On 5 October, the European Parliament adopted the "European Green Bond" regulation in first reading. The decision is essentially made against the background of the informal agreement of the EU legislators in the trilogue procedure on the European Green Bond Standard (EuGBS) as a voluntary standard for the issuance of bonds (see TSI kompakt 2 May 2023). With regard to the use of proceeds of an issue (Use-of-Proceeds), the European Parliament follows the EBA's proposal to focus on the originator instead of the issuer in securitisations (see TSI kompakt 14 October 2022).
Key features of the EuGBS from a securitisation market perspective
Securitisations are dealt with in the EuGBS in Articles 16-19:
- Up to 15% of the proceeds of a securitisation under the EuGBS may be used by the originator for economic activities for which technical assessment criteria of the Taxonomy Regulation are not yet available at the time of issuance of a bond.
- The pool of securitised assets shall not include exposures that finance fossil fuel operations (including exploration, extraction, production, processing, storage, refining or distribution, including transportation and trading).
- Securitisations under the EuGBS are practically only possible for public ABS due to a prospectus requirement; bonds issued for the purpose of synthetic securitisation shall not be eligible to use the designation 'European Green Bond' or 'EuGB'.
- The originator of a securitisation must disclose additional information on taxonomy eligibility, taxonomy compliance and compliance with the Do No Significant Harm (DNSH) principle to the best of its ability in relation to the activities financed by the securitised risk exposures.
Changes compared to the informal agreement in the trilogue at the beginning of May
Compared to the trilogue draft (see TSI kompakt 2 May 2023), the legislative text adopted by the European Parliament now provides for 30 instead of 18 months for the establishment of a legal framework for External Reviewers in the EuGBS. Details are to be adopted by the European Commission in the course of a Delegated Regulation.
The Council of the European Union ("Council of Ministers") as co-legislator still has to agree to the text of the European Parliament. This will most likely happen in the course of this quarter. Following this, the EuGBS will be published in the Official Journal and will then be legally binding 20 days later. However, this regulation will not be applied until 12 months later. We therefore assume that the EuGBS will become effective on 1 January 2025 at the latest. Furthermore, the timetable until the first bonds are issued under the new EuGBS will still be determined by when the European Securities and Markets Authority (ESMA) specifies the technical standards for the External Reviewer in more detail - we can be curious about this.