Last December, Luxembourg Stock Exchange was given the Outstanding Contribution to the Financial Center of Luxembourg award. We met with their representatives to discuss the creation of LGX, its future steps and main priorities.
LuxSE is getting more and more recognition as a green finance hub. How did this idea of creating LGX come up?
Demand for green investments is growing rapidly. But the risk of greenwashing threatens the integrity of the green market. As the market evolves, there is a growing need for greater transparency. The same applies to social and sustainable instruments.
With the creation of LGX, LuxSE aims to provide green, social and sustainable issuers and investors with a dedicated infrastructure where they can post and access information relating to security use of proceeds and impact in a transparent and efficient way, thus boosting investor trust and integrity in the market.
Can you share some significant figures with our readers?
Sustainable finance is gaining momentum very quickly and notably since the COP 21 Agreement. All relevant segments are increasing rapidly, albeit green bonds are still only at 1% of the total debt markets, whereas in the fund industry sustainable products already account for more than 12 % of assets under management. We however need to raise awareness about the performance of sustainable investment products. There is still this misconception that sustainable investments and good performance are two different things, whereas numerous studies clearly demonstrate that investing responsibly and getting an even better return than in conventional investments are perfectly compatible objectives.
We launched LGX as the first platform of its kind and one year later, we are proud to say that 50% of the world production of listed green bonds are displayed on LGX. Our platform is attractive for issuers of green bonds to showcase their projects. In parallel, investors get free access to the full documentation of the underlying green or sustainable products, allowing them to take informed investment decisions. Over the past 15 months, we have extended the green platform to sustainable and social instruments. We are currently diversifying into bonds, funds and indexes and will, ultimately extend to all sustainable financial instruments.
What are the next steps for LGX?
Overall, we have a long record of being the first exchange in many novelties that have come to the market – be it in the fund industry, dedicated investment vehicles or in conventional bond markets, where we have seen many different forms of financing instruments come to light. Now I believe that we need to make sure that we are reaching worldwide standards in sustainable finance to provide maximum transparency and comparability. That is the reason why we are cooperating with Chinese institutions, who cover the biggest green bond market to date. First and foremost, we need to create more transparency in making Chinese standards better known and more visible. This is why we also display green bond indexes of the Shanghai and the Shenzhen Stock Exchanges on the LGX platform, allowing China to bridge the gap between their domestic market and the international investment community. Ultimately, the objective is to create one global green bond market with a common denominator assorted with national or regional specificities.
What are the future projects and priorities for next year for the Luxembourg Stock Exchange?
Today, capital market transactions are handled in a very short timeframe; therefore, our service delivery also needs to adapt to this accelerated process and use latest technology. For example, one year ago we introduced distributed ledger technology in our financial reporting channels because it allows for a safer, quicker and less expensive way of handling this business. In other words, blockchain is live at LuxSE since October 2016. Another good example is the FundsDLT initiative whereby we are aiming at optimizing cross-border fund distribution based on the blockchain concept, to the benefit of both investors and asset managers. Overall, we are extremely international and today the aim is to serve markets and clients all around the world in the most efficient way, considering both regulatory requirements as well as new technology offering.
Publié le 11 janvier 2018