1.   Before the maturity of a European Green Bond, the proceeds of such a bond shall be allocated in full, in accordance with the taxonomy requirements, to one or more of the following categories (the ‘gradual approach’):

(a)	fixed assets that are not financial assets;

(b)	capital expenditure that falls under point 1.1.2.2. of Annex I to Delegated Regulation (EU) 2021/2178;

(c)	operating expenditure that falls under point 1.1.3.2. of Annex I to Delegated Regulation (EU) 2021/2178 and was incurred no more than three years before the issuance of the European Green Bond;

(d)	financial assets that were created no more than five years after the issuance of the European Green Bond;

(e)	assets and expenditure of households.

By way of derogation from the first subparagraph, issuers may deduct issuance costs from the proceeds of the European Green Bond before allocating those proceeds.

2.   By way of derogation from paragraph 1, issuers may allocate proceeds from one or more outstanding European Green Bonds to a portfolio of fixed assets or financial assets in accordance with the taxonomy requirements (the ‘portfolio approach’).

Where issuers allocate proceeds in accordance with the first subparagraph of this paragraph, they shall demonstrate in the allocation reports referred to in Article 11 that the total value of the assets referred to in the first subparagraph of this paragraph in their portfolio exceeds the total value of their portfolio of outstanding European Green Bonds.

3.   By way of derogation from paragraph 1, a sovereign or a third-country issuer which is a State, a member of a federation in the case of a federal State, or a regional or municipal entity, may also allocate the proceeds of European Green Bonds it has issued to tax relief, subsidies, intermediate consumption, current transfers within a general government, current international cooperation or other types of public expenditure, provided that the proceeds are allocated in accordance with the taxonomy requirements.