The law, which entered into force on July 1st, establishes the legal framework for a new type of covered bond to finance the generation of renewable energies. This is the first law globally to establish a Green Covered Bond and underlines Luxembourg’s commitment to help drive global innovation in sustainable finance.

The Green Covered Bond is a new instrument to finance facilities that generate renewable energy. These include facilities producing any energy from renewable non-fossil sources, such as wind, solar, aerothermal, geothermal, hydrothermal, marine and hydroelectric, biomass, landfill gas, sewage treatment and biogas, as well as energy produced from similar sources.

The law contains strict criteria relating to the purpose of the equipment and infrastructure financed, to ensure the “green” nature of this new category of covered bonds.

The bank issuing a Green Covered Bond provides loans that are secured by real rights or real movable or immovable security interests in renewable energy assets. Investors will benefit from the security features inherent in covered bonds, including the right of preference over coverage values

Creating a new financial product subject to very high standards and having a direct link with the world’s growing renewable energy sector, the new law complements the range of products available to global institutions and investors available in Luxembourg and further strengthens the Grand-Duchy’s role as an international platform for sustainable finance.

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