Issuers must clearly disclose the nature of the use of proceeds in financing or refinancing of projects according to the Green Bond Principles (GBP), Climate Bonds Initiative’s eligibility taxonomy, Social Bond Principles (SBP), Sustainability Bond Guidelines (SBG), Sustainability-Linked Bond Principles (SLBP), the People’s Bank of China Green Bond Catalogue, or another frameworks.
Bond issuers must provide information about where the proceeds from their bond will be allocated and which framework is applied to classify their bond.
To ensure that proceeds are independently verified, we ask that issuers provide an external review of the bond from a third-party expert before applying to join LGX. In exceptional circumstances, for larger pure-player issuers, LGX may conduct internal due diligence in the absence of a third-party external review.
External reviews generally focus on the following areas:
Review of the bond use of proceeds framework with a conclusion about whether the framework is aligned with acceptable green, social or sustainability taxonomies, generally issued prior to bond issuance
Review of the actual use of proceeds as compared to the planned use of proceeds, often carried out within the first 12 months after issuance of the bond
Review of the alignment of the process around project selection and evaluation, allocation and management of proceeds, reporting, with internationally accepted principles such as those issued by ICMA (GBPs, SBPs, SBGs), carried out either pre- or post-bond issuance
Review of the controls in place within the bond management process as well as review of allocation of proceeds and impact reporting (where provided), carried out over the post-issuance period, often through to the maturity of the bond, or until full allocation of proceeds
Reviews may take the form of a second-party opinion, verification, certification or scoring/rating.
LGX has adopted the Guidelines for External Reviewers issued by the Executive Committee of the Green Bond Principles. The guidelines provide voluntary guidance relating to professional and ethical standards for external reviewers, as well as to the organisation, content and disclosure for their reports. The guidelines promote best practices in the provision of external review services for green, social and sustainability bonds.
External reviewers are invited to voluntarily provide information about the different external review services they provide by completing and publishing the “External Review Service Mapping” template. The purpose of this template is to provide market participants with greater clarity on the increasingly complex universe of external reviewers and their services.
LGX encourages external reviewers to voluntarily fill in this template in order to promote transparency and disclosure, and support market efficiency.
To remain on LGX, issuers must provide information about the intended and actual use of proceeds. The aim of ongoing reporting is to inform investors about how funds are being allocated to projects and, where possible, the expected environmental, social and sustainable impacts.
The first mandatory reporting should be supplied as from 12 months after the bond was issued or as at another date, as agreed with LuxSE. Issuers can also publish reports more frequently, on a voluntary basis. Issuers are encouraged to report on the use of proceeds and impact throughout the duration of the bond up until maturity; at a minimum, issuers shall report up until full allocation of proceeds.
Accepted formats of ongoing reporting include:
Dedicated use of proceeds reports
ESG/Sustainability reports featuring information on the funding behind the bond
Newsletters (or equivalent) giving appropriate information on the use of proceeds (projects, sectors, geographies and, expected impact)
It is at the issuer’s discretion to choose its preferred reporting format, KPIs and frequency.
Read our FAQ for more information about ongoing reporting.
The LuxSE Group is composed of the Luxembourg Stock Exchange (LuxSE) the leading listing venue for international securities and Fundsquare, its wholly-owned subsidiary specialized in delivering to the fund industry an efficient and standardized infrastructure for the exchange of information.