Sustainable finance

Luxembourg was the first European country and first AAA-rated country worldwide to launch its sustainability bond framework (the “Framework”), on September 2, 2020. This framework meets the International Capital Markets Association (ICMA) Green, Social and Sustainability Bonds principles, the standard in the field. Living up to its reputation as a first-mover, Luxembourg also incorporated eligibility criteria that are as much as possible in line with the recommendations of the final report of the Technical Expert Group (TEG) on the Taxonomy of the European Union. In the same spirit, the Framework was designed to comply with the draft European Green Bonds Standard (EU GBS). 

Sustainability Bond Framework

 

The launch of the Framework, which enables the issuance of green, social or sustainability bonds (i.e. combining green and social aspects), is in line with the efforts undertaken by the Luxembourg Government over the last years in the field of sustainable finance. It underlines the innovative and proactive role of the country and its financial centre, which is an international leader in the area of sustainable investments already today. Anticipating current market trends and investor demand that are increasingly oriented towards sustainable investments, the Framework enables the country to be ready for the financial world of tomorrow. In particular, it contributes to the positive development of the sustainable bond market and accompanies the maturing of this market on a global scale.

Based on this Framework, Luxembourg was the first European country and the first AAA-rated country in the world to launch a sustainability bond on September 7, 2020. With a volume of €1.5 billion and a 12-year maturity, the bond bears a negative interest rate of -0.123%. The fact that the demand for this bond quickly exceeded the initial offer underlined both the interest that investors have in this new type of product and the confidence that the markets place in the Luxembourg economy. The bond is listed on the Luxembourg Stock Exchange (www.bourse.lu), the world's leading exchange for sustainable securities and home to almost half of the world's listed green bonds..

The sustainability bond finances or refinances investments worth €1.5 billion until 2022, covering at least 65 projects in seven different sectors providing positive environmental and social outcomes.

On September 6, 2022, the Luxembourg State Treasury published the second sustainability bond report, as foreseen by the Framework. The report contains both the allocation as well as the impact report for the year 2021. This second sustainability bond report provides details on the allocation of the €331 million invested in 2021 as well as the expected impacts of the investments. In total, €1.103 million have been invested over the period 2018-2021. The full allocation of proceeds is planned to come to term at the end of the budget year 2022.

The alignment of the Framework and of the allocation report has been independently assessed by Sustainalytics, a leading ESG ratings, research and analytics firm.

Learn more about Luxembourg’s role as a leading hub for sustainable finance:

https://www.luxembourgforfinance.com/en/financial-centre/sustainable-finance/

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