Julie Becker (Luxembourg Stock Exchange) : Adapting to Changing Market Realities
With a history spanning nine decades, LuxSE stands as a unique hybrid of private and state ownership, positioning itself as a key player in Luxembourg's thriving financial sector. Becker unravels LuxSE's pivotal role in sustainable finance, shedding light on its initiatives and the transformative effects on the nation's financial landscape.
Can you present the Luxembourg Stock Exchange in a few words?
The Luxembourg Stock Exchange, or LuxSE, has a history that goes back more than 90 years. It is an interesting institution in the sense that it is a private company which is partly owned by the Luxembourg State and partly by the leading banks in the Luxembourg financial centre and other corporate and individual shareholders. This gives us a unique position at the heart of Luxembourg’s dynamic and flourishing financial sector. We have around 140 employees and a strong international footprint. LuxSE is in fact the leading listing venue for international debt securities in the world, and we currently have a total of 42,000 listed securities on our exchange, from 1,800 issuers across 100 countries. We also operate two markets, the EU-regulated BdL market and the exchange-regulated Euro MTF, and we offer a range of data and information services linked to our listing and market activity. What we are widely known for today, is our pioneering role in sustainable finance. We established the Luxembourg Green Exchange in 2016, and since then, we have been recognised multiple times for the role we play in accelerating financing for sustainable development across the world. We are also addressing the main obstacles to mainstreaming sustainable finance: education, data and access to the sustainable finance market. In addition, we contribute to the digital transformation of capital markets and are actively supporting developments in the DLT space.
"Sustainable finance is here to stay, and Luxembourg, through LuxSE, has been a pioneer."
How is sustainable finance impacting Luxembourg?
Sustainable finance, meaning the mobilisation of financing earmarked for investment projects with a positive impact on the environment and society, is a priority in Luxembourg. In 2020, Luxembourg became the first country in Europe to issue a sustainability bond. The EUR 1.5 billion bond raised financing for multiple projects which benefit the population here, such as Luxtram and social housing, for instance. Beyond this bond issuance, the Luxembourg financial centre has pioneered developments in the sustainable finance space. EIB is very active in this field, and issued what is known as the world’s first green bond in Luxembourg back in 2007. The work done by LuxFLAG and LSFI are also examples of how Luxembourg is contributing to advancing the sustainable finance agenda, with positive effects well beyond Luxembourg. It all started with microfinance and LuxFLAG’s Microfinance Label back in 2006, and today, almost a third of microfinance investment vehicles, which support financial inclusion, are based in Luxembourg. Sustainable finance has had and will continue to have a significant impact on the Luxembourg financial centre as all market participants, from the fund industry to the banking industry and capital markets, fall under the scope of new regulations such as the Sustainable Finance Disclosure Regulation and Corporate Sustainability Reporting Directive, to mention a few. Sustainable finance is definitely here to stay.
Which risks and opportunities do you identify?
Christine Lagarde summarises it well in what she calls the 3 “Ds”: deglobalisation, demographics - which includes digital - and decarbonisation. Capital markets are global by nature, which means that financial shocks in one part of the world can have a domino effect elsewhere. Geopolitical tensions and devastating wars also tend to influence the political agenda and financial activity, and upcoming elections in 2024, be it in the United States or in Europe, may have a substantial impact as well. With record inflation and rapidly increasing interest rates, the general market environment has changed considerably over the past two years, and this also affects Luxembourg. The current market environment is very challenging for start-ups and many companies struggle to finance their operations now that the era of cheap money has ended. More than ever, we need an integrated Capital Markets Union. Despite the new market reality, our business activity is however stable, and we are focused on being a strategic partner for our issuers and new partners, and we help them navigate the new market dynamics at best. Change is not as fast as it could or should be. Happily, we also see plenty of opportunities: things are boiling and bubbling wherever you look, and we need to address the obstacles that must be overcome. The European Union has established an ambitious green and digital agenda and we are well positioned to contribute positively within these essential fields. We also see new opportunities outside our traditional field of activities, which we will explore in 2024.