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The role of education in sustainable finance
Sustainable finance has come to the fore over the past years. In 2019, new green bond issuance increased by more than 50% compared to the year before. Surveys conducted by Climate Bond Initiative suggest that investors want to see more green bonds from a broader range of issuers, and that a large majority of existing green bond issuers are planning to issue other green bonds, mentioning increased visibility, a larger investment base, stakeholder engagement and catalysing new business as the main drivers.
When the COVID-19 pandemic hit, the “S” of ESG was brought centre stage and we saw an uptick in social bond issuance. Social bonds are financial instruments used to fund projects linked to healthcare, food security, social housing and education, all areas heavily impacted by the ongoing crisis. In April and May alone, COVID-19 response bonds totalling USD 20 billion were listed on our exchange.
This goes to show that the rise of sustainable finance is real. Nevertheless, a significant number of market players lack the crucial knowledge they need to be part of the change. This is where exchanges can play an important role.
Boosting financial literacy
In May 2020, the Luxembourg Stock Exchange launched the LGX Academy. Through this new initiative, our sustainable finance experts provide tailor-made trainings on a broad range of topics linked to sustainable finance to industry professionals, students and other groups. The LGX Academy has also worked with institutions such as the International Finance Corporation and the University of Luxembourg to provide sustainable finance trainings on a national and international level.
In a first phase, the LGX Academy offers three courses covering the fundamentals of sustainable finance, the main instruments and relevant standards as well as taxonomies, reporting requirements and the process of external reviews. These core topics are flavoured with insights into current market practices and recent industry developments affecting sustainable finance. We have also made available an in-depth glossary and a resource section with relevant reports to help those interested in the field to get an initial overview of the terminology and the basic concepts.
Making finance sustainable by default
Stock exchanges play a key role in promoting and facilitating the sustainable finance agenda. One of the missions of an exchange is to ensure investor protection and this starts with raising awareness and education.
We established the LGX Academy, because more education will be needed for the sustainable finance market to grow. The LGX Academy allows participants to enrich their knowledge in this field and gain a deeper understanding of sustainable finance market practices. The overall goal is to promote inclusive investment products and help direct future capital flows towards sustainable investment projects.
Financial literacy is key to making finance sustainable by default. To borrow a quote from Nelson Mandela Education is the most powerful weapon which you can use to change the world.
By Julie Becker, Deputy CEO of the Luxembourg Stock Exchange and Founder of LGX / Photos : Luxembourg Stock Exchange
