Luxembourg and Shanghai in green bonds tie-up

Strategic arrangement between stock exchanges aims to encourage investment in green bonds to “go mainstream”

International investors will have easier access to Chinese green bonds, thanks to a new strategic partnership between the Luxembourg Stock Exchange (LuxSE) and its counterpart in Shanghai.

LuxSE and the Shanghai Stock Exchange (SSE) explained that the Index Agreement builds on a Memorandum of Understanding that the parties signed in 2006.

The partnership is comprised of two new indices: the SSE Green Corporate Bond Index and the SSE Green Bond Index.

SSE officials developed this special ‘index family’ in collaboration with China Securities Index Co. The new indices are now displayed on both exchanges’ websites.

In a statement, LuxSE said: “The indices aim to provide greater transparency and facilitate access to Chinese green securities for investors in Europe.

“The yield to maturity of the SSE Green Bond Index is 4.91% and the average modified duration is 4.38 years.”

It also pointed out: “The wide majority of the green bonds in the two indices have obtained an external review by independent third parties such as EY, KPMG, PwC or SynTao Green Finance – showcasing the highest standards these indices abide by.”

Luxembourg minister of finance Pierre Gramegna said: “During the recent official visit of [our] Prime Minister Xavier Bettel to China, whom I accompanied, we saw first-hand how committed China is to green finance and the fight against climate change.

“Therefore, I am very pleased that the index-display agreement between the LuxSE and SSE will help to further facilitate access to Chinese green securities in Europe.”

He added: “After the great success of a similar agreement with the Shenzhen Stock Exchange, I would like to congratulate [LuxSE CEO] Robert Scharfe and his team on this new promising initiative.”

Scharfe himself called the Agreement a “practical solution” that will help green finance to “go mainstream, and engage not only public, but also private investors”.

He noted: “China is already the world’s number one green bond issuer, and a country seriously committed to tackle climate change. LuxSE is the number one green bond platform. It’s a perfect match.”

According to a recent report from leading specialist advocacy group the Climate Bonds Initiative, green bond issuance in China “soared” in 2016 from almost zero to 238bn renminbi ($36.2bn). That activity accounted for 39% of last year’s total green bond issuance around the world.

The report notes that green bonds issued by non-financial parties have supported more than 110 projects across 27 provincial administrative regions.

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