FESE input on Green Bond Prospectus

FESE members operate markets where green bonds are issued. Market standards have developed in recent years and the green bond space can be seen as a sector that could now benefit from being strengthened further by recommendations or some level of regulation. FESE fully supports the Commission’s Sustainable Finance proposals aimed at reorienting capital flows to sustainable investments and managing financial risk related to climate change, as well as fostering transparency and long-termism in financial and economic activity. It is important to ensure that all capital market raising activities adhere to sustainable financing, so all companies can be part of the necessary transition towards a sustainable future for our planet.

However, at this point in time, FESE would not favour the creation of a green bond prospectus, for the following reasons:

• The green bond market is rapidly growing but still remains very modest, accounting for less than 1% of total bonds outstanding worldwide, as noted by the Commission in the Action Plan published in 2018. 
• While the Prospectus Regulation only applies to bonds listed on regulated markets, a large share of bond issuances in the EU is are currently conducted through private placements and those are already subject to lower legally binding requirements compared to listed instruments. Therefore, introducing further prospectus requirements for listed bonds would risk creating an even more unlevel playing field.
• In addition, many green bond issuances are issued by states or their local authorities, which are exempt from the Prospectus Regulation.