will run from 21 December 2024 to 21 June 2026).

A small number of the Regulation’s provisions will not apply until 21 June 2026 (relating to the equivalence framework for third country ERs).

Key Documents for Green Bond Issuers

Issuers who opt to use the ‘European green bond’ or ‘EuGB’ designation from 21 December 2024 onwards don’t need to wait for detailed Level 2 measures – the key documents they will need are already set out in the Annexes to the Regulation:

• the form of European Green Bond Factsheet (which must be completed by the issuer prior to issuing an EuGB);
• the form of European Green Bond Annual Allocation Report (which issuers must prepare for every 12-month period until the date of full allocation of the EuGB’s proceeds and, where applicable, until the completion of the CapEx plan);
• the form of European Green Bond Impact Report (issuers of EuGBs must, after the full allocation of proceeds and at least once during the lifetime of the EuGB, prepare and publish a report on the environmental impact of the use of the EuGB’s proceeds);
• the required contents of Pre-Issuance Reviews (which must be carried out by an ER before an EuGB is issued), Post-Issuance Reviews (which must be carried out by ERs and look at the European Green Bond Annual Allocation Report drawn up by the issuer), and Impact Report Reviews (which issuers may commission from ERs of the issuer’s European Green Bond Impact Report).

Environmentally Sustainable Bonds/Sustainability-Linked Bonds

The following Level 2 and Level 3 mandates, which sit with the European Commission and must be prepared in 2024, are key ones to watch for issuers who may wish to make voluntary pre-issuance disclosures for environmentally sustainable bonds, or sustainability-linked bonds.  For the purposes of the Regulation, a sustainability-linked bond is one whose financial or structural characteristics vary depending on whether the issuer achieves predefined environmental sustainability objectives (social and governance objectives are out of scope).

• Commission Delegated Act on the content, methodologies and presentation of post-issuance disclosures of bonds marketed as environmentally sustainable, and sustainability-linked bonds.
• Guidelines with templates for voluntary pre-issuance disclosures for issuers of bonds marketed as environmentally sustainable, and sustainability-linked bonds.

ESMA Deliverables (focused on External Reviewers)

The Regulation sets out several deliverables for ESMA. These, together with its final report on greenwashing, are key elements of its 2024 Work Programme. The bulk of the ESMA deliverables relate to its new responsibility for the registration and ongoing supervision of ERs and were covered in our recent update.

How significant the level of take-up of the ambitious EuGB framework will be is not yet clear (given the existing widespread use of the ICMA Green Bond Principles). Taxonomy-alignment may prove challenging (albeit the 15% flexibility pocket will be helpful).  However, as issuers continue to strengthen their ESG frameworks in parallel with the increase in their reporting / disclosure obligations (most notably under the Corporate Sustainability Reporting Directive) the EuGB framework may prove increasingly attractive for EU issuers.