Luxembourg and London have reaffirmed their complementary roles in asset management and green finance, with leaders stressing the importance of collaboration on sustainability, digital transformation, and post-Brexit resilience.
A British Chamber of Commerce for Luxembourg (BCC) event this week brought together finance minister Gilles Roth and Lord Mayor of the City of London, Michael Mainelli (photo), to discuss the synergies between the two jurisdictions.
The International Investment Summit in the City of London on Monday resulted in 63 billion pounds of private investment commitments for the UK, more than twice the amount secured at last year’s event.
The summit also prompted the Lord Mayor of the City of London, Michael Mainelli, to remotely join the BCC event, which took place Monday evening at A&O Shearman’s premises on Kirchberg. “One area where London and Luxembourg truly collaborate and complement each other is investment in asset management. We sell a joint product,” he said via video conferencing.
“I don’t think it’s an exaggeration to say that one could not operate without the other.”
Peter Myners, A&O Shearman
Mainelli recognised Luxembourg being well established as a leading international hub for cross-border fund distribution, being both the first and one of the first to transpose the European Ucits and AIFMD directives, respectively. “We need Luxembourg,” he added.
Despite Brexit, which led to the relocation of some British operations in areas such as banking and insurance, the financial relationship between the two countries is robust. As Luxembourg finance minister Gilles Roth noted in his opening speech, “Luxembourg, with 900 billion euro in assets being managed by UK fund promoters, around 17 percent of all assets in Luxembourg investment funds, stands as a key partner for the City of London.”
Green transition
Both Roth and Mainelli shared their views on the potential of the two centres to tackle challenges in areas such as sustainable finance and digital transformation. In May 2023, Luxembourg and the UK signed a joint cooperation statement to reaffirm bilateral commitment in key areas, including strengthening financial sector links, priority areas including “financial innovation, sustainable finance, and women in finance.”
Mainelli noted that green finance has been a priority in London. “Sitting at number six and one, respectively, in the Global Green Finance Index, Luxembourg and London are ideally positioned to help mobilise private capital for the green transition,” he said.
The Lord Mayor pointed out measures such as London’s creation of carbon markets in the late 1990s, the promotion of sovereign sustainability-linked bonds, and , “most interestingly, insurance backing for voluntary carbon market projects. This, I think, could transform the nature of the voluntary or sequestration market.”
Meanwhile, Roth praised London for its leadership in Sustainable Development Goals and enhanced disclosures and called the UK an “inspiration” in the area of fintech to address challenges.
“Whether it’s addressing climate change, navigating new regulations or managing new technologies, we need to work together: countries, regulators, businesses and investors alike,” Roth said.
A constructive relationship
Following the opening speeches, panelists shared their experiences on the impact and the repositioning of their Luxembourg offices or strategy in the post-Brexit landscape. A&O Shearman partner and global board member, Peter Myners, was among the panelists. The firm has 4,000 lawyers with international coverage, and prides itself on being “equally fluent in English law, U.S. law and the laws of the world’s most dynamic markets.”
As Myners later told Investment Officer, “From our perspective the relationship between the Luxembourg and London financial sectors is symbiotic and one of mutual reliance and mutual benefit.” Taking, for example, the funds industry, he added, “Luxembourg has become a strategically important hub when it comes to fund raising, distribution, compliance and risk management, and London is where much of the deal origination takes place. I don’t think it’s an exaggeration to say that one could not operate without the other.”
“The UK-Luxembourg partnership remains incredibly important for financial services in the post Brexit landscape.”
Craig Blair, Franklin Templeton Luxembourg
Meanwhile, Franklin Templeton, which has been present in the UK and Luxembourg since 1985 and 1991, respectively, currently counts more than 1,000 employees in the UK, or 10 percent of its global workforce.
As Franklin Templeton Luxembourg country head, Craig Blair, explained to Investment Officer, “The UK-Luxembourg partnership remains incredibly important for financial services in the post Brexit landscape. Within the continent of Europe, the UK continues to be the largest asset management centre while Luxembourg remains the leading international product and distribution gateway.”
Both financial centres, Blair added, are seen as “a critical compontent of our international, cross-border strategy.”