As a result of the study, it is found that the EU Green Bond Standard will help to resolve current information imperfections and information asymmetries in the green bond market. This makes it a good tool to determine how ‘sustainable’ or ‘green’ a financial product is.
Until now, there was not enough information available to determine how ‘sustainable’ or ‘green’ a financial product was. This research found that the EU Green Bond Standard will help to resolve current information imperfections and information asymmetries in the green bond market. The leading cause for information imperfections is the lack of an agreed-upon standard on what is green, which is being addressed in the action plan. The EU Taxonomy will create clarity about what green projects are and what aren’t, creating a standard that issuers and investors can follow. Also, the EU-GBS will create more transparency due to more frequent reporting obligations. More importantly, the EU-GBS introduces an accredited verification scheme, which increases the comparability and credibility of external reviewers. This will enhance the quality and comparability of these verifications, which will help provide more transparent information. Consequently, greenwashing can be reduced since the EU Taxonomy defines which investments are ‘sustainable’ and which are not. The results show that the EU-GBS will create more certainty, transparency, and unity in the green bond market since market players (e.g., investors, issuers) no longer have to decide themselves what falls within the scope of ‘green’. Now, they can use the standardized framework. As a result, it will be possible to distinguish between bonds that do or do not comply with the EU Green Bond Standard. All in all, this research discovered that the EU-GBS is expected to be better equipped to limit information imperfections as opposed to voluntary market standards.
