Luxembourg wants to be the leading global centre in sustainable finance by 2025. It also wants to keep increasing the number of foreign banks and asset managers active in the country and strengthen its role as a wealth management hub by attracting more family offices.
These are the main priorities of a five-year plan that Luxembourg for Finance (LFF), the umbrella organisation for the Grand Duchy’s financial sector, published on its website on Tuesday.
Leading the drive to sustainability
Luxembourg should ‘lead the drive to take total sustainable investment from the billions to the trillions of dollars or euros’, according to LFF-director Nicolas Mackel. ‘While it still remains a small part of the overall financial services market, the growth in green financial products has already been remarkable.’
LFF considers the strong position of Luxembourg in green bonds and microfinance an important ‘first-mover advantage’. The Luxembourg Stock Exchange listed the world’s first green bond in 2007 and today lists around 50% of the world’s green bonds in terms of volumes. Besides, 61% of the assets held in microfinance funds globally are held in Luxembourg investment funds. ‘Luxembourg wants to strengthen its role in impact investing and help it reach the mainstream’, says Mackel.
Sustainable Finance Initiative
In order to develop a national strategy to further develop Luxembourg’s role as an international platform for sustainable finance, the country’s government will shortly set up a national Sustainable Finance Initiative to coordinate activities, LFF announced in its five-year plan.
This is supposed to take ‘several forms’, including incentives for climate-related financial services and the development of frameworks for new green financial products in banking, asset management and insurance, notably in the retail space with the aim to further mainstream sustainable finance products.
LFF hopes the European green taxonomy, that focuses on environmentally sustainable activities, will be instrumental in reaching this goal. However, for now the eventual form the taxonomy will take is still unclear: there’s still no agreement on what criteria investments should fulfil to be classified as sustainable. Nevertheless, Luxembourg considers increasing its market share in the area of green and climate funds an important priority.