Forward thinking in the labelled bond markets

The Luxembourg Stock Exchange, home to the Luxembourg Green Exchange, won Stock exchange of the year in Environmental Finance's 2022 Sustainable Investment Awards. Julie Becker, CEO of LuxSE, explains why LGX is prioritising data, diversity and education

Environmental Finance: What strengths of the Luxembourg Green Exchange platform set it apart from the offerings of its peers?

Julie BeckerJulie Becker: The Luxembourg Green Exchange (LGX) is unique as it is the world's leading platform for sustainable securities, with more than 1,400 green, social, sustainability and sustainability-linked (GSSS) bonds from 240 issuers in 50 countries, raising a total of €736 billion ($775 billion) for sustainable development.

To ensure transparency, we make all relevant documents freely available on our website so investors can easily verify that issuers deliver on their commitments.

We created LGX in 2016 as a way for the Luxembourg Stock Exchange (LuxSE) to facilitate sustainable investment and accelerate financing for the UN Sustainable

Development Goals (SDGs) and the Paris Agreement. While we initially focused on featuring a growing range of sustainable securities on the platform, we have since broadened the scope to also address the main hurdles facing sustainable finance today, namely the need for education and structured sustainability data.

EF: Tell me about LGX's revamped fund window – what has changed and why?

JB: The adoption of the EU's Sustainable Finance Disclosure Regulation (SFDR) – along with other market developments – was what spurred this revamp. Ensuring greater transparency has always been at the heart of LGX's mission so we decided to change the structure of our fund window to reflect two fund categories on LGX – one for ESG funds, which features SFDR Article 8 funds, and one for impact funds, which features SFDR Article 9 funds.

All funds listed on LuxSE and classified under SFDR Article 8 or Article 9 by the asset manager are now displayed on LGX, and this new structure brings investors more transparency on the funds' SFDR classification.

EF: Sustainable investors commonly say that access to reliable, comprehensive data is key. How does LGX address this?

JB: Investors need access to structured, complete and meaningful sustainability data to make informed and sustainable investment decisions. To address this data challenge, we established the LGX DataHub in September 2020.

A unique data source in the sustainable finance market, the LGX DataHub is a centralised database for structured and granular datapoints on over 7,000 GSSS bonds – covering close to the entire universe of the world's listed sustainable bonds.

Through the LGX DataHub, asset managers and investors can explore multiple datapoints on each bond and compare the social and environmental impact of different securities. This will help them build sustainable investment strategies and report on their investments.

We are constantly developing the LGX DataHub to strengthen the user experience through new data categories and filters, and we work to reach full coverage in the shortest possible timeframe.

EF: You recently adapted the platform to improve the visibility of gender bonds – what changed and why is this important?

JB: Gender inequality is still a reality in most parts of the world and to help rectify that, we need to better link gender and finance. To contribute to these efforts, LuxSE signed a Memorandum of Understanding with UN Women in May whereby we committed to use our expertise to advance financing for gender equality and women's empowerment.

As a first step, we decided to flag gender-focused bonds on LGX to make it easier for investors to identify sustainable bonds that contribute to women's empowerment. Gender-focused bonds are social, sustainability or sustainability-linked bonds that allocate all or a portion of their financing to projects and strategies that contribute to gender equality objectives.

We believe that gender lens investing is a megatrend that will grow in importance as investors become more precise when it comes to the kind of social impact they would like to support.

EF: LGX launched its Academy in 2020 – what has been achieved so far?

JB: Since launching the LGX Academy two years ago, our courses have grown in reach and scope. Our trainings cover the fundamentals of sustainable finance, products, labels and standards, regulations and best market practice.

In 2021 alone, our expert lecturers provided nearly 140 hours of training to groups of participants from banks, financial companies, law firms, issuers and professional services firms from countries including Luxembourg, Malta, Switzerland, Australia, Vietnam, Cabo Verde and Rwanda.

While our lecturers provide training to participants from all over the world, we are focusing on emerging markets this year. These are the countries likely to suffer the most from climate change, so educational programmes, knowledge-sharing and capacity building will be key. With the LGX Academy, LuxSE is well placed to provide this support.