EU Green Bonds: More or less green

Investing money sustainably and with a clear conscience: This is the idea behind so-called green bonds. From today on, the European Union will issue such green bonds. But how green are they really?

In the European Union it has not yet been finally clarified how much green should actually be in the so-called green bonds, since they are already coming onto the market – first for large investors, later also for small investors. In the next five years, the EU Commission wants to collect a total of 250 billion euros with these ecological promissory notes – money that is to flow into the huge European Corona rescue fund called “Next Generation EU”, which is supposed to flow through common debts of the EU countries is financed. Green bonds are a crucial pillar of financing; they make up about a third of the total volume.

Green bonds are becoming increasingly popular with investors

EU budget commissioner Johannes Hahn proudly speaks of the fact that the European Union will issue the largest number of eco-promissory notes in the world – at least in the long term. However, some European member states had already issued their own bonds in the past few months, including Germany, the Netherlands, France and Spain. According to the EU budget commissioner, the market for such bonds will become increasingly attractive over the next few years. Investors are already looking specifically for green investments, because the conviction is growing that the restructuring of the economy towards CO2 neutrality can no longer be stopped.

So the EU wants to be there as early as possible and as attractive as possible for investors. The whole thing has one flaw – at least for now. Because so far there are no uniform EU standards for exactly how much green there must be in the European system. It is guaranteed that the money for the promissory notes will flow into climate protection projects; in the development of CO2-neutral transport chains, in building renovation or in the expansion of renewable energies. However, exact definitions of what that means exactly have not yet been established. International standards, not European ones, apply as a benchmark.

Skeptics lack a clear definition

The European Parliamentarian and financial expert Damian Böselager from the European Volt Party sums it up like this: Without defining exactly what a green bond really is, and without explaining exactly what the money is used for, the Commission already gives one Loan out. That is a problem. You could also say: Here the second step is taken before the first.

This is evident, for example, with natural gas: Brussels does not actually consider this to be a promising energy for the future, after all, the combustion of natural gas is not climate-neutral. Nevertheless, investments in the energy supply with natural gas can be financed with green bonds – at least when it comes to district heating. For nuclear energy, on the other hand, according to the budget commissioner, green bonds are out of the question.

The bone of contention nuclear power

But whether it will stay that way in the long term and what will count as a climate protection investment in the EU in the future is still being discussed in Brussels and in the European capitals. It is about the so-called taxonomy in the EU with which such investments are classified. Nuclear power is obviously the biggest point of contention.

France insists that electricity from nuclear reactors in Europe must be considered climate neutral. For in France, nuclear power continues to play the most important role in electricity supply. Paris does not want a debate about it – and is getting support from many Eastern European countries that also rely on nuclear energy. In Germany or Denmark you see it very differently. The taxonomy for climate neutrality in the EU is to be precisely defined this year: Complicated, according to the Brussels Commission.

Orientation towards the Corona rescue fund

But this does not affect the European green bonds. Until your own standards are set, they are therefore based on the rules that also apply to the use of the money from the large Corona rescue fund. Because around a third of these funds must also be spent on climate protection projects by the member states. And there are regulations. For example, for investments in building renovation: only those are considered green if they save at least 40 percent of a building’s energy requirements.

At least that’s the way it should be. Now it is important to check the use of the money in practice and to make it transparent, warns European parliamentarians Böselager. This is to ensure that Europe takes the right course when it comes to climate protection and that investors who finance Europe’s debts by buying green bonds are not only fooled into making a green investment – according to the motto: It is so green, but nothing more. According to the Commission, the European Green Bonds can be trusted completely. Whether investors do that remains to be seen from today. In any case, in Brussels it is firmly assumed.