Luxembourg retained its lead as the biggest global hub for sustainable investment funds last year, accounting for nearly half of ESG assets managed in Europe while global interest in the Luxembourg Green Exchange increased sharply, Luxembourg For Finance (LFF) said in its annual financial services review.
The Grand Duchy accounted for 44 percent of total European ESG fund (Article 8 and Article 9) assets under management by the end of the first half of 2021, said LFF, a public-private partnership managing the international promotion of the Grand Duchy’s financial services.
LFF said that the country has “emerged as a clear frontrunner in the field of sustainable finance” and attributed this to the presence of expertise, drive and an understanding of “he role finance will play in funding a sustainable and equitable economic recovery.” The launch of the Luxembourg government’s Sustainable Finance Strategy in March last year marked a further step towards becoming a leading sustainable finance hub.
Assets under LuxFlag up 13%
Luxembourg was home to some 190 billion euro in certified sustainable investment funds at the end of last year, according to data from labelling agency LuxFlag, which seeks to encourage sustainable finance by verifying sustainability credentials of investment products. Demand for the label has continued to grow since its creation in 2006, said LuxFlag Chair Denise Voss.
As of end 2021, LuxFlag had issued labels for 365 investment products, including 282 ESG labels. This represents a 13 percent increase in assets managed under LuxFlag labels to reach a total of €190 billion. Towards the end of the year the labelling agency also launched a new label for sustainable insurance products, of which five have already been awarded.
A total of 1234 sustainable bonds were listed on the Luxembourg Green Exchange, known as LGX, at the end of last year, up 47 percent from a year earlier, said LFF. LGX is part of the Luxembourg Stock Exchange.
LGX lists some 560 bln euro in green bonds
LGX marked its fifth anniversary last year and in June became the listing venue for the first €20 billion bond issued as part of the EU’s NextGeneration recovery package. In October, LGX issued a €12 billion green bond, considered the largest Green Bond ever issued globally.
Throughout the course of 2021, 560 sustainable bonds were added to the LGX list, amounting to 246 billion euro. By the end of the year, the total volume of sustainable bonds listed on the LGX had reached 640 billion euro.
“Luxembourg’s multi-jurisdictional expertise, economic stability, and pioneering position in terms of sustainable finance continues to make it a leading international financial centre within the heart of the EU,” LFF said in a press release.
77 new entities licensed
Addressing other parts of the finance ecosystem in Luxembourg, LFF said that a total of 77 new entities were licensed by Luxembourg’s financial regulators last year, while employment in financial and insurance activities increased by 3 percent to 51.632 people.
One new bank set up operations in Luxembourg, while three new Management Companies, as well as six new investment firms, and seven new reinsurers were licensed by the two financial regulators, CSSF and the Luxembourg Central Bank. The country also remains attractive for alternative investment fund managers, known as AIFMs, with 41 ‘light’ AIFMs and 11 new AIFMs licensed. A ‘light’ AIFM is defined as one with assets below €100 million with leverage, and below €500 million without leverage.
“Continued uncertainty stemming from the Covid-19 pandemic meant that financial services had to continuously react to shifting circumstances throughout the year. Despite this, Luxembourg-based players weathered the year well and managed to grow both their assets and their operations,” said LFF CEO Nicolas Mackel.
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(This story has been updated to correct the fourth paragraph with the name of the LuxFlag chair.)