lu_inside12-full

Inside magazine issue 12 | Part 03 - From a corporate perspective
From happy hippies
to tenacious traders?
Welcome to conscious
capitalism
Julie Becker
Head of International
Primary Markets
Member of the Executive
Committee
Luxembourg Stock Exchange
Talk of caring for the environment may have once
conjured up images of happy hippies huddled together
around a campfire or doggedly scaling tall buildings.
But, as green goes mainstream, that image may soon
be replaced by… bond traders?
Julien Froumouth
Head of Business Project
Management
Luxembourg Stock Exchange
Chiara Caprioli
Business Development
Manager
Luxembourg Stock Exchange
Pascal Martino
Partner
Deloitte Digital Leader
Deloitte
Louisa Bartolo
Consultant
Technology & Enterprise
Application
Deloitte
When two worlds collide
Next time you’re at a dinner table
with a mix of traders, financiers and
environmental activists and fearing
an uncomfortable silence, you may
want to turn the conversation to green
bonds. First issued by the EIB in 2007,
this unconventional—and increasingly
promising—financial instrument is
emerging as definitive proof that
something a little bit magical happens
when the worlds of finance and
environmental do-gooding collide.
But first, what is a green bond?
There is currently no legal definition
of green bonds. A green bond is
technically a “private purpose bond,” 1
no different from any other plain
bond. It works in much the same way:
investors buy the bond from an issuer,
and the latter pays investors the
principal amount back, plus interest
over a set period of time (until the
bond reaches maturity). What makes a
green bond distinctive, though, is that
it carries with it the promise that the
bond’s proceeds will be “earmarked”—
and go toward projects that have a
positive environmental impact.
Notwithstanding this widely accepted
description of a green bond, the lack
of a legal definition means that the
market is composed of issuers that
are, effectively, self-labelling and
self-regulating. Currently, it is issuers
themselves who determine if their
bonds are green and, by means of
the investment information disclosed
in the prospectus, how green they
are (although many are increasingly
turning to second opinions in an effort
to reinforce the credibility of their
investment statements, satisfy an
increasingly demanding investor
class and allay fears of
“greenwashing”).
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