09.06.2022  |   Advisory Report

Prevent greenwashing in the case of EU green bonds

The EU plans to use less stringent criteria for its own green bonds than for bonds of private issuers. As a result, the EU might be accused of greenwashing, says the German SAI in a report to the Budget Committee of the German Parliament. This could undermine the climate change ambitions of the EU.

The EU Recovery Fund has a volume of €750 billion and is financed via bonds on the capital market. The Fund is to support the Member States in tackling the economic impact of the coronavirus pandemic. Up to €250 billion are expected to originate from green bonds. This amount is earmarked to fund environmentally sustainable activities. The goal is to drive the green transition in the EU at the same time.

How environmentally sustainable are EU green bonds?

In order to assess whether activities financed via green bonds qualify as environmentally sustainable, the EU Commission and the Member States developed a new classification system for the Recovery Fund. However, this classification system is less stringent than the taxonomy, which the Union has already used to set harmonised and binding sustainability standards for green bonds of private issuers..

For the purpose of comparison: According to the taxonomy criteria, construction work on train tracks, for example, only qualifies as environmentally sustainable if it makes a major contribution to climate change mitigation. This is, for instance, the case when tracks are electrified or planned to be electrified. Pursuant to the Regulation applicable for EU green bonds, 40 per cent of the expenditure may qualify as environmentally sustainable even if the tracks are not electrified

Classification system for EU green bonds is less effective for climate change mitigation than the taxonomy

We note with concern that the classification system for EU green bonds is less effective for climate change mitigation and also less transparent than the taxonomy. That gives particular cause for concern since the EU Commission and the Member States thus demand enterprises and private investors to commit more to climate action than they are willing to do themselves.

“When it is labelled environmentally sustainable, then it must be environmentally sustainable. If not, the EU could be accused of greenwashing.”

Kay Scheller, President of the German SAI

We demand the Federal Government to scrutinise the selection and assessment of green activities at least in Germany. Furthermore, the Government should take action to ensure that the EU Commission critically assesses the green activities in all Member States.

It is not yet too late to apply the taxonomy: Since the EU Commission does not need to repay the bonds until 2058, there is enough time to make adjustments and to apply the taxonomy after all.

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