In Search of Sustainable Finance - A Study of Practices on the Slovak Corporate Bond Market

• Author: Ján Mazur, Sabina Petrovičová
• Position: Comenius University Bratislava
• Pages: 111-128

BRATISLAVA

LAW

REVIEW

PUBLISHED BY

THE FACULTY OF LAW,

COMENIUS UNIVERSITY

BRATISLAVA

ISSN (print): 2585-7088

ISSN (electronic): 2644-6359

IN SEARCH OF SUSTAINABLE FINANCE: A STUDY

OF PRACTICES ON THE SLOVAK CORPORATE BOND

MARKET / Ján Mazúr, Sabina Petrovičová

Mgr. Ján Mazúr, PhD.

Assistant Professor

Comenius University Bratislava

Faculty of Law

Department of Financial Law

Šafárikovo nám. 6

810 00 Bratislava, Slovakia

jan.mazur@flaw.uniba.sk

ORCID: 0009-0009-3996-0969

JUDr. Sabina Petrovičová

Slovenské elektrárne, a.s.

Mlynské nivy 47

821 09 Bratislava, Slovakia

petrovicova.sabina@gmail.com

This article was supported under the

grant project VEGA No. 1/0212/23

“Financial innovation as a determinant

of current and anticipated financial

market regulation (challenges and

risks)”.

Abstract:

Financial market is expected to play an important role

in transition towards more sustainable setup of the business

environment. The European Commission published the EU’s

Strategy for Financing the Transition to a Sustainable Economy

in 2021, requiring the inclusion of environmental, social and

governance considerations into investment decision making. Yet,

small, open EU economies, such as Slovakia, are in a specific

position when implementing this legal framework. For instance,

Slovakia does not have any meaningful stock market to speak of,

although its bond and collective investment markets perform

better. To assess the adoption of sustainable finance elements

and to assess the convergence on the Slovak bond market

towards standard practice, we investigated current practices on

the corporate bond market of nonfinancial corporations. We

conducted our research through a review of corporate bonds

prospectuses published during 2020-22, in which, to assess

current market practices, we examined and evaluated selected

criteria and indicators related to issuers and bonds and

compared them. These criteria include for example issuer´s

business and purpose of finance, form, yield, security, or

transferability of bonds. We find that relevant variable criteria and

indicators related to reviewed bonds, compared in our research,

are similar, indicating that the market converged into a standard

practice. Finally, we find almost no evidence of adoption of the

sustainable finance elements although there are hints of market

uptake of sustainable practices.

Submitted:

26 September 2023

Accepted:

17 June 2024

Published:

07 July 2024

Key words: Sustainable Finance; EU Sustainable Finance

Strategy; EU Taxonomy; ESG Considerations; Financial Market;

Corporate Bonds; Green Bonds; Slovak Capital Market

Suggested citation:

Mazúr, J., Petrovičová, S. (2024). In Search of Sustainable Finance: A

Study of Practices on the Slovak Corporate Bond Market. Bratislava

Law Review, 8(1), 111-128. https://doi.org/10.46282/blr.2024.8.1.737

1. INTRODUCTION

The EU’s objective to reorient capital flows towards financing sustainability, as

established by the European Commission’s 2018 Action Plan on Financing Sustainable

112

J. MAZÚR & S. PETROVIČOVÁ

BRATISLAVA LAW REVIEW

Vol. 8 No 1 (2024)

Growth, included 10 key actions.1 Among these actions rested a crucial requirement for

common taxonomy for a number of environmental objectives, including climate change

mitigation and adaptation, which took form in the so-called EU Taxonomy Regulation,

entered into force on 12 July 2020 (hereinafter “

Taxonomy Regulation

”).2 The regulation

enables market participants to recognise the activities enabling sustainable growth and

therefore assess their contribution to sustainable growth through investments. The

regulation’s objective is to provide “[a] clear guidance on activities that qualify as

contributing to environmental objectives [which] would help inform investors about the

investments that fund environmentally sustainable economic activities.“3

The EU Taxonomy Regulation operationalises the environmental objectives

through the following elements. First, it establishes the criteria for determining whether

an economic activity qualifies as environmentally sustainable to evaluate an investment

towards such activity as environmentally sustainable. The criteria for environmental

sustainability of economic activities include:4 (i) a contribution to environmental

objectives as laid out in the Art. 9 and subsequent of the regulation, including climate

change mitigation and adaptation, but also objectives beyond climate action, such as the

sustainable use and protection of water and marine resources or the transition to a

circular economy and pollution prevention and control; (ii) an economic activity does not

significantly harm any of these environmental objectives as based on an objective-

specific qualification under the Art. 17 of the regulation; (iii) an economic activity is carried

out in compliance with the minimum safeguards established by international documents

and guidelines, as laid down in Art. 18; and (iv) an economic activity must comply with

technical screening criteria established by the European Commission under Art. 19 of the

regulation.

Building on the EU Taxonomy Regulation, the EU Green Bond Standard tackles

the challenge of no uniform green bond standard within the EU.5 However, the EU Green

Bond Standard, a voluntary, taxonomy-aligned standard that includes transparent

reporting and review, is in force only since the beginning of 2024.6 The European Green

Bonds (hereinafter “

EuGB

”) are thus a novel, although optional, addition to the regulatory

landscape of European sustainable finance, allowing an exclusive use of the designation

“European Green Bond” or “EuGB” for bonds that comply with the requirements set out in

the EuGB Regulation. The EuGB Regulation mandates that the proceeds o f the EuGB

must be used fully in alignment with the taxonomy requirements, as set forth in the Art.

3 of the Taxonomy Regulation.7 The verification of the allocation of the bond proceeds

takes place th rough a regular allocation report verified by third-party independent

reviewers.8 Additionally, issuers of EuGB are obligated to draw up and publish a European

1 European Commission. (2018). Action Plan: Financing Sustainable Growth. COM(2018) 97 final. Available at:

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52018DC0097 (accessed on 22.06.2024).

2 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the

establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088

(Text with EEA relevance). Official Journal of the European Union, L 198, 22.6.2020, p. 13–43.

3 Rec. 6 of the Taxonomy Regulation.

4 Art. 3 of the Taxonomy Regulation.

5 For more see: The European green bond standard – Supporting the transition. Available at:

https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/european-green-bond-standard-

supporting-transition_en (accessed on: 26.09.2023).

6 Regulation (EU) 2023/2631 of the European Parliament and of the Council of 22 November 2023 on

European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for

sustainability-linked bonds (hereinafter „

EuGB Regulation

“).

7 Art. 4 (1) of the EuGB Regulation.

8 Art. 11 of the EuGB Regulation.