LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Hawa Mahamoud and Eva Jean, GSK Stockmann
to fully comply with the new recommendations of the European taxonomy for green financing. Following the establishment of the sustainability bond framework, Luxembourg has successfully issued its first sovereign sustainability bond, for an amount of EUR1.5 billion, with a 12-year maturity and bearing a negative interest rate of -0.123%. The bonds have been listed on the Luxembourg Green Exchange, the world’s first dedi- cated and leading platform for green, social and sus- tainable securities, which was launched in 2016. The Luxembourg Green Exchange has the largest market share of listed green bonds worldwide. In February 2024, the value of outstanding green, social, sustain- ability and sustainability-linked (GSSS) bonds on the platform reached the amount of EUR1 trillion. Moreover, the House of Sustainability in Luxembourg was officially created in 2023 at the initiative of the Luxembourg Chamber of Commerce and the Cham- ber of Skilled Trades, in partnership with the National Institute for Sustainable Development and Corporate Social Responsibility (INDR). Its objective is to serve as a one-stop shop for companies seeking compre- hensive support in their sustainable development efforts. In March 2024, the CSSF released an update of its supervisory priorities in the area of sustainable finance, which are aimed at enhancing further sus- tainability practices with a focus on ESG integration. 2. Authorisation 2.1 Providing Financing to a Company According to the Luxembourg law of 5 April 1993 on the financial sector, as amended (the “LFS”), any per- son granting loans in Luxembourg on a professional basis must hold a licence of a credit institution or a professional in the financial sector carrying on lending activities. Pursuant to Article 28-4 of the LFS, professionals granting loans to the public for their own account and professionals of the financial sector performing lending operations (such as financial leasing and fac- toring operations) fall under the scope of the licence requirements.
The granting of loans could be an activity exempted from licensing requirements, insofar as, among others, loans are not granted to the public. In its frequent- ly asked questions, updated on 15 June 2021, the CSSF provided some guidance on the reference to the “public” as used in Article 28-4 of the LFS. The CSSF considers that, where loans are granted to a limited circle of previously determined persons, they are not granted to the public. Moreover, the CSSF considers that a credit activity is not aimed at the public within the meaning of Article 28-4 of the LFS, where: (i) the nominal value of the loan amounts to EUR3 million at least (or the equivalent amount in another currency); and (ii) the loans are granted exclusively to profes- sionals such as defined in Article L. 010-1.2) of the Consumer Code. Entities looking to engage in lending activities in Lux- embourg need to satisfy a number of legal require- ments as set out in the LFS. Since November 2014, the ECB has been exclusively competent for the authorisation and qualifying holding approvals of all credit institutions (except for branches of a third-country-based entity), while the authorisa- tion of non-bank entities as well as branches of a third-country-based entity seeking to provide loans in Luxembourg, remains within the remit of the CSSF. Furthermore, the CSSF closely monitors lending activities given that such activities continue to develop outside traditional banking circuits. As such, lenders looking to engage in lending activities in Luxembourg should approach the CSSF by submitting a detailed description of the envisaged activities and obtaining clearance from the CSSF. 3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans As indicated in 2.1 Providing Financing to a Com- pany , the granting of loans is, in principle, a regulated activity in Luxembourg that should be provided by duly licensed credit institutions or non-bank entities.
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