ESMA Sets New Standards For Green Bond Reviewers

The European Securities and Markets Authority (ESMA) has released a new Consultation Paper detailing key reforms aimed at increasing the integrity and credibility of the European Green Bond market. The move represents an important step towards building investor confidence and ensuring that green investments actually reflect climate objectives. The proposal revolves around a series of outstanding Regulatory Technical Standards (RTS) under the European Green Bond Regulation, but aimed at the supervision and performance of external reviewers—organizations tasked with reviewing the environmental credentials of green bonds.

As the green finance sector grows exponentially, the integrity of evaluations underpinning green bonds has become more scrutinized. ESMA is responding by implementing more stringent criteria for the manner in which external reviewers function, including the way they gain access to and process information, handle internal compliance, and ensure transparency throughout the review process. These technical standards are designed to enhance the quality of evaluations performed by these reviewers, thus furthering investor confidence that their capital is being used efficiently to fund the green transition.

In its Consultation Paper, ESMA insists that the future RTS will apply across a wide range of significant areas. Among them are the sufficiency and efficacy of external reviewers' systems, resources, and procedures, and the authority and competence of compliance functions. Standards will also look at the administrative and internal controls that are established—most importantly, IT protection measures securing the integrity of green bond opinions.

In addition, the regulations will analyze the quality and integrity of sources of data employed for appraisals. Keeping facts guiding green bond assessments accurate, verifiable, and relevant is critical to the sustenance of green finance credibility. Procedures for applications for recognition as an ESMA-registered external reviewer will be regulated, along with provisions for continued disclosure of any material developments post-registration.

By strengthening the independence, governance, and transparency of external reviews, these technical standards will bolster the robustness and credibility of European Green Bonds," ESMA said. "This will further have the effect of reinforcing investors' trust that their capital is actually channeling the green transition.

The proposal comes at a timely moment, as the EU continues to assert itself as a world leader on sustainable finance. With the increasing demand for green investments, there is mounting pressure to make sure ESG-marked financial products are not just cosmetic, but supported by real environmental value and accountability.

Stakeholders, especially those already established as external reviewers or those who plan to apply for ESMA recognition, are being invited to join the consultation process. ESMA has scheduled a 30 May 2025 deadline for public comments. The last draft of the standards and a complete report shall be made available to the European Commission on 21 December 2025. After the submission, the standards will be subject to a non-objection procedure by the European Parliament and the Council before the formal adoption.

This regulatory effort is consistent with overall EU attempts to strengthen consistency and transparency in sustainable finance. The step is also a follow-up to ESMA's recent launch of efforts to promote corporate sustainability reporting, which indicates an all-round drive for more accountability within the green finance space.

With these new technical standards, ESMA is establishing a model for how external green bond assessments should be done in the EU. It aims not only to ensure that green bonds are of high credibility and transparency but also to establish a sustainable financial framework where investors are confident that their money plays a significant role in climate action.

With the European Green Bond market still growing, the reforms aim to safeguard against greenwashing and encourage real environmental effect. By setting higher standards of performance and transparency for external reviewers, ESMA is paving the way for a financial system that more effectively supports the EU's climate and sustainability agenda.