The German financial supervisory authority, BaFin, will start to monitor whether the issuers of European Green Bonds meet obligations in terms of transparency and information, it said in an article in its BaFinJournal.
BaFin will also look at whether documents required to issue European green bonds have been checked by external auditors, it added.
The EU green bonds regulation, implemented last November, gives national supervisory authorities the power to suspend or prohibit an offering, with sanctions also possible for violations of the regulation, it said.
However, the specific design of the sections still needs to be defined at national level, BaFin explained.
The European Green Bond Standard (EUGBS), legally based on the EU green bond regulation, grants national supervisory authorities special powers, giving BaFin for example the authority to require the issuer to add information missing in its reports, or redeem missing disclosures.
The EU Green Bond Standard, which applies across Europe, gives clarity to investors for sustainable bond investments, BaFin said, adding that from 21 December 2024, providers of such products must meet the requirements.
The regulation establishes a registration system and supervisory framework for external reviewers of European green bonds. A uniform set of requirements gives institutional investors guidance on suitable investment options, the regulator said.
Investors that want to invest in sustainable bonds should be able to understand the principles used to invest the funds, and the reporting obligations of the issuer, it added.
In addition to the prospectus, green bond issuers must publish an information sheet before issuing the bonds, which includes essential information on the planned taxonomy-compliant use of proceeds, BaFin stated.
The information sheet should also lay out how the issue of European green bonds is embedded in the issuer’s sustainability strategy, it said.
The issuer must also fulfill transparency obligations with an allocation report so that institutional investors can check whether the issuer meets the promises included in the information sheet. The allocation report must be published annually until the proceeds have been fully deployed, BaFin said.
The issuer should also publish a report describing the impact of the bond proceeds on environmental goals – the report should be published after all proceeds have been used. Auditors will check whether the bond issuance meets the criteria of the EU regulation.