11 April 2017
In September, Luxembourg Stock Exchange launched the Luxembourg Green Exchange (LGX) – a platform displaying green bonds.
LGX does not judge the sustainability or ESG credentials of an issuer or the 'greenness' of a security. Rather, it focuses on ensuring that all the material information on the green features of the bond are available for investors, helping them make informed investment choices.
The LGX team assesses that a security meets the minimum eligibility requirements, i.e. (1) the issuer provides at least one form of robust external review and (2) commits to ex-post reporting at the bond's issuance anniversary.
Bonds will be delisted if they fail to meet the post-issuance requirements within a year after issue, although there is a grace period until September 2017.
"What attracted many issuers is the level of transparency we provide to investors," says Julie Becker, a member of the executive committee at the exchange. "Investors feel they have comfort that non-green compliance will be withdrawn." There are about 10 green bonds listed in Luxembourg that never made it onto LGX, she adds.
One judge described LGX as "critical to market development". Another said: "[It is] improving reporting standards for green bond issuers, although requirements remain very broad."
The value of green bonds on LGX recently passed the 50 billion mark, making it the biggest of all the dedicated green bond segments or lists on stock exchanges throughout the world.
Its €50 billion of listings, which represent roughly a quarter of the overall value of the green bond market, comprise 110 bonds in 19 currencies from 25 issuers.
Becker adds that the bourse plans to expand LGX this year to cover other asset classes, such as social and sustainability bonds, ESG funds, environmentally-themed ETFs and other index tracking funds.
"We are establishing new criteria. We would like to set the bar higher as we did with green bonds," she says. "We hope to expand it in the coming year - the other asset classes will probably have their own dedicated segments on LGX.