Julie Becker (Luxembourg Stock Exchange): LGX and the evolution of green finance
Julie Becker, Member of the Executive Committee of the Luxembourg Stock Exchange gives insights on the Luxembourg Green Exchange and on the Grand-Duchy leading role in the market of listed green securities.
Can you explain the Luxembourg Green Exchange in a few words?
Launched in 2016, the Luxembourg Green Exchange, or LGX, is the world’s first platform that displays exclusively green financial instruments. It is also the first platform that makes the industry’s best practices for green securities a mandatory requirement. Initially meant to display green bonds only, LGX’s success has rapidly generated the need to open two extra windows and display social and sustainable bonds as well. The 2017 year-end results are very encouraging: 132 green bonds, 13 social bonds and 6 sustainable bonds from 41 issuers across the globe. We are home to over 50% of all listed labelled green bonds globally. The bonds listed on LGX are contributing to the achievement of 15 of the 17 UN Sustainable Development Goals (SDGs), as defined by the United Nations.
“The International Energy Agency estimates that $1 trillion a year will be spent between now and 2050 to fund low-emission projects.”
We are an exchange unlike any other. We have been actively involved in the development of the green bond market from its beginning. In 2007, we listed the first ever green bond, the European Investment Bank’s “Climate Awareness Bond”. Since then, we have experienced significant growth, we are the listing venue of choice for supranational issuers and multilateral development banks (MDBs), and today we lead the market in terms of volume of listed green securities. When the world’s first sovereign green bond, issued by the Republic of Poland, joined LGX in late 2016, Poland’s Ministry of Finance explained in a written statement why they have chosen Luxembourg: “The recent implementation of the Green Exchange is a proof of an open-minded approach towards the needs of financial markets. We would definitely recommend LuxSE as a listing venue as our cooperation has always been smooth and very productive.”
What impact do you anticipate for the middle to long-term?
The International Energy Agency estimates that $1 trillion a year will be spent between now and 2050 to fund low-emission projects. We know that banks alone are not able to carry the funding burden. As a result, companies and governments are increasingly turning to capital markets in order to raise sufficient long-term capital. As an exchange committed to ensuring transparency, offering disclosure and comparability solutions, we are in a unique position to support the transition to greener and more inclusive economies and to make sustainable investment mainstream. 10 years after the listing of the first green bond, we are at USD 155.5 billion in 2017. If we look at the growth of issuances, there were 78% more green bonds issued in 2017 than in 2016. That is huge growth for one specific asset class compared to other instruments, which demonstrates that green bonds are really taking off.