The Luxembourg Stock Exchange (LuxSE) on 13 October published a market study analysing trends in green bond issuance. Looking at 5,451 sustainable bonds, they concluded that elements of the EU taxonomy were found in 14% of the bonds listed worldwide, a percentage that grew to 27% when it came to EU-based issuers.
For their analysis, the specialists used the LGX DataHub to search for references to elements of the EU taxonomy in pre-and post-issuance documents.
New reporting obligations for investors and assets managers will likely push the demand for EU taxonomy-compliant products, explains LuxSE. “We are assessing how prepared issuers are for the EU Taxonomy at this stage. The adoption of bond-level EU taxonomy disclosures has the potential to attract more capital flows, as the demand for EU Taxonomy-aligned products,” explained head of sustainable finance at LuxSE, Laetitia Hamon in a press release.
Banking sector most proactive
The banking sector appears to be ahead of the curve. While 19% of the sustainable bonds analysed were issued in the banking sector, they represented 39% of the bonds incorporating elements of the taxonomy. Sovereign, supranational and agency issuers were also noted in the study for producing “the most sophisticated EU Taxonomy-related disclosures at this stage.”
LuxSE describes the findings of its study as an “encouraging start”, as the draft EU Green Bond Standard--of which the EU taxonomy is a key component--is likely to serve as a gold standard for green bond issuance. The taxonomy serves as a tool to help define what activities are environmentally sustainable.
A complementary climate delegated act adopted in March 2022 caused controversy for accepting specific nuclear and gas energy activities as part of the EU taxonomy, leading to legal action by Austria and Luxembourg in October 2022.