LGX Corner - December

Welcome to the special December edition of the LGX newsletter!

This month marks the end of an extraordinary year for the Luxembourg Green Exchange (LGX) - a year filled with awards, appointments, highlights and innovation centred on two key drivers of sustainable finance: Data and education.

With the COVID-19 pandemic still raging, sustainable finance has become more important than ever. We need to create a more sustainable and resilient economy, and a more inclusive world. At LGX, we remain determined to help reorient capital flows towards sustainable investment projects, and drive the growth of sustainable finance.  

Our first stop brings us to an important appointment. Earlier this month, the Board of Directors of the Luxembourg Stock Exchange (LuxSE) appointed Julie Becker, Founder of LGX and LuxSE’s Deputy CEO, as the company’s next CEO. In April 2021, Julie Becker will officially take over the reins of the exchange from CEO Robert Scharfe, who has been at the helm of LuxSE for the past 9 years. 

An avid advocate of sustainable finance, Julie Becker founded LGX in 2016 to facilitate sustainable investment worldwide. Widely recognised as an innovative sustainable finance expert, Julie Becker represented LuxSE and LGX at the prestigious EU High-Level Expert Group on Sustainable Finance from 2016-2018.

Under her leadership, the sustainable finance agenda is expected to remain front and centre at LuxSE!

Our second stop takes us to the United Nations. This year for the very first time, LGX was recognised by the United Nations Climate Change for its leadership in tackling climate change.

LGX was awarded the prestigious United Nations Global Climate Action Award 2020 in the category ‘Financing for Climate Friendly Investment’. As the United Nations Sustainable Development Goals along with the Paris Agreement were what inspired us to establish LGX in 2016, this recognition by the United Nations is a great honour. The award has made us even more determined to continue on our mission to help make finance sustainable by default.

The market calls on us for our third stop. Capital markets are constantly evolving, and so is the sustainable debt sphere. This year, Sustainability-Linked Bonds (SLBs) gained traction, supported by the Sustainability-Linked Bond Principles (SLBP) released by the International Capital Market Association (ICMA) in June.

SLBs are performance-based bond instruments where issuers commit to future improvements in sustainability outcomes within a predefined timeline. The novelty of this instrument is that the financial or structural characteristics of the bond can vary depending on whether the issuer achieves the predefined sustainability objectives.

To support market innovation and companies’ sustainability efforts, and to ensure that the securities displayed on our platform mirror the diversity of the products available on the market, we decided to increase the scope of LGX to include SLBs.

Learn more about the first two SLBs available on LGX:

Our fourth stop takes us inside an index. In November, we collaborated with the German index provider Solactive to establish a new Green Bond impact index, the Solactive LGX Green Bond Impact Index.

Owned and managed by Solactive, the index is composed of a selection of Green Bonds displayed on LGX, which all aim to fund projects with positive environmental or climate impacts. The selection of bonds is built with liquidity in mind and all the Green Bonds included in the index are priced and available for trading on LuxXPrime.

Data is the new gold and the topic of our fifth stop. In September, we launched the LGX DataHub to provide asset managers and investors with access to centralised and structured sustainability data with a high level of granularity. Through the LGX DataHub, our sustainable finance experts identify, collect and structure sustainability data in one centralised hub, allowing asset managers and investors to focus on more strategic activities.

The LGX DataHub offers structured data on a wide range of Green, Social and Sustainability Bonds that asset managers and investors can leverage to build their sustainable investment strategies and report on the real impacts of these investments.

We would like to dedicate the sixth stop on our Tour of Milestones 2020 to one of the main keywords of 2020, namely education. Since we created LGX, various market players have asked us to share our expertise and knowledge in sustainable finance. This recurring demand led us to establish the LGX Academy in May 2020.

Through 3 certified course programmes, participants of all levels get the chance to increase their sustainable finance knowledge, start building a strategy tailored to their business, and accelerate their green transition.

Not only does the LGX Academy offer virtual classes in its own capacity, we have also partnered with the international strategy consulting and communication agency NextSee to bring our sustainable finance classes to the French market.

We have reached the last stop on our journey through 2020, and would like to dwell on one of this year’s most defining topics: the emergence of the COVID-19 response bonds.

As the coronavirus pandemic swept across the world this spring, there was an almost immediate uptick in social bond issuance, the so-called COVID-19 response bonds issued to address the significant social and economic consequences of the pandemic. Social bonds finance projects linked to healthcare, education, social housing and food security, all areas heavily impacted by the current crisis.

From April to June 2020 alone, social or sustainability COVID-19 response bonds totalling USD 20 billion were listed on the Luxembourg Stock Exchange. Among the issuers of these bonds were the European Investment Bank, the World Bank, the International Finance Corporation, the Council of Europe Development Bank and the African Development Bank, to mention but a few.

2020 has been marked by the focus on Transition, which is likely to shape the coming decade. Publications such as the whitepaper “Financing credible transitions” by Climate Bonds Initiative and Credit Suisse, published in September, and this month’s “Climate Transition Finance Handbook” by ICMA are leading the way and provide guidance on how issuers across sectors can accelerate their green transition and make their operating models more sustainable. The spotlight has been turned to the broader sustainability strategy of all issuers regardless of sector, and how they contribute to the Paris Agreement, and this trend is definitely here to stay.

SpareBanken Vest made its debut on LGX with the issuance of a SEK 1bn Green Covered Bond, aimed to finance renewable energy and green building projects. Earlier this year, in June 2020, the Norwegian bank's Green Covered Bonds were certified by the Climate Bonds Initiative.

The German bank DZ Bank returned to the market with a second Green Bond issued under its updated framework. The EUR 250m proceeds will finance renewable energy projects, especially onshore wind turbines in the US and Canada.

Real estate specialist Cofinimmo issued a EUR 500m Sustainability Bond, its first public benchmark Sustainability Bond. Proceeds will finance various assets in accordance with the company's Sustainable Finance Framework, published in May 2020.

Earlier this week, LGX marked the 10th anniversary of the International Finance Corporation (IFC) Green Bond Program. In this period, IFC has issued more than USD 10 billion worth of Green Bonds to support green projects in developing countries and make a tangible difference for people and countries particularly vulnerable to the consequences of climate change. Many of IFC’s Green Bonds are listed on LuxSE and displayed on LGX, totalling close to USD 6 billion.

A sister organisation of the World Bank, IFC is the largest global development institution that focusses exclusively on the private sector in emerging markets.

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