On June 26, 2018 the Official Journal published the new law on renewable infrastructure covered bond or “lettres de gage énergies renouvelables” amending the law of 5 April 1993 on the financial sector.
The introduction in Luxembourg law of this new type of covered bond will further strengthen Luxembourg’s position as a center of competence in the field of green finance.
Thanks to the involvement of the public and private sectors, the financial center has developed an ecosystem able to raise international capital in order to finance sustainable development projects. The new law aims at completing the range of products and services available to market participants and reflects the pioneering spirit that Luxembourg has always shown in this area.
Main potential impacts of the new law
- As the legal definition is broad enough to embrace a wide range of ESG (Environmental, Social, Governance) initiatives, this could boost the financing of environmental and climate protection projects (including renewable energy, waste, water treatment or e-mobility projects)
- Create a legal framework with clear criteria and standards that will increase the confidence of potential investors in ESG products (i.e a wider audience of institutional and private investors)
- Revitalize the local Covered Bond market and promote the dynamism of the Luxembourg financial center.
By Fabio Mandorino, ABBL, Adviser, Commercial Banking I Private Banking I Sustainable Finance