Bloomberg: The European Parliament has decided to tighten rules on the issuance of “green” bonds with companies breaking their promises to save the planet. Bloomberg reports.
Issuers of green and sustainable bonds will now have to develop a plan to achieve carbon neutrality by 2050. Companies also need to adhere to development options that help limit global warming to 1.5 degrees Celsius above pre-industrial levels. The EU Commission has proposed these amendments to the rulebooks to ensure that green bonds do not fund nuclear or gas energy.
“I want to increase confidence in green bonds,” said MP Paul Tan, who is responsible for drafting legislation. He stressed that the company must be on a path towards carbon neutrality. Otherwise, investors may be wasting their funds by investing in companies that do not really adhere to the principles of sustainable development. Green bonds were sold by oil companies, airports, and other pollutants.
The amendments imply that new requirements for green bonds will remain voluntary for now, but lawmakers are going to gradually introduce them as mandatory. The rules require discussion and agreement of the EU member states. Although this is the first salvo in a parliamentary position, the negotiation process requires the consent of the member states and may take a year or more. Paul Tan hopes that the amendments will be submitted to parliament by the spring.
More companies and states are committing to reducing emissions, and investors are becoming more interested in securities that are consistent with the principles of sustainable development. Market participants who do not have time to adapt to new trends risk losing some of their possible investments – and this applies not only to enterprises, but also to entire countries. In particular, Australia, which relies too heavily on coal, could face default if the country does not change its policies to be more environmentally friendly.