Free listing for Covid-19 response bonds

Published by: Julie Becker, Deputy CEO, LuxSE & Founder, LGX, Luxembourg Stock Exchange & Luxembourg Green Exchange Apr 2020

The novel coronavirus pandemic has created a global health emergency, put billions of people under lockdown, and brought the economy to a halt. Such unprecedented times call for extraordinary measures, and exchanges have a crucial role to play in supporting the financing process needed to address the enormous economic and social consequences of the pandemic.

Across the world, governments, development banks, institutions and corporates are struggling to cope with the social and financial consequences of the coronavirus outbreak. Mobilising the required funding will be key and as a consequence, debt instruments dedicated to addressing the human and economic impact of Covid-19 are starting to emerge. Over the past weeks, the Luxembourg Green Exchange (LGX) has welcomed several Covid-19 response bonds representing in excess of USD 15 billion in total. This illustrates an unparalleled level of issuance of Covid-19 focused social bonds, compared to a monthly average of USD 1.2 billion in the period 2018-2019, and constitutes a remarkable achievement given the current levels of market volatility.

Among issuers of social and sustainability bonds issued in the context of the coronavirus pandemic are the World Bank, the African Development Bank, the Council of Europe, IFC and the European Investment Bank. The World Bank recently made history with its USD 8 billion sustainable development bond, the biggest USD bond ever issued by a supranational institution. What is more, these Covid-19 response bonds are receiving an overwhelming support from investors and were all heavily oversubscribed.

Given the current context and what it will take to bring countries and the global economy back on track, these issuances are probably only the beginning and could open the door for sovereigns across both mature and emerging markets to issue Covid-19 response bonds.

The role of exchanges

When the coronavirus outbreak started to spread in Europe in late February, the Luxembourg Stock Exchange first focused on protecting its employees while preparing and implementing its business continuity plan. Exchanges have a critical function in financial markets and we did our utmost to keep our markets open and secure, and all our business functions and services operational and accessible. In a matter of days, we rolled out firm-wide home-working arrangements and since mid-March, 97% of our workforce have been working remotely. The Luxembourg Stock Exchange has remained fully operational throughout this time, keeping normal turnaround times and quality standards for the listing of new securities, applying stringent surveillance of our markets, while supporting our clients in times of unprecedented uncertainty.

Once we had secured our business continuity and joined calls from exchanges around the world highlighting the importance of keeping markets open, we considered going further and contribute in a more direct way to the ongoing global efforts to remedy the colossal consequences of the current pandemic. That’s when we took the decision to waive the entire listing fee for social and sustainable debt instruments that are specifically earmarked the current coronavirus pandemic and eligible for display on LGX. From April and up until 30 September 2020, it will be entirely free for our issuers to list their Covid-19 response bonds on one of the two markets of the Luxembourg Stock Exchange, for simultaneous display on LGX.

Call for action

By waiving the listing fee, we support fund raising transactions by issuers dealing with the enormous impact of the Covid-19 pandemic that has paralysed the world. Exchanges enhance issuers’ visibility and give credibility to listed financial instruments that mobilise financing for the extraordinary mitigation efforts that are underway. Exchanges go to great lengths to support their issuers. In times of crisis, even more significant and joint efforts will be needed to find solutions and turn the situation around.

In these unprecedented times, some might be tempted to push ESG aspects to the sidelines. However, now - perhaps more than ever - the 'S' in ESG is gaining prominence and may become one of the key areas of focus for the entire ecosystem in the Covid-19 and post-Covid-19 world.

In one way or the other, we can all help mitigate the devastating impact of the pandemic, and this is our contribution.

The Luxembourg Stock Exchange calls on exchanges across the world to support financing efforts to fight the pandemic and its overwhelming ramifications. Every single step matters!