We interviewed Julie Becker, CEO of the Luxembourg Stock Exchange (LuxSE), to find out what resulted in the exchange winning “Exchange of the Year” for the 7th time since 2017 at Environmental Finance’s Sustainable Debt Awards.
Julie Becker joined LuxSE in 2013 and was appointed CEO in 2021. Widely recognised as an innovative sustainable finance expert, she was instrumental in the creation of the Luxembourg Green Exchange (LGX) in 2016, LuxSE's world leading platform dedicated to sustainable finance.
After an important year of strengthening sustainable finance in emerging markets and advancing financing for gender equality, LuxSE was named ‘Exchange of the Year’ for its work in these important areas of sustainable development. Environmental Finance’s Sustainable Debt Awards seek to recognize institutions that excel, innovate, and contribute to the successful development of the sustainable debt market. The winners of the different categories are recognised for their thought-leadership, best practice, and innovative initiatives in the field of sustainable finance throughout 2023.
SSE: Winning an award once could be lucky, but seven times in recent years is a testament to a commitment and underlying values to sustainability. When did sustainability become such a strong foundational value at the Luxembourg Stock Exchange?
Julie Becker: Indeed, we are really pleased that our work and contribution to the sustainable finance agenda is being recognised by Environmental Finance year after year. Our commitment to sustainability and to making sustainability a natural part of finance dates back to the early days of sustainable finance.
In 2007, LuxSE was chosen as the listing venue of the world’s first green bond, a Climate Awareness Bond issued by the European Investment Bank, with the World Bank following suit with its first green bond in 2008. However, developments were slow at first. It wasn’t until 2016, when we established the Luxembourg Green Exchange, or LGX, the first platform entirely dedicated to sustainable securities, that things really started to take off and we decided to place sustainability at the heart of our mission as an exchange.
We launched LGX as a direct contribution to the Paris Agreement and the United Nations Sustainable Development Goals. The objective was and still is to help mobilise and reorient capital flows towards sustainable development projects across the world. Since 2016, LGX has seen exponential growth in terms of scope, reach and impact, and we are very proud of what we have achieved so far. That said, we continue to explore additional initiatives to mobilise financing and help accelerate progress towards the green transition and the global goals.
SSE: What lessons have you and your team learned along the way from starting the Luxembourg Green Exchange in 2016, to becoming a front-runner in green and social bond listing globally?
Julie Becker: LGX started as a platform dedicated solely to green bonds, but as the sustainable finance market evolved, so too did our platform. We knew that as new types of sustainable securities came to the market, we needed to expand our offering. That’s why we opened windows on the LGX platform dedicated to social and sustainability bonds in 2017, a section for ESG funds in 2018 and we went on to add a sustainability-linked bond window in 2020.
Another important lesson we learned was to listen to the market and find ways to address the barriers to entering sustainable finance that both issuers and investors were voicing. This led us to discover that although the market was growing at an incredible pace, there was a lack of concrete sustainable finance education initiatives available, and that people were finding it increasingly hard to access structured and comparable data on sustainable bonds. This led us to launch two important initiatives in 2020 that expanded LGX beyond being a platform solely for the display of sustainable bonds – the LGX Academy and LGX DataHub.
SSE: How have green and sustainable issuances changed over this time and what trends or changes have surprised you the most?
Julie Becker: We have seen many changes in sustainable bond issuances since we launched LGX in 2016, be it through the introduction of new types of instruments, regulatory developments and new or updated standards guiding the market. We have also observed important changes in the types of issuers that issue sustainable bonds. Initially, multilateral development banks and supranational institutions dominated the space, but over the years, companies from a vast range of sectors and industries have issued sustainable bonds and the geographical reach has also increased considerably. This is a very positive and necessary trend. Today, we serve more than 310 issuers from 60 countries which have brought more than 2,000 sustainable bonds to LuxSE and LGX.
One thing that has been interesting to observe is how issuers have embraced the different categories of sustainable bonds. Against the backdrop of the COVID-19 pandemic, social bond issuances increased tenfold from 2019 to 2020. Green bonds had until then dominated the sustainable debt sphere, but since 2020, the social dimension has gained traction, which is also reflected in the uptick in sustainability bonds, which combine green and social objectives. Nevertheless, green bonds are still the most popular category and represented more than 60% of sustainable bond issuances globally in 2023, according to data from Bloomberg.
We had expected to see an uptick of sustainability-linked bonds or SLBs in 2023, but this did not materialise. On the contrary, global SLB issuance declined last year. As the only instrument in the sustainable bond category which raises financing for general corporate purposes, SLBs could be a good alternative for companies especially in hard-to-abate sectors and help them finance their transitions and link their sustainability goals to their financing strategy. We will keep a close eye on the developments in this area, as we are convinced the market needs sustainable instruments targeted to companies which do not have specific green or social projects that can be financed through green or social bonds.
SSE: We’re very grateful to be working closely with your team on many areas, but in particular we’ve been collaborating in recent months on the delivery of training on gender equality for capital market participants. This collaboration is based on a strong expertise at Luxembourg Stock Exchange on this topic and a growing market for gender-linked financial products. What led to the exchange’s work on this topic in particular?
Julie Becker: Women and girls make up half of the world’s population and so represent half the world’s potential when it comes to achieving the sustainable development goals and accelerating the necessary green transition. Multiple studies suggest that women and girls are being disproportionately affected by the negative consequences of climate change and this was also the case during the COVID-19 pandemic.
We noticed that issuers and investors alike were beginning to seek out sustainable debt instruments that contribute to reducing these disparities, and we decided to categories and flag sustainable debt instruments on LGX which contribute to gender equality objectives. Through the gender-focused bond flag, we make it easier for investors to identify sustainable bonds which contribute to the empowerment of women and girls and help facilitate financing for such projects.
In 2022, we signed a Memorandum of Understanding with UN Women and we committed to join forces to advance gender finance and gender-lens investing. Since then, we have published a market study on the state of the gender-focused bond market, contributed to a series of case studies published by UN Women and developed a course dedicated to gender finance to foster awareness of this important topic. We are convinced that gender finance is a new mega trend and that there will be important developments in this space in the coming years.
SSE: Are there ways other exchanges can collaborate with you to advance sustainable bond markets?
Julie Becker: Collaboration between exchanges is key when it comes to advancing the sustainable bond market, and it is something that we’ve placed great emphasis on in recent years. There are many ways in which collaboration can propel the market, be that through committing to work together to dual-list sustainable securities or focus on capacity building or sustainable finance initiatives that will allow issuers in new regions to enter the market.
Last year alone, we joined forces with Chongwa Financial Asset Exchange or MOX in Macau, the Abu Dhabi Securities Exchange and Bolsa de Valores de Cabo Verde to advance the sustainable finance agenda in new regions. Through this next step in our collaboration with Cabo Verde, we were able to bring the first Cabo Verdean green bond issued by the International Investment Bank focused on the blue economy to international capital markets. The bond highlighted the island nation’s drive to channel sustainable finance into improving its maritime and fisheries sectors, as important parts of the country’s economy and society.
Beyond working together to bring more sustainable bonds from emerging markets to international capital markets, exchanges can and must work together to educate market actors. One example of this is our cooperation with the Santiago Exchange and Governart in Chile. In 2019, we signed an MoU with the Santiago Exchange whereby we teamed up to promote green and social bonds in Latin America. However, with this new cooperation, LuxSE acts as an International Certifying Institution for the entities’ ESG Analysis Certification programme, training Latin America-based professionals in the analysis and integration of ESG matters, in the corporate and sustainability business strategies of companies, as well as in the responsible investment strategies of institutional investors. In 2023, we provided more than 40 participants from Chile, Mexico and Guatemala with this certification, which we hope will help advance the sustainable bond market in Latin America.
SSE: What can we expect next from LuxSE and the Luxembourg Green Exchange in this space and how do you stay ahead of the game?
Julie Becker: 2024 has already been an important year for LuxSE and LGX. In April, we announced that LGX hit a major milestone, reaching EUR 1 trillion worth of outstanding green, social, sustainability and sustainability-linked bonds, or sustainable bonds, on the platform. Then, just a few days after announcing the Exchange of the Year award, we reached 2,000 outstanding sustainable bonds on the platform. We are committed to continuing to work towards the sustainable finance agenda and reach new milestones, through the dedication of our teams, issuers and partners.
Ensuring a just transition means that we need to allow all players in all countries and industries to contribute. Private capital will play a key role in this, and we will continue to play our part in mobilising this capital, especially among private investors in developed markets to finance essential sustainable development projects in the emerging markets experiencing the most devastating effects of climate change.
Companies operating in hard to abate sectors also need to be given the opportunity to finance their transition. Going forward, we will continue to advocate for innovation within the realm of sustainable finance products, especially when it comes to innovations that could help mobilise the capital that these companies need in the move towards greener operations.
When it comes to staying ahead of the game, it’s all about listening to the market. That’s exactly what we did when we expanded the LGX platform to include new security types and initiatives. Going forward, we will continue to contribute in new ways to accelerating the green transition and create more sustainable and inclusive capital markets, which support the real economy and the real society, throughout 2024 and beyond.
