The Luxembourg Finance Labelling Agency (LuxFLAG) has added to its list of labels with one for investors in green bonds, which are instruments used to finance green projects.
The suit of labels offered by the labelling agency thus constitutes Green Bond, Microfinance, EST (Environmental, Social, Governance) and Climate Finance.
Criteria for inclusion on the list of labelled Green Bonds include:
- Follow internationally recognised guidelines/standards such as the Green Bond Principles in order to illustrate its commitment to transparency and disclosure.
- Utilise its proceeds for investing in one of the broad categories of potential eligible Green Projects recognised by LuxFLAG.
- Report on qualitative performance indicators and, where feasible, quantitative performance measures with the key underlying methodology and/or assumptions used in the quantitative determination.
- Apply the Sustainable Development Goals in the use of proceeds and povide evidence that an exclusion policy is applied across 100% of its use of proceeds.
- Be subject to regulatory requirements applicable in the EU Member States or equivalent and must be issued on a regulated or regulated equivalent recognised stock exchange.
- Provide ex-ante external review and commit to regular (every 24 months) ex-post reporting.
Bonds must apply for the label, and are subject to a vetting procedure similar to that applied to the other labels. This means a committee of experts will review the applicants to determine whether they meet the labelling criteria.
Members of the review committee determining whether a label is suitable include:
- Rodolphe Bocquet is CEO and co-founder of Beyond Ratings, a research provider that offers services in integrating climate and energy issues in sovereign risk assessment.
- Giuseppe Corsini is Director of Capital Markets and Accounting Advisory Services at PwC Luxembourg.
- Vincent Linari-Pierron is Managing Partner at Linari Law Firm since 2000.
- Tom Pfeiffer is Partner at Deloitte with over 20 years of experience in audit and advisory in the financial, commercial, industrial and public sectors.
Pierre Gramegna, Luxembourg minister of Finance, said: “The Green Bond market is evolving rapidly and requires high transparency and evidence that proceeds are used for green projects only. In line with its other green initiatives, the Luxembourg Government endorses the creation of the LuxFLAG Green Bond Label, a transparent high-standard certification that allows investors to be sure about their investments in green products.”
Carole Dieschbourg, Luxembourg minister for the Environment, added: “The Luxembourg government remains strongly committed to international climate finance action and the Paris Agreement. With a contribution of €120m from 2014 to 2020, corresponding to €215/inhabitant, Luxembourg is one of the biggest donors in relative terms. This amount includes an annual contribution of € 5m to the Green Climate Fund which translates into €10/inhabitant per annum summing up to €35m in total. LuxFLAG’s Green Bond label plays an instrumental role in helping to set strong market standards to bolster green finance flows.”
LuxFLAG said it will review incoming applications on a “first come, first served basis”, with label award decisions made quarterly.