On November 30, 2023, Regulation (EU) 2023/2631 on European Green Bonds and Optional Disclosures on Bonds Marketed as Environmentally Sustainable and Sustainability-linked Bonds (EU Green Bond Regulation) was published. The Regulation applies in its entirety from December 21, 2024. The EU Green Bond Regulation specifies the circumstances under which bond issuers may use the designation “European Green Bond” or “EuGB” for bonds offered in the Union. In order for a bond to qualify as a European Green Bond, the proceeds of the issue must, subject to certain flexibilities, be used in full for specific investment categories in accordance with the criteria for environmentally sustainable economic activities set out in the European Taxonomy Regulation (Regulation (EU) 2020/852). In addition, as with other Green Bond standards, external auditors must be involved and documentary requirements must be met.

The European Green Bond Standard Requires Prospectus Transparency and External Audit

The EU Green Bond Regulation stipulates that only bonds for which the issuers have published a securities prospectus in accordance with the Prospectus Regulation (Regulation (EU) 2017/1129) can qualify as a European Green Bond. In addition, the issuer must complete an information sheet provided for in the EU Green Bond Regulation prior to issuance and ensure that the completed information sheet is subject to a pre-issuance review and that an external auditor issues a favorable opinion on it. In order to ensure that the proceeds have been invested in accordance with the EU Green Bond Regulation, issuers must prepare an allocation report for each 12-month period until the date of full utilization of the proceeds of their bonds and indicate that the proceeds of the bonds have been used in accordance with the EU Green Bond Regulation since their issuance and until the end of the period specified in the report. If the allocation report has been prepared after the proceeds of the bond have been fully utilized, the report must be subject to a post-issuance audit by an external auditor. Issuers should also provide information on the environmental impact of their bonds by publishing an impact report at least once during the duration of the bonds after the proceeds have been fully utilized.

Security tokens and Crypto Securities May Also Meet the Green Bond Standard

The EU Green Bond Regulation does not regulate that blockchain-based security tokens or crypto securities under the Electronic Securities Act (eWpG) cannot fulfill the requirements of the European Green Bond Standard . Therefore, bonds for which a securities prospectus must be prepared can be issued both as security tokens and as crypto securities under the eWpG. The funds raised from such an issue can be used for the environmental objectives of the European Taxonomy Regulation. The information to be provided in the individual reports on the form of the bonds also does not suggest that blockchain-based bonds cannot be issued under the EU Green Bond Regulation. There are therefore valid reasons to believe that blockchain-based bonds can also be issued as European Green Bonds. It remains to be seen whether a market for European Green Bonds based on blockchain technology will develop.

Attorney Dr. Konrad Uhink

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The lawyer responsible for providing advice on the issuance of electronic securities and security tokens in our law firm is attorney Dr. Konrad Uhink.