The Luxembourg Green Exchange (LGX) is more than a sustainable securities platform, it provides education, data resources, and issuance assistance to its issuers and partners on a global scale. Luxembourg Stock Exchange (LuxSE) CEO Julie Becker highlights some of the exchange's achievements over the last 12 months.
Environmental Finance: Last year, LuxSE and UN Women joined forces to advance gender finance. What informed this decision?
Julie Becker: We were convinced we could play a concrete role in advancing financing towards gender equity and women's empowerment. This is what prompted us to sign a Memorandum of Understanding (MoU) with UN Women last year to advance gender finance and gender-lens investing.
As part of this commitment, we now flag sustainable debt instruments displayed on LGX which raise financing for projects advancing gender equality and women's empowerment. The objective of this flag is to highlight issuers that are linking gender equality and financing. It also makes it easier for investors to identify gender-focused bonds. These are social, sustainability or sustainability-linked bonds which allocate all or part of their proceeds or set clear KPIs related to advancing gender equality.
Less than a year after launching this gender-focused bond flag, there are almost 50 gender-focused bonds totalling $34 billion on LGX.
This year, for International Women's Day 2023, we celebrated the launch of the first gender bond issued by a Sub-Saharan African issuer – a $32 million bond from NMB Bank, a commercial bank in Tanzania. We believe we have an important role to play in supporting and strengthening gender-focused investment by clearly highlighting these types of bonds so that they can be easily identified by investors.
We also plan to leverage the LGX Academy to promote and raise awareness of gender finance in the coming months to keep momentum up.
EF: The Bond Awards judges noted LGX's strength in emerging markets. How do you expect the segment to grow in importance?
JB: When we created LGX back in 2016, the objective was to direct capital towards sustainable development projects across the world. A key priority today is to mobilise international investors to finance sustainable domestic projects in emerging markets. This is extremely important in making sustainable finance mainstream and ensuring a 'just transition'.
Emerging economies experience the most adverse risks of climate change yet do not have the financing needed to address these risks. According to the IMF, the total amount of finance channelled towards ESG-related bonds almost tripled between 2020 and 2021. However, emerging markets still only represent 6% of green, social, sustainability or sustainability-linked bond issuances.
We are convinced that exchanges have an essential role to play in mobilising this capital and in giving issuers a platform to highlight their sustainable bonds and strategies at an international level.
Since 2019, we have signed several MoUs and cooperation agreements with exchanges in emerging markets, such as the exchanges of Santiago, Nigeria, Cabo Verde, Rwanda, Western Africa, and Vietnam to advance knowledge sharing, and capacity building.
EF: How are your initiatives in ESG data and education progressing?
JB: On the education side, we launched the LGX Academy in May 2020. Last year, we had more than 300 participants from around the world attend our courses and we provided over 170 hours of trainings. Through the LGX Academy, we are contributing to raising sustainable finance awareness across the world and avoiding further fragmentation of the market.
In terms of data, we recently reached 10,000 bonds on the LGX DataHub. For each of these bonds, we collect up to 150 data points to help investors build their sustainable investment policies, and report on and compare the green and social impact of different instruments. We are also expanding the scope of the LGX DataHub to include more post-issuance data for sustainability-linked bonds.
We also added a feature called 'My Portfolio' which allows users to conduct securities- or portfolio-level analysis, see the potential impact of their investments, and align their investment strategies accordingly.
Another priority when it comes to progressing the LGX DataHub is to make sure the data is accessible at a combined, aggregate-level. Having accurate and up-to-date data is not enough anymore. You now need to be able to analyse the data in a combined way in order to build investment portfolios and to meet reporting requirements such as the Sustainable Finance Disclosure Regulation (SFDR).
EF: How are you navigating the rapidly developing regulatory landscape and related disclosure requirements?
JB: We need to close the data gap, especially in emerging markets, and make investments as transparent as possible. We will do this by continuing to support the actions of multilateral development banks, helping to build capacity, and putting in place technical assistance programmes for bankers and financial professionals in emerging countries.
Aside from that, we will continue with our plans to grow, share knowledge, and lead by example.
Our head of sustainable finance Laetitia Hamon is part of the EU High-Level Expert Group (HLEG) on scaling up sustainable finance in low and middle-income countries. This a strong signal that we are not only focused on feeding policy development and making recommendations to the European Commission but also that we are committed to helping countries to build sustainable capital markets.
It is thanks to the commitment and dedication of our team that we manage to continue to cater to market needs and align with best practices, thereby maintaining the integrity of the market. Our team is key to our success.
For more information, see: https://www.luxse.com/discover-lgx