By Matt Painvin (Reuters)
Seeking to widen the universe of socially responsible instruments listed on its platform, the Luxembourg Green Exchange (LGX) is opening a segment devoted to sustainable and social projects bonds, a sector valued at over US$23trn. Although socially responsible investments were originally led by Green Bonds, the asset class has recently widened to so-called SRI bonds that finance a variety of projects, covering such areas as education, healthcare, and social cohesion. The Global Sustainable Investment Alliance estimates that the worldwide value of SRI products and strategies totals more than US$23trn.
According to Robert Scharfe, CEO of the Luxembourg Stock Exchange (LuxSE), “since the launch of LGX, there’s been a push, from both investors and issuers side, to expand the Green bond market from simply a climate remit to other aspects of socially responsible investment.”
This new segment on the Luxembourg Stock exchange will raise the visibility of Sustainable and Social (S&S) projects and better enable their financing, with issuers including BNG, Council of Europe Development Bank and ICO. Examples of S&S project eligibility categories include socioeconomic advancement and empowerment, affordable housing and food security. Already displayed in the new window are ten securities, valued at over €5bn combined.
Launched in September 2016, the LGX and now lists over €50bn of Green bonds from 27 international issuers. Sustainable bonds are likely to produce a larger market owing to the flexibility they offer, which allows for a much broader range of projects than just Green. As such, according to the exchange, they can draw more corporates to issuing such instruments.
In order to be listed, issuers will need to follow a process similar to listing a Green bond, including committing to disclosing detailed information pertaining to planned use of proceeds, providing an ex-ante external review, and a post-issuance report presented regularly throughout the lifetime of the security. As is the case with Green bonds, the key point in mainstreaming this instrument will remain transparency.