Luxembourg Stock Exchange extends Green universe to SRI

LONDON, May 18 (IFR) - The Luxembourg Green Exchange (LGX) is opening a segment dedicated to sustainable and social projects bonds, a sector valued at over US$23trn, as it looks to broaden the universe of socially responsible instruments listed on its platform.

While Green bonds initially spearheaded socially responsible investments, the asset class has broadened out in recent times to so-called SRI bonds that finance various projects, ranging from education, healthcare and social cohesion.

“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,” said Robert Scharfe, CEO of the Luxembourg Stock Exchange (LuxSE).

The global value of SRI products and strategies amounts to more than US$23trn, according to the Global Sustainable Investment Alliance.

The new segment on the Luxembourg Stock exchange will increase the visibility of Sustainable and Social (S&S) projects and facilitate their financing.

Ten securities, with a combined value of over €5bn, are already displayed in the new window. BNG, Council of Europe Development Bank and ICO are among the issuers represented.

Eligibility categories of S&S projects include socioeconomic advancement and empowerment, affordable housing and food security.

The LGX was launched in September 2016 and now lists over €50bn of Green bonds from 27 international issuers. Due to the flexibility offered by sustainable bonds, allowing for a much broader range of projects than just Green, they are likely to produce a larger market. For the same reasons, they can attract more corporates to issuing such instruments, according to the exchange.

Issuers will have to follow a similar process as they would to list a Green bond in order to be listed. They must commit to disclosing detailed information relating to planned use of proceeds, provide an ex-ante external review, as well as a post-issuance report presented regularly throughout the lifespan of the security.

As with Green bonds, transparency will remain the focal point in mainstreaming this instrument. (Reporting by Matt Painvin; Editing by Helene Durand, Philip Wright)