Luxembourg becomes first European country to launch 'Green Bond framework

Luxembourg has commenced the sale of 'sustainability' bonds, making it the first European country to launch such a reference framework.

Posted mercredi, septembre 30 2020
Luxembourg becomes first European country to launch 'Green Bond framework

Luxembourg is the first European country and first AAA rated country worldwide to have launched a sustainability bond framework,” according to Bob Kieffer, director of Luxembourg’s treasury, commenting on the launch which took place in early September.

The Luxembourg government stated, “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 standardizes how economic activities are screened for sustainability across the bloc) and the EU Green Bond Standard (a draft common labelling scheme).

The bonds are issued under a framework can have green, social or sustainability objectives. The choice of green bonds that finance environmentally friendly projects and social bonds that target spending with socially beneficial outcomes, contrasts with that of other European governments. Germany for example has sold green bonds in their efforts to fund climate friendly spending and support the development of sustainable finance, but have no associated social bonds available.

For the Luxembourg finance ministry, "There is no sustainable development if you don't have the social aspects in (the issuance framework) as well.

In the future, Luxembourg will also be able to issue standalone green or social bonds via the bond's framework.

Sustainability bonds have gained prominence in the past few years. Despite the current economic crisis, 2020 is also expected to be a year of growth for both green bonds and social-impact bonds with global issues like climate change and plastic pollution still very much of concern.

The framework will enable the Grand Duchy to reinforce its involvement in responsible and innovative finance sectors, while at the same time providing national and international investors with the opportunity to diversify their investments.

Although a step in the right direction, Luxembourg still ranks the last among all EU countries in making progress to achieve the UN sustainability goals, according to the 2020 Sustainable Development Report. Important challenges remain in sectors like clean energy and climate action.