Luxembourg is the first country in the world to implement a law on green covered bonds (lettres de gage portant sur les énergies renouveables).

The new law adopted on June 22, 2018 amends the Luxembourg law dated April 5, 1993 on the financial sector (the Luxembourg Law on Financial Sector) to create a legal framework allowing Luxembourg banks to issue covered bonds backed by renewable energy assets.

The main amendments are the following:

  • The law introduces a series of definitions such as "renewable energies" (énergies renouvelables) and "assets generating renewable energy" (biens générateurs d'énergies renouvelables) to help clearly define what a green covered bond is.
  • This new category of covered bonds now specifically covers the granting of loans secured by rights in rem on movable or immovable properties generating renewable energy and the issuing on that basis of debt instruments secured by the assets resulting from those loans (new article 12-1, § 1 (h) of the Luxembourg Law on Financial Sector).
  • These loans may be granted in any form, including the acquisition of bonds issued by a securitization vehicle (or a compartment of a securitization vehicle) where a minimum of 90% of the assets is made up of  debt secured by rights in rem on movable or immovable assets generating renewable energy.
  • The adoption of this law is in line with Luxembourg's goals to mobilize private capital to finance green projects with the ultimate goal of mitigating climate change and to be recognized as a pioneer in the green and sustainable financial sector.

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