The Luxembourg Green Exchange (LGX) has just won the ‘Exchange of the Year’ award for the second time. What sets the platform apart on the international stage?
And then there’s the shift we’re currently undergoing. Last July, we launched the ‘Transition Finance Gateway’. We’re no longer just looking at financial instruments; we’re also looking at the issuers themselves: is their transition plan logical? Credible? Backed up by concrete targets and deadlines? That’s what matters now.
LGX was launched by the Luxembourg Stock Exchange (LuxSE) in 2016. Looking back, were you aware that you were building something that would have a global impact?
“I wasn’t working on the stock exchange at that time, but I’d already been working in sustainable finance in Luxembourg since 2008, and yes, you could really sense that something was happening. There was a strong momentum. LuxFlag had been set up back in 2005. The major industry associations – Alfi, ABBL, LFF – were already actively promoting these issues. And 2015 was a pivotal year [with] the United Nations Sustainable Development Goals and the Paris Agreement signed in December. There was a clear convergence between the political, regulatory and financial agendas. LGX emerged directly from this. We knew we were laying the foundations for something transformative.
Even the most sceptical players have had to get on board. Then the backlash came, but it’s limited to a specific region.
How do you view the past ten years? Has the sector lived up to its promises?
“Sustainable finance has gone from being a ‘nice-to-have’ to an unavoidable reality. The catalyst was the European regulatory package introduced in 2018, the Commission’s action plan on sustainable finance, which brought in the taxonomy, the SFDR, and everything that followed. Even the most sceptical players have had to get on board: recruiting, reporting, positioning themselves. But let’s be honest: over the past year or two, there has been a backlash, with fierce criticism coming mainly from the United States. We must be careful not to generalise. When working with emerging markets, the desire to move towards sustainable finance is still there, intact. This backlash is geographically localised.
How has Luxembourg, a small country with no significant natural resources, become a global leader in green finance?
“It has to do with the history of the financial centre. Luxembourg was already the leading or second-leading European centre for the domiciliation of Ucits funds. As ESG first developed within investment funds – even before bonds – and as these funds were domiciled here, there was a natural, almost automatic interest. By 2008, sustainable finance was already one of Alfi’s three strategic pillars. That was very early on.
What’s more, being a small country is a real advantage, not a disadvantage: we have easy access to decision-makers, we can put forward ideas directly at ministerial level, and the Luxembourg government has supported these initiatives from the outset. Finally, the financial centre is structurally geared towards the international market. Our clients are not based in Luxembourg. The funds are distributed worldwide. It is this openness that makes the difference.
Has the European taxonomy really been a game-changer?
“Yes, it’s a real game-changer. Before the taxonomy, there was no agreed answer to the question ‘What constitutes a sustainable activity?’ There was no definition, no threshold, no shared criteria. Everyone made their own judgement. The taxonomy came along and said: ‘Here are the activities that contribute substantially to one of the European Union’s six environmental objectives.’ It wasn’t a response to suspicion or greenwashing; it was first and foremost a response to a need for definition. And that is why taxonomies have started to emerge in every other region of the world. It is a good idea.
The European taxonomy operates in a fairly binary manner: either an activity is aligned or it is not. Other parts of the world prefer a three-tier system: green, orange and red, with an intermediate category for activities in transition until a certain date, after which they move into the red category.
Has regulation become too burdensome? Is there a risk that it is stifling the very thing it was meant to encourage?
“I am fundamentally in favour of regulation; we have been eagerly awaiting it. But if it is too strict, it has the opposite effect: too many constraints push players to find ways around them. It is also a question of competitiveness between Europe and other, more flexible markets.
And when it comes to reporting, I think we’ve gone too far in terms of the sheer volume of data: at one point, we wanted to include everything. However, a company has activities that are material to its sector, and others that are not. If we focus reporting on what is truly material, the task becomes manageable and the data is available. The best is the enemy of the good. We need to be pragmatic. In fact, we are now seeing that this regulatory package, which we had put together with great ambition, is in the process of being simplified. This is a sign that we may have gone a bit too far.
Can we really measure the impact of green finance today, or are we still just talking the talk?
“It depends on the instruments, and we need to be precise about this. When it comes to sustainable bonds, which are our core business, it’s actually quite straightforward. A bond finances a specific project over several years: three years, five years, sometimes ten years. We know exactly which project is being financed, we can measure its environmental or social impact over time, and we can report the results. It’s traceable.
In the bond market, the impact is measurable. What is lacking is not technical capability, but sometimes the will to act.
For investment funds, it is far more complex: portfolios are constantly changing, company-level data evolves, and methodologies differ. But in the bond market, the tools exist. What is sometimes lacking is not the technical capability, but the willingness to put in the effort to collect the necessary data. It involves a cost and a lot of work. And you have to be willing to do it.
Greenwashing is often portrayed as the biggest threat. Is that really the case?
“This is, above all, the favourite argument of critics of sustainable finance. With bonds, the risk is structurally limited. We know exactly which project is being financed, investors are watching, reports are public, and it is very difficult to hide for long. On the other hand, there is a real issue at the level of the companies themselves, when their transition plans lack credibility. A company can issue a fully compliant green bond whilst having an unconvincing transition plan at the corporate level. That is precisely why we launched the ‘Transition Finance Gateway’. We now look at both levels: the instrument and the issuer. Is the narrative surrounding the bond consistent with that of the company? Is the transition plan credible, with KPIs, dates and interim targets? That is where the sector’s true credibility is at stake.
Should defence be incorporated into sustainable finance, in the name of sovereignty and reindustrialisation?
“It’s a very lively debate at the moment, particularly in Europe. But the International Capital Market Association (Icam), which sets the standards for sustainable bonds, has been very clear: defence is not compatible with green bond financing. And saying that doesn’t mean we shouldn’t fund defence. The money will go to defence; that’s just the way it is.
But is it necessary to go through sustainable finance to achieve this? I don’t think so. Because it creates confusion and mistrust among investors who are already questioning the credibility of the approach. There are exclusions that have long existed in this sector: cluster munitions and nuclear weapons. They are excluded from most ESG funds and green bond financing. Mixing sustainable finance and defence only serves to further confuse a subject that is already difficult to understand properly.
It is risk management and performance that should have been the focus, not values. […] That’s where we went wrong.
Did sustainable finance, at some point, promise more than it could deliver?
“I wouldn’t approach the issue that way. The problem lay in the communication, not the instruments themselves. Sustainable finance was presented as philanthropy. As if investing in green initiatives were primarily a moral act, a values-based decision. But it is finance. Finance that generates returns, and which, moreover, has a positive impact and helps to avoid risks that could affect those returns. It is risk management and returns that we should have focused on, not values.
And we’ve sometimes made people feel guilty instead of convincing them: ‘What? You’re not investing sustainably; you don’t want to save the planet?’ That sort of rhetoric has created a disconnect. Investors started to make a choice: either I want performance, or I want impact. Whereas it isn’t a choice. That’s where we got it wrong.
So, what exactly is still needed for sustainable finance to really take off?
“One thing we haven’t managed to do yet is to engage retail investors. That’s the hurdle we haven’t cleared. We haven’t been able to explain that these instruments offer financial returns as well as social impact. And we haven’t managed to make them appealing. When I see young people who know everything about cryptocurrencies – the mechanisms, the risks, the opportunities – yet know nothing about sustainable finance, I tell myself that we’ve got something wrong in our teaching, in the way we make this subject accessible and tangible. Cryptos have achieved something that green finance has not: creating excitement, inspiring dreams, making investment tangible. That is where the real source of growth for this sector lies.
LuxSE recently acquired a company. What is the real aim behind this move?
“It is, above all, an operational decision: [it is about] strengthening our data collection and analysis capabilities. In particular, this concerns the environmental and social data relating to the sustainable bonds listed on LGX. Investors are increasingly demanding transparency and concrete evidence of impact. To respond to this seriously, we need reliable, centralised and verified data. This is an issue that is becoming crucial to the credibility of the entire platform.
What would you like people to say about LGX in ten years’ time?
“The same thing we’re saying today, ten years on from the start: it was necessary, we were right to build it, and there was never any reason to question it. Because it’s still there, still useful, still at the heart of the market. That would be the greatest recognition possible.”
This article was written for the June 2026 issue of Paperjam magazine, published on 20 May. The content is produced exclusively for the magazine. It is published on the website to contribute to Paperjam’s comprehensive archive. Click on this link to subscribe to the magazine.
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