The rapid rate at which the Sustainable Finance industry has evolved in recent years means that the need for sustainability data is growing considerably. Seeing the opportunity to provide asset managers and investors with the sustainability data they need, the Luxembourg Green Exchange (LGX) team at the Luxembourg Stock Exchange (LuxSE) developed the LGX DataHub, and brought it to market in September this year.
But how did this project come about and what were the challenges along the way? Find out all the answers in an exclusive Behind the Scenes interview with the LGX DataHub team.
Why develop a data hub for sustainable securities?
LGX is the world’s leading platform for sustainable securities now counting around 800 Green, Social and Sustainability bonds. Since its launch in 2016, LGX has been gathering sustainable data from issuers all over the world to help investors make informed investment decisions and turn Sustainable Finance into a global priority. The idea of creating the LGX DataHub emerged in 2018 as a response to the market’s increasing need for structured, complete and reliable sustainability data.
“We started by analysing the data challenge and outlining a possible solution with our sustainable finance experts. Then, we invited our designers, IT specialists, business developers as well as our clients to discussions surrounding our idea. We continually analysed each new functionality with our clients to make sure that our DataHub answered their needs. Even though our hub is fully operational today, we constantly receive feedback from our external and internal stakeholders, and seek to improve the product to ensure the best possible user experience,” explained the LGX DataHub Project Manager, Thomas Kieffer.
What were the main challenges along the way?
The main challenge the team encountered stands at the core of the project: How do we design a data model with enough flexibility to accommodate different levels of issuer disclosure, and how do we ensure that the data is useful for the target clients? Today, the available data on sustainable instruments is spread over multiple sources, comes in different formats, lacks a clear structure and is difficult to compare. With this in mind, the team defined a smart data structure and an elegant platform design that allow users to navigate structured data on a vast range of Green, Social and Sustainability bonds, and extract the data that is relevant to them.
The LGX DataHub required a highly diverse project team, with different levels of knowledge of sustainable finance, data solutions and market needs, as well as different views and opinions. However, each member of the project team was able to bring his or her specific expertise to the project, which eventually led to the unique offering of the LGX DataHub.
The outbreak of the COVID-19 pandemic hampered progress on the project at the beginning of 2020, but the team still managed to keep the planned launch day in September 2020.
What did you learn in the process?
Many members of the LGX DataHub team confessed that they were pleasantly surprised to discover the outstanding results that a close-knit team can bring when focusing on solutions and not on problems. “Our diversity was our main force,” added the team’s project manager, Thomas Kieffer.
When it comes to the data collection, LGX Sustainability Data Analyst, Lucas Rabiot, explained that the LGX DataHub provides key insights that capture the newest trends in terms of disclosure of information. “The data collection process gives a great overview of the market as a whole. We clearly observe that issuers are learning how to better structure their reporting in a way that is useful for investors, and this is reflected in the DataHub. Naturally, the most important aspect of the data collection is the quality of the data.”
Why is data so important for asset managers and investors?
With the LGX DataHub, users can find structured and comparable sustainability data, all in one place. The database furthermore offers the most granular data on the market today, and includes both pre and post-issuance data. Pre-issuance data covers the commitments made by the issuers in terms of use of proceeds, project selection, and management of proceeds and reporting.
Post-issuance data, on the other hand, provides information on how the proceeds of the bonds are invested, and indicates what the environmental and social benefits of these investments are. The LGX Datahub also features data points illustrating an investment’s contribution to the United Nations Sustainable Development Goals and its impact in terms of reduction in greenhouse gas emissions.
The LGX DataHub allows asset managers and investors to find the securities that match their sustainable investment goals, build sustainable investment strategies and report on these investments. This is the true value of the database according to the LGX DataHub team.
What was the feedback from users so far?
According to the LGX DataHub team, clients are impressed by the remarkable level of granularity of the data available. Identifying, collecting and structuring this data is a resource-intensive and time-consuming process, and the LGX DataHub users appreciate that they now have access to the sustainability data they need, all in one, convenient place. This means that they no longer need to gather the data on their side and can use their own resources on more strategic activities.
