POLITICS & INSTITUTIONS - ECONOMY

LGX expands platform for climate-aligned issuers



LuxSE deputy CEO and LGX founder Julie Becker described the “unprecedented sums of money” required to achieve the UN sustainable development goals LuxSE

LuxSE deputy CEO and LGX founder Julie Becker described the “unprecedented sums of money” required to achieve the UN sustainable development goals LuxSE

The move will provide a new section on LGX, made possible through a partnership with Climate Bonds Initiative (CBI), which is geared to issuers of debt securities in climate-aligned sectors to meet the growing demand of both issuers and investors for a broad range of options as ESG products are on the rise. 

The section will “leverage[e] [CBI’s] research and screening methodology [and] shines a light on climate-aligned issues [that] by the very nature of their activity and revenue streams contribute directly to meet the global climate goals,” explained Arnaud Delestienne, LuxSE director of international capital markets, during a Thursday press conference. 

Science-backed methodology

The platform will highlight fully-aligned issuers, which have at least 95% of their revenues from low-carbon activities, as well as strongly-aligned issuers, at minimum 75%. 

The science-backed methodology is carried out by CBI, an international non-profit aimed at mobilising the $100t bond market for climate solutions, and will cover eight sectors: renewable energy, low-carbon transport, smart buildings, water, waste, sustainable land use & agriculture, climate adaptation and ICT. 

LuxSE deputy CEO and LGX founder Julie Becker--appointed to take over as CEO this April--described the “unprecedented sums of money” required to achieve the UN sustainable development goals--around $11.5t--as well as those of the Paris Climate Agreement goals, around $6.9t per year. And, while emphasising the crucial role exchanges have in redirecting investment, Becker noted, “Today’s investors want to invest in their own values and convictions.”

This is not just limited to social or green bonds either, but there is a need to uncover new sustainable financial investments. 

“By adding the new issuer section, just next to our existing product section, we want to bring more visibility to financial instruments that have a positive impact on our planet,” Becker said, adding: “The outstanding debt of climate-aligned issuers represents a huge part of the total climate finance market.”

Referring to a 2018 study carried out by CBI, she also revealed that the unlabeled part of climate-aligned debt instruments is four times bigger than the labelled one, “but this is not yet visible enough for the environmentally-friendly investor community,” she added.

A push for more transparency

Sean Kidney, CBI CEO, called the LGX announcement a “positive step in market development,  connecting investors and capital with companies that already have inherent low carbon business models. In an environment where climate and sustainability factors are becoming fundamental to investment decisions, the CBIs section opens new opportunities for finance to flow where it’s needed most.” 

While the CBI tool is one way to look at companies, he sees scope for a lot more in this domain and says the 2030 climate goal set out by the EU should be a global one.

Chiara Caprioli, LuxSE business development manager, added that the climate-aligned bonds were another step in LuxSE’s commitment to transparency which also gave “more importance to entity level considerations in a way that is really addressing the whole way to look at the overall product.”

On launch date, the platform included 23 climate-aligned issuers in 16 countries, including Eurofima, a non-profit financing the modernization and development of European railway transport.

Since its 2016 launch, LGX has become the world’s leading platform for sustainable finance, today boasting over 930 displayed securities totalling more than €417b equivalent.