European Union plans to issue green bonds and social bonds to finance part of its €750 billion relaunch fund, a source inside the European Commission told Bloomberg.

According to the source, European officials are working on a set of guidelines that would introduce criteria for green bonds, although the legislative proposal is unlikely to be ready by the end of this year.

Although analysts expected the EU to issue green bonds, given that European officials have promised to allocate almost a third of the funds in the incentive package to environmentally friendly projects, Brussels has not yet officially confirmed that it will issue such bonds, according to Agerpres.

“It will change things. It will attract more investors, which will mean greater demand. This is the spiral we were looking for,” said Sean Kidney, director of the Climate Bonds Initiative.

It is possible that this measure will make the EU the largest issuer of green bonds as well as the main provider of secure assets that are linked to environmental objectives. According to estimates by the financial rating agency S&P Global Ratings, total EU green bond issues could reach €225 billion. It is a volume similar to all green bonds issued worldwide last year, according to Bloomberg calculations.

However, the procedures for placing green bonds issued by the EU on the market are at a preliminary stage. There is still no uniform standard at EU level for what constitutes a green bond, nor is it clear how many such bonds will be sold and when.

Launched more than a decade ago, the green bond market has exploded in recent years as investors demand more sustainable investment options. Global green bond sales fell in the first half of this year as issuers opted for social and sustainable bonds that help counteract the effects of the pandemic.