The grand duchy is the first EU country to unveil a “sustainability bond framework” that complies with new European rules. Luxembourg’s finance minister, Pierre Gramenga, said it will help the country’s goal of being a leader in green finance. Library picture: Pierre Gramegna is seen speaking at a business event in April 2018. Photo credit: Matic Zorman 

The finance ministry said on 2 September that its “Sustainability Bond Framework” was the first to meet new EU green finance rules.

“Luxembourg is the first European country and first AAA rated country worldwide to have launched a sustainability bond framework,” Bob Kieffer, director of Luxembourg’s treasury, wrote on his Linkedin page.

The government’s press release stated that, “living up to its reputation as a first-mover, Luxembourg has also incorporated eligibility criteria that are already fully in line with” the EU taxonomy for sustainable activities (which standardises how economic activities are screened for sustainability across the bloc) and the EU Green Bond Standard (a draft common labelling scheme).

Five banks appointed

Luxembourg’s government has already engaged five banks to float the bonds, Reuters reported on 2 September. The news agency, citing a lead manager memo, said the banks were BCEE, BNP Paribas, Bil, Deutsche Bank and Société Generale.

Luxembourg’s finance ministry will present the framework during an investor call on Thursday at 3pm, according to Reuters.

The government has not announced when it will sell its first sustainability bond, only saying that it would be “in the near future”. However, Reuters said the timing would be “subject to market conditions” and that the paper would be issued with a “medium to long-term maturity”.

Germany sold its first green bonds on Wednesday, attracting €33bn in bids for €6bn in 10-year bonds, per the Financial Times and Reuters.

Sustainable objectives

According to the Luxembourg finance ministry’s press release, bonds issued under the framework can have “green, social or sustainability” objectives.

The ministry stated:

“Proceeds from the bonds issued through this framework can 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.”

Pierre Gramegna, the finance minister (DP), said the new framework “will enable the country to consolidate its position as a centre of excellence in the field of responsible, sustainable and innovative finance.”

The Luxembourg Stock Exchange started a platform for trading green bonds in 2016. About €50bn in sustainable securities were listed as of the end of April, the bourse said on 14 May.