The main characteristics proposed by the European Commission are: - Taxonomy alignment: meaning that the funds raised by the bond should be allocated to projects that are aligned with the EU taxonomy. - Transparency as to how bond proceeds are allocated, through detailed reporting requirements. - External review: all European green bonds must be checked by an external reviewer to ensure compliance with regulations and taxonomy alignment of the funded projects, and,  2  See ECB (2023). Towards climate-related statistical indicators. Statistics Committee of the European System of Central Banks. January. 3  - Supervision by the European Securities Markets Authority (ESMA) of the reviewers. This means that external reviewers providing services to issuers of European green bonds must be registered with and supervised by ESMA. The European Council and the European Parliament have this year reached a provisional agreement on the creation of this European Green Bonds Standard. Pending the final text, a very important element of the proposal is that the standard will be voluntary. The European Central Bank issued an opinion in 2021 on the proposal for a regulation on European green bonds,3 which it welcomed. Regarding its voluntary nature, the ECB considered that, in the short term, a strictly mandatory standard might lead to divestment from non-taxonomy-aligned green bonds and a sudden drop in Union-based green bond issuance.
- Green bond issuance saw the largest increase, comparing with the previous quarter and with the same quarter a year earlier. Financials and governments remained the largest issuers with a share of over 73 percent in 2023 Q1. Indeed, new sovereign issuance increased sharply in 2023 Q1, the European Commission issuing € billion of NextGenerationEU green bonds in its fourth syndicated transaction for 2023. 1  See IMF (2023). Climate Finance Monitor Q1 2023. May. 1  - Conversely, the issuance of most other types of bonds declined. For example, sustainability-linked instruments saw slower growth in the first quarter of the year, which, according to the IMF, “may reflect market participants’ perceptions around greenwashing and the credibility of the asset class to drive companies to meet sustainability targets”. Focusing on the euro area, according to the experimental indicators on sustainable finance developed by the Eurosystem: - The outstanding amount of sustainable debt securities issued in the euro area has more than doubled in the last two years. Securities designed to finance green and social projects, which account for the majority of the market, have seen a particularly strong increase. - Over the same period, sustainability-linked bonds recorded the highest growth rate. However, the relevance of these instruments in the overall debt securities market remains minor. Another interesting aspect highlighted by these experimental indicators is holdings. Since the beginning of 2021, euro area holdings of sustainable debt securities have grown continuously, following a similar trend to the one observed for euro area issuances.