McGuinness says opportunities for Ireland in new EU green bonds standard

A new green bond standard launched by the European Union holds opportunities for the Irish financial industry, European Commissioner Mairead McGuinness said as she launched the initiative to drive money into climate-friendly investments.

The voluntary standard categorising what can qualify as a green bond is designed to help businesses and governments that seek to raise money for projects that will help towards the bloc’s aim to reach net zero emissions by 2050.

Green bonds are a small but fast-growing market that has just surpassed $1 trillion in size, making up 2-4 per cent of the global bond market, and the European Commission believes an EU standard is required to prevent "green-washing" and ensure that bonds classified as climate-friendly truly meet the description.

Ireland’s financial industry is well poised to be a player in the growing market, the Commissioner for Financial Services, Financial Stability and Capital Markets Union told The Irish Times.

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"There are a lot of funds registered in Ireland, there's a lot of investment that actually wants to find a home that is sustainable," Ms McGuinness said. "The Government's future-focused finance strategy talks about sustainable finance."

The green bond standard is the second part of the EU’s Sustainable Finance package, and Ms McGuinness said it should create a “gold standard” for the industry.

It will be entirely based on the bloc’s so-called taxonomy, a list of activities it classifies as green, and issuers that offer a bond under the EU regime can be fined by regulators if they fail to comply with disclosure rules, according to an EU official.

Big benefits

“We would expect the taxonomy to produce really big benefits for domiciled funds that I referenced, as approximately 8,000 of those funds are domiciled in that member state, with more than €3 trillion in net assets,” Ms McGuinness said. Ireland itself issued €3 billion in green bonds in 2018 and €2 billion in 2019.

“It’s a significant volume of capital. And that capital can be invested in the member state but equally in sustainable investments elsewhere...there is a huge opportunity there.”

The European Commission hopes that the standard will serve as a tool to help companies and participants in the financial market demonstrate that their investment projects are in line with the EU’s climate targets.

“I think those opportunities will only be harnessed when we have clarity around the information and transparency,” Ms McGuinness said. “When we talk about green standards, and investment flowing, there will be a coming point when checks will be made to see did the money go in that direction. And all of those who work in this area...they want clarity, and therefore they want the standards to mean something.”