What is Social Bonds

The European Union has a clear strategy on how sustainable development should be financed. However, there is still no regulation that defines which activities can be considered sustainable and which cannot. Private initiative has taken the lead in recent years with the publication of different taxonomies and principles applicable on a voluntary basis to green financial products and social projects. The EU taxonomy, issued in 2020, establishes criteria to determine whether an economic activity is environmentally sustainable, and the green bond standard is in the consultation period in 2021. The EU taxonomy will increase investor confidence in green financial products, prevent greenwashing, and reduce information costs. This chapter reviews the evolution and future application of the EU taxonomy, the EU green bond standard, and the need to adopt a taxonomy for socially sustainable activities.