(Bloomberg) -- A key ESG bond market may not be green enough to merit being included in a European Union review of sustainable flows in the region.

The Platform on Sustainable Finance, which advises the European Commission on environmental, social and governance policies, is proposing that flows generated through sustainability-linked bonds (SLBs) be excluded from an EU exercise designed to monitor how well the bloc’s green rules are working.

“Integrating these instruments would require an in-depth assessment of the materiality and ambition of SLB targets,” according to a report published by the Platform on Thursday. Focus should instead be on green bonds, which target specific projects, it said in the report, titled Monitoring Capital Flows to Sustainable Investments.

The market for SLBs, which BloombergNEF estimates is worth about $290 billion, has been the target of regular criticism from analysts and asset managers who note the bonds often come with weak targets that can be hard to monitor. A report last week by the investor-focused nonprofit Climate Bonds Initiative found that more than 80% of 768 SLBs issued from 2018 through November of last year aren’t aligned with global climate goals. Still, BNEF has noted that the securities — if done right — offer a meaningful opportunity to tie sustainable goals to debt financing.

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Over the past five years, the EU has introduced a welter of new regulations to make the region’s economy greener. These include the March 2021 rollout of the Sustainable Finance Disclosure Regulation, a rulebook intended to improve ESG reporting by investment managers. This year, the EU adopted the Corporate Sustainability Due Diligence Directive which mandates climate transition plans and the monitoring of value chains.

The Platform, whose members include the European Central Bank as well as the EU’s banking, markets and insurance regulators, is developing a system to track whether regulations are succeeding in leading investors to put their money into companies that are responding to environmental degradation and climate change.

Helena Vines-Fiestas, who chairs the platform, says the exercise is far from straightforward. While there is “a lot of experience on monitoring capital flows,” this is the first time they’ll be tied to regulation.

In addition to concerns about their credibility, sustainability-linked bonds also present other problems, according to the report. They often combine environmental and social key performance indicators which makes monitoring performance complicated. Nor is it possible to determine whether they refinance existing debt.

In addition to recommending the type of financing by banks and the markets to include when calculating capital flows, the platform is also advising the commission to focus on capital expenditures. These provide the best insight into whether companies are implementing climate transition plans, Vines-Fiestas said.

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