A new sustainability bond framework for Luxembourg
Luxembourg is the first European country and first AAA rated country worldwide to launch its new sustainability bond 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 has also incorporated eligibility criteria that are already fully 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 has been designed to comply with the draft European Green Bonds Standard (EU GBS).
The launch of the framework, which will enable 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, and underlines the innovative and proactive role of the country and its financial centre, which is already today an international leader in the area of sustainable investments. Anticipating current market trends and investor demand that are increasingly oriented towards sustainable investments, the framework will enable the country to be ready for the financial world of tomorrow. In particular, it will contribute to the positive development of the sustainability bond market and accompany the maturing of this market on a global scale.
Learn more about Luxembourg’s role as a leading hub for sustainable finance :
Sustainability bonds fund one or several projects that have a positive environmental and social impact. They differ from conventional bonds by requiring precise and specific information on the investments they fund and their “green” and “social” character with identical financial risk for investors.
Proceeds from the bonds issued through this framework will only be used to finance or refinance eligible expenditure. More specifically, this covers expenditure in the following green and social categories: construction of green buildings, energy transition, development of low-carbon transport, environmental protection, water and wastewater management, climate financing and R&D, access to essential services - health, education and social inclusion, affordable housing and job creation.
In this way, the framework will provide an objective and transparent tool to determine the sustainability of the country's public investments, and act as a catalyst to achieve its commitments under the Paris Climate Convention and the 17 UN Sustainable Development Goals (SDG). The framework is also aligned with Luxembourg's two flagship sustainable strategies, the National Plan for Sustainable Development (PNDD) and the Integrated National Energy and Climate Plan (PNEC).