Supporting Luxembourg in its Sustainability Strategy

18/09/2020

Grand Duchy of Luxembourg is the first European sovereign to issue a sustainability bond, for an amount of €1.5bn. The proceeds will be used to fund government expenditures that contribute positively to the country’s environmental and social goals.

The Grand Duchy of Luxembourg issued its inaugural sustainability 12-year benchmark for an amount of €1.5bn, with a warm reception of the market. The bond issue was supported by Societe Generale, acting as bookrunner and sole structuring advisor on the establishment of its best in class Sustainability Bond Framework. The proceeds raised from such bond issuance will enable Luxembourg to fund government expenditures with environmental and / or social benefits such as investments to support the development of low carbon transportation, climate finance, as well as the access to essential services (social inclusion, healthcare, education) or affordable housing. 

The Grand Duchy of Luxembourg is committed to sustainability and, as such, pursues a clear and robust strategy for the implementation of the Paris Agreement as well as the achievement of the UN Sustainable Development Goals. As such Luxembourg established a Sustainability Bond Framework that is designed to comply with the draft EU Green Bonds Standard and incorporates eligibility criteria fully in line with the Technical Expert Group (TEG) final report on the EU Taxonomy. A first for a Sovereign, highlighting the ambitious approach of the Grand Duchy of Luxembourg as well as its commitment to act as a European leader in Sustainable Finance.
 

It is the first time that a sovereign goes so far into incorporating the EU taxonomy and EU green bond standard in the assessment, highlighting the pioneering approach of the Grand Duchy of Luxembourg, which is also reflected in the second party opinion.

Stéphane MARCIEL,
Head of Sustainable Bonds, Societe Generale

Indeed, Sustainalytics - who was appointed by the Sovereign to review the Framework – has for this project published its first Second Party Opinion comprising a detailed assessment of the Framework’s alignment with the EU taxonomy.

The issuance of this first sustainability bond was anything but business as usual, as it involved substantially more work in the lead-up to going to market, not least in defining and setting up a dedicated sustainability bond framework, identifying eligible projects and establishing a second party opinion. In order to make this possible, the Treasury needed a trusted partner.

Bob KIEFFER,
Director of the Treasury of Luxembourg

The new sustainability benchmark bond, which allowed the issuer to extend its curve beyond 10 years, was quickly oversubscribed with an impressive participation of real money investors despite the negative yield and strong interest of investors specializing in ESG issues. The total orderbook stood north of €12.5bn, a record for the Grand Duchy testifying of the robustness of the framework and the undeniable success of this operation. 

Societe Generale is proud to have supported the Grand Duchy of Luxembourg in this prestigious project from the beginning, contributing to shape best market practices.  

Thanks to the strong structuring expertise of Societe Generale CIB teams and SG Luxembourg’s intimate knowledge of the Luxembourg environment, Societe Generale was able to deliver to the Grand Duchy a highly innovative financing solution through a sustainability bond combining both the environmental and social dimensions.

Arnaud JACQUEMIN,
CEO, Societe Generale Luxembourg
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