Published: August 22, 2018
Luxembourg has created what it calls the first law globally to establish a green covered bond, as regulation around environmentally responsible investing continues become more refined and definitions standardised.
Covered bonds are debt securities that are collateralized against a pool of assets. This usually means commercial or residential mortgages or public sector debt. However, Luxembourg’s green covered bond legal framework looks at loans financing renewable energy generation assets like wind turbines, solar panels and sewage treatment for collateral, marking a distinct difference from existing covered bond laws. This is the fifth type of covered bond that Luxembourg legislates for.
The law came into force on July 1. It is based on a draft bill floated in January 2018 called Lettre de Gage d’Energies Renouvelables.