The Luxembourg Green Exchange (LGX) has just taken its first steps! This platform, dedicated to green financial instruments, makes the Luxembourg Stock Exchange the world's first stock exchange to restrict itself to environment-friendly financial products. Access is restricted to issuers meeting strict criteria for admissibility. The platform is aiming at establishing a new benchmark for the strongly developing market for green securities.
114 green bonds were being quoted when the LGX first opened - from 25 issuers and quoted in 19 different currencies, they represented a total sum of more than 45 billion US dollars. Since the Climate Bond Initiative estimates the volume of green issues in 2016 at 100 billion US dollars, the LGX occupies a key position in the global market for green securities.
LGX brings together issuers devoting 100% of the funds they raise to green investments. With this initiative, the Luxembourg Stock Exchange is meeting the increasingly demanding requirements of investors regarding the environment-friendly aspect of their investments. Green securities have become particularly attractive since the COP21 Conference in Paris, and this has raised questions as to the way in which the green securities being issued can be made more visible, and how their quality can be checked. As a result, the Luxembourg Stock Exchange applies strict admissibility criteria for the LGX:
- self-labelling as a green instrument or equivalent (in relation to the climate, for example). During the application process, the issuer must indicate clearly the green nature of the security;
- Use made of the funds raised. The funds must be used exclusively for financing or refinancing projects that are 100% green;
- 'Ex-ante' review and 'ex-post' reporting. The issuer must undertake to supply both an external 'ex-ante' review drawn up by an independent third party and 'ex-post' reports - an unprecedented requirement on the world's capital markets.
Access to the LGX will be refused to securities falling in a number of listed categories, including the production of nuclear energy, trading in protected flora and fauna, experiments on animals for cosmetics and other non-medical products, medical tests on species facing extinction, and fossil fuels.
The LGX concept has been developed in accordance with the best practices drawn up by the Climate Bonds Initiative (CBI) and the International Capital Market Association (ICMA).