Welcome to the European Parliamentary Research Service Podcasts.

In this podcast, we'll talk about European green bonds, a tool for financing green investments that can help us make the transition to a low-carbon economy, and how a European standard could become global. Stay with us.

Issuance of green bonds is booming, but what are these exactly? Well, a green bond is a traditional bond where the proceeds from issuance are used for a

project that meets certain environmental criteria. Both governments and companies use

them to finance the climate transition and green our economy and financial system.

Since the European Investment Bank inaugurated the world's green bond market in 2007,

with its climate awareness bond, the market has grown very fast, although it still represents

only about 3% of overall bond issuance.

So it will need to grow much faster to achieve the targets in the Paris Agreement.

So what's hampering its development?

The Commission identified three main barriers to developing the green bond market.

Here's Stefano Spinacci from the European Parliamentary Research Service.

Well, if I had to summarize, I would say, first, the lack of agreement on a common definition of what is a green project and what is green bond.

Second, disingenuous and not always transparent review procedures for the green bonds.

And last but not least, the consequent fragmentation of the green bond market.

All that imply additional costs for green bond issuers and more difficulties to identify

high-quality green bonds for investors.

All these issues could lead to market disruption from greenwashing. and more difficulties to identify high-quality green bonds for investors.

All these issues could lead to market disruption from greenwashing,

a lack of supply of quality green bonds,

and the risk that not enough investment will be channeled towards projects with a substantial impact.

Another problem is the lack of a uniform green bond standard within the EU.

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