New ILA board member Julie Becker: “You can’t improvise on ESG”

Julie Becker has played a key role helping to establish the Grand Duchy’s reputation as a leader in sustainable finance, leading the growth of the Luxembourg Green Exchange. Now as the newly appointed CEO of the Luxembourg Stock Exchange, she has a wider role including joining ILA’s board.

“Investors increasingly want insight into companies’ overall sustainability strategies. This is where governance – the G of ESG – is so important, as companies that do not disclose a complete and credible ESG profile will struggle to access capital markets in the future,” Julie said, commenting on one of the perspectives she will be bringing to ILA’s highest decision-making body. 

Ten principles of corporate governance

She also represents the organisation which oversees a key norm-defining document for local boards: the Ten Principles of Corporate Governance of the Luxembourg Stock Exchange. Although legally this code only applies to publicly listed companies, it acts as a benchmark for best practice for all boards, and hence it helps to set the tone for all directors. First published in 2006, the code has been amended three times, most recently in 2017 when a major reform was undertaken to give corporate social responsibility enhanced status as one of the ten principles. 

“The objective of the 10 corporate governance principles is to promote the highest market standards of transparency, business ethics, and control,” Julie explained. It offers a guide to help directors see why and how they can change their outlooks. “They see the need to think long term with a sense of purpose, of value creation that is sustainable in the fullest sense of the term, rather than prioritising short term gains.”

In 2019, and in line with the objective to promote transparent capital markets, Julie added that the exchange “published a set of guidelines for reporting on ESG aspects, the LuxSE Guide to ESG Reporting. Reflecting the unique diversity in its capital market ecosystem, “the Guide addresses the specific scope and needs of our three main stakeholders: companies, issuers of sustainable debt instruments, and asset managers active in sustainable and responsible investment funds,” explained Julie,”ESG is much more than a reporting or supervision obligation. it must form the basis of the dna of any business, as it will be a question if accountability and responsibility and, in the end, of survival of any business in the future,”

Full diversity

Promoting diversity as a path to better business decision making is also a priority for Julie. “Of course this goes much beyond gender balance, as decision making bodies need to assess questions from the points of view of people from very different backgrounds,” she said. “Having deeply culturally engrained different outlooks is essential for adding nuance to every conversation.” This relates to age, country of origin, culture and more. 

Yet she was also keen not to downplay gender balance. On the controversial topic of board quotas, Julie said she has sympathy with the quote “I don’t like quotas, but I like what they provoke and achieve,” an outlook echoed by the likes of Christine Lagarde and Madeleine Albright. “We should ensure that future generations evolve in a gender balanced world and workplace, and we might need to take that kind of decision,” Julie said. 

Focus on sustainability

Julie is gratified that Luxembourg has worked well to create an international reputation in the fast -growing green finance segment. She highlights LuxFlag as being a long-standing initiative which has done much to promote the Grand Duchy’s green finance expertise and ambition. She is also justifiably proud of her contribution to the Luxembourg Green Exchange (LGX) “the world's first and still leading platform dedicated to sustainable financial instruments,” she noted. 

Indeed LGX goes from strength-to-strength, only recently celebrating the listing and display of its thousandth bond. While initially focused on green bonds, Julie noted that the range is being extended to social bonds, sustainability bonds and even sustainability-linked bonds. Of course, she recognises the exchange as a landmark in a financial ecosystem, which has developed diverse, world-class expertise within Luxembourg’s banks, asset managers, insurance companies, servicing companies and more. 

The challenge now is to build on these foundations, and Julie is keen for directors to contibute their part to maintain this momentum. “Everything is moving very quickly, especially in terms of definitions, standards, frameworks of reporting guidelines, impact measurement, which are not yet standardised,” she notes. “The market needs guidance and needs clarity to be able to compare standards.” There are many positive developments in this field at international level, as explained by Julie, “such as the Task Force on Climate-Related Financial Disclosures, the Sustainability Accounting Standards Board or IFRS’s ongoing work on sustainability reporting.” Europe is key to this debate as well. As highlighted by Julie, “at the European Union level, the Taxonomy Regulation, along with the Sustainable Finance Disclosure Regulation and the recent proposal from the European Commission for a Corporate Sustainability Reporting Directive, amending the Non-Financial Reporting Directive, will play a crucial role in strengthening investor trust in sustainable instruments and thereby help drive the growth of sustainable finance.” Last but not least, Julie stressed the need to closely monitor upcoming legislative proposals at the European level, “such as those related to Sustainable Corporate Governance which is now expected to be published in Q3 2021.” This is where ILA is working closely with the Luxembourg Stock Exchange and all other market participants can help shape the national, European and even international debate. 

She is also impressed with ILA’s role in raising awareness and helping the education of directors, both in terms of formal qualifications but also the networking which allows information and expertise to flow. Particularly with sustainability, she sees this area becoming even more technical. “It is a topic where you will need to know what you're talking about, as it’s not something that you can improvise. I’m convinced ILA has a central role to ensure board members in Luxembourg have a proper understanding of environmental risks and opportunities for the companies they are supervising, applying the highest and most advanced standards.”