GBIC Warns EU's Green Bond Standard Could Disrupt Market
The German Banking Industry Committee (GBIC) has responded to the EU's draft Green Bond Standard (EuGBS), praising its aims but raising concerns about certain provisions. The GBIC believes Article 7 of the draft could have significant implications for issuers, investors, and financial institutions.
The GBIC welcomed the EU's initiative to establish a common standard for green bonds, with the Technical Screening Criteria (TSC) focusing on environmental goals, climate protection, and climate change adaptation. However, it expressed reservations about Article 7, which allows for the reallocation of bond proceeds within five years of new TSC implementation.
The GBIC fears this provision could disrupt the status quo, potentially forcing projects suitable for initial allocation to be refinanced, find new 'green' purposes, or even face bond repayment. This could negatively impact issuers, drive down the price of European green bonds, and create uncertainty for investors. The GBIC warns that institutions such as credit institutions, investment firms, insurers, and asset managers could all be affected if these provisions were implemented.
The GBIC's comments highlight the need for careful consideration of Article 7 in the EuGBS draft. While the GBIC supports the EU's efforts to create a robust green bond standard, it urges the EU to address these concerns to ensure the practicality and stability of the market.
