The history of LGX: Diving back to 5 years of growth
In this special series of articles, we look back at each year of milestones of the Luxembourg Green Exchange (LGX) from its creation in 2016 to its 5th anniversary celebration in September 2021.
2020 was undoubtedly an extraordinary year. The global pandemic brought widespread attention to the consequences of climate change and the importance of forging a more sustainable and inclusive economy. For many, COVID-19 signalled the point of no return, bringing environmental, social and corporate governance (ESG) criteria center-stage in finance, backed by a clear policy direction and fast-evolving regulatory framework.
Despite the significant socioeconomic setback brought by the pandemic, 2020 was a year of firsts, records and accomplishments – both for sustainable finance and for the Luxembourg Green Exchange (LGX). In 2020, the combined value of social and sustainability bonds significantly surpassed the total value of green bonds displayed on LGX. The platform experienced record growth which, compared to 2019, translated into a 134% increase in sustainable bond issuance in terms of value, and a 51% increase in the number of new sustainable securities. To make a direct contribution to the massive public financing efforts that followed in the wake of the pandemic, the Luxembourg Stock Exchange (LuxSE) announced the waiving of listing fees for eligible social and sustainability bonds issued from April to 30 September 2020.
Other main trends that gained substantial traction in 2020 were the progressive legitimation of transition finance along with the standardisation of Sustainability-Linked Bonds (SLBs). SLBs represent a complementary instrument to green, social and sustainability bonds, and have the potential to bring issuers from all sectors to accelerate their transition to more sustainable operating models. Following the International Capital Market Association (ICMA)’s publication of the voluntary SLB Principles in June, LGX expanded its scope to also include SLBs. Notably, 2020 also saw investors increasingly shift their primary focus from considering specific projects to taking into account the issuer’s overall sustainability profile and strategy.
2020 was also marked by LuxSE and LGX’s first steps into the Indian market, in the form of two Memoranda of Understanding (MOUs) signed with Indian counterparts. Built with the aim of advancing sustainable finance in the Indian market, these milestone partnerships with the State Bank of India and India International Exchange (INX) opened up new avenues for long and fruitful cooperation between our institutions.
It was also year distinguished by innovation, which saw LGX launch two new initiatives to support the growth of sustainable finance – the LGX Academy and the LGX DataHub. In May, the LGX Academy was developed to fill the gap in sustainable finance education and increase the knowledge and understanding around sustainable finance principles, standards, labels and regulation. Offering courses to financial professionals and students, the LGX Academy plays an important role in advancing the knowledge of sustainable finance among current and future market participants.
In order to allow investors and asset managers to build sustainable investment strategies, meet their reporting requirements and stay compliant with new regulations, LuxSE launched the LGX DataHub in September 2020 – a centralised database hosting structured sustainability data points for fixed income products in the sustainable finance market. Today, the LGX Datahub offers the most advanced coverage of labelled green, social and sustainability bonds and the most comprehensive scope of data points on these instruments.
That same month, LuxSE celebrated the listing of Europe’s first sovereign sustainability bond, a EUR 1.5bn bond issued by the Grand Duchy of Luxembourg, also displayed on LGX. The following month marked the listing of the first EUR 17bn social bond issued by the European Commission under the EU SURE programme, which aims to protect jobs and workers across Europe heavily impacted by the COVID-19 pandemic. By the end of 2020, LGX counted close to 900 sustainable securities totalling EUR 388 billion, issued by 150 issuers in more than 30 countries.
With great achievement comes recognition. In October 2020, LGX’s key role in facilitating sustainable investment was recognised at the United Nations Global Climate Action Awards 2020 in the category of ‘Financing in Climate Friendly Investment’. For the fourth year running, LGX also received the title of Exchange of the Year by Environmental Finance at its Green Bond Awards 2020, highlighting yet again LGX’s innovative approach to promoting the sustainable finance agenda.