To keep up to speed with recent market developments, the innovative Sustainability-Linked Bonds (SLBs) can now be displayed on the Luxembourg Green Exchange (LGX).
The Luxembourg Stock Exchange (LSE) has decided to welcome Sustainability-Linked Bonds (SLBs) on its Luxembourg Green Exchange platform (LGX), alongside Green, Social and Sustainable Bonds, as well as Green, Social and ESG Funds.
This decision follows the publication of ICMA’s Sustainability-Linked Bond Principles (SLBP) in June 2020 and takes into account an increased popularity for these sustainable debt instruments.
SLBs are performance-based bond instruments whose financial and/or structural characteristics can vary depending on whether the issuer achieves predefined sustainability objectives within a predefined timeline. The potential variation of the coupon of the bond is the most common example.
According to the SLBP, an issuer will first have to select one or more Key Performance Indicator(s) (KPI(s)), which must be "material to the issuer’s core sustainability and business strategy and address relevant environmental, social and/or governance challenges of the industry sector and be under management’s control". As a second step, an appropriate and “ambitious” target level (i.e. Sustainability Performance Targets (SPTs)) must be calibrated.
Unlike Green, Social and Sustainability Bonds, which proceeds can only be used to finance a pre-determined green, social or sustainable project, proceeds deriving from SLBs do not need to be allocated to a specific project and can be used to finance any corporate activity, thus shifting the focus on the overall sustainability progress achieved by the issuer.
SLBs can therefore offer new opportunities to sectors where it is difficult to identify environmentally positive projects that can be matched with the issuance of Green, Social and Sustainability Bonds (like for example, consumer goods companies).
The sustainable finance market will hence be accessible to a much broader scope of participants.
For further information, please visit the LGX dedicated webpage.