Luxembourg financial centre breaks new ground in fight against climate change
The Luxembourg Stock Exchange (LuxSE) today launched the Luxembourg Green Exchange (LGX). LuxSE is the first stock exchange in the world to introduce a platform dedicated to listing and dealing in green instruments, a move that will set a new benchmark for the rapidly evolving green securities market.
The LGX, which went live today, gathers into one place issuers that dedicate the funds they raise entirely to green investment. LGX will immediately become home to the majority of the 114 green bonds listed on LuxSE, worth over $45 billion, issued by the EIB, the World Bank and the Bank of China, among others. It marks the first time that a stock exchange has required green labelled securities to adhere to strict eligibility criteria, that include labelling, the use of proceeds, and most importantly ex-ante review and ex-post reporting.
Ex-post reporting is currently not the market standard. The bold decision to introduce it as an entry requirement stems from the LuxSE’s ambition to be able to guarantee that securities on the Green Exchange are genuinely green. Such reassurance is what investors seek as they increasingly expect issuers to be crystal clear about the use of proceeds.
This launch is not the only initiative marking Luxembourg’s commitment to provide a transparent assessment and certification framework. Last week, LuxFLAG, the Luxembourg Finance Labelling Agency, launched a new Climate Finance label that will be granted to eligible investment funds financing climate change mitigation and/or adaptation measures. One of the primary eligibility criteria of the label is that the applicant fund must dedicate at least 75% of assets under management to investment in climate change mitigation and/or adaptation activities. The label is available to regulated UCITS and AIFMD funds domiciled in any EU country or a country that is recognised as having an equivalent level of supervision.
Luxembourg has an impressive track record in Climate Finance tools. Green listings on LuxSE represent the highest number of listed green bond offering globally, making it the global market leader in this sector. 67% of AuM in European impact funds are domiciled in Luxembourg, as well as 37% of funds with environment strategies, representing Europe’s largest market share.
The launch of the Luxembourg Green Exchange and Climate Finance label is fully in line with the strategic aims of the Climate Finance Task Force. The Task Force brings together the Luxembourg Government and the financial industry with the aim of leveraging private sector expertise and the toolbox of products and services available in the financial centre to make a sustainable contribution to the international fight against climate change.
Further initiatives will be announced over the coming weeks and months.
Discover our new video about the Luxembourg financial centre’s fight against climate change here.