Luxembourg and its very international stock exchange are well positioned to become the standard bearer that leads the green and sustainable finance industry of the future, says Luxembourg Stock Exchange (LuxSE) CEO Robert Scharfe
What facts and figures best illustrate the LuxSE?
LuxSE is an exchange unlike any other. It operates in an extremely tiny country, and has only 25 local equity listings. Yet we are a major global exchange today because we are specialized in listing international securities. We now list 36,000 securities from over 2,500 issuers in over 100 countries, denominated in 57 currencies. LuxSE is thus very international and covers all financial instruments. LuxSE has substantially diversified its product base, developing its business linked to green/sustainable finance and RMB-denominated securities.
How has the Luxembourg Green Exchange (LGX) contributed to sustainable finance?
The world’s first dedicated green stock exchange, the LGX lists 50% of the world’s green bonds. Investors can freely access the documentation of the underlying green or sustainable products, and thus make informed decisions. The green platform now extends to sustainable and social instruments and is diversifying to bonds, funds and indexes, eventually extending to all sustainable financial instruments. The COP 21 Agreement created momentum for sustainable finance to grow. Green bonds are still only 1% of the total debt market, and in the fund industry sustainable products account for over 12% of assets under management. For promotion, we must raise awareness about the performance of sustainable investment products. Studies clearly demonstrate that responsible investment in these products can achieve an even better return than in conventional investments.
What are some of the latest innovations coming from LuxSE?
Historically, we have achieved many firsts in the fund industry, with dedicated investment vehicles, and in conventional bond markets. We need to ensure standards worldwide in sustainable finance, for transparency and comparability. We cooperate with institutions in China, home of the biggest green bond market. We must make Chinese standards better known and more visible and transparent. We should also display the Shanghai and Shenzhen Stock Exchanges’ green bond indexes on our exchange. This would help China bridge the gap between the domestic market and international investors. Our goal is to create one global green bond market with one denominator assorted with national or regional specificities.
What are some core technological milestones that LuxSE has reached?
Our service delivery must adapt to today’s accelerated process of capital market transactions delivery, and use the latest technology. A year ago, we introduced distributed ledger technology in our financial reporting channels, as it allows for a safer, quicker and less expensive way of handling this business. Blockchain has thus been live at LuxSE since October 2016. Also, our FundsDLT initiative aims to optimize cross-border fund distribution based on the blockchain concept. This will benefit both investors and asset managers.