The Luxembourg financial centre: committed to help develop sustainable finance at European and global level
On 28 September, Luxembourg for Finance (LFF) and the Luxembourg Stock Exchange participated at the 1st international meeting of sustainable financial centres, organized by Casablanca Finance City together with the United Nations Environment Programme Inquiry (UNEP Inquiry).
Together with other leading international and regional sustainable and green financial centres, including London, Paris, Shanghai, Casablanca, Stockholm and Milan, amongst others, LFF supported on behalf of the Luxembourg financial centre the Casablanca Statement on Financial Centres for Sustainability.
This marks the first step to establish an international network of financial centres for sustainability, an idea first launched at the 2017 G7 meeting of Environment Ministers. The network will be officially inaugurated in Italy in early 2018. Exchanging best practices and taking common action on shared priorities, the international network will promote strategic action on green and sustainable finance in their respective centres, cooperate on expanding the pipeline of green products and assets, and share knowledge to build human capacity.
At EU level, moreover, the Luxembourg financial centre’s leading stakeholders in sustainable finance, representing the fund, banking and insurance industries, finance labeling, as well as the Ministry of Finance, responded, in close coordination, to the questionnaire of the European Commission’s High-Level Expert Group on Sustainable Finance (HLEG) at the beginning of September.
The Luxembourg financial centre, which has a long track record as an international platform for sustainable finance, actively encourages the EU Commission’s intention to develop a comprehensive EU strategy on sustainable finance.
The HLEG, bringing together 20 senior experts from civil society, academia and the financial industry (including Julie Becker, Member of the Executive Committee of the Luxembourg Stock Exchange) was established in late 2016 to advise the Commission in developing this strategy and has recently published its interim report.
Responding to the HLEG questionnaire, all the Luxembourg stakeholders agree that the most pressing issue to address is the establishment of common definitions and standards in sustainable finance, notably to improve reliability and comparability for investors as well as for impact measurement and reporting mechanisms.
The development of a taxonomy of sustainable assets and financial instruments would be a critical step towards enabling investors to differentiate sustainable investments from unsustainable ones. The Luxembourg fund industry, for instance, has developed guidelines that could act as a blueprint for such an EU taxonomy. (http://www.alfi.lu//sites/alfi.lu/files/files/Setting-up-in-Luxembourg/Fund-RI-categorisation.pdf)
Moreover, when defining European standards and labels, policymakers should build upon national experiences and take into account existing best practices. Luxembourg, through the work of LuxFLAG, the finance labelling agency, has more than a decade of experience in the area of sustainable finance labels. Based upon a rigorous review process, LuxFLAG grants recognized labels in the area of sustainable finance, including climate finance and green bonds.
Raising international capital for sustainable finance
Luxembourg is already playing an important role in the EU’s efforts to develop an effective strategy on sustainable finance. The financial centre has developed an ecosystem and a proven track record that is uniquely suited to raising international capital for sustainable investment.
Luxembourg is today the world’s leading centre for listing green bonds. Having launched the Luxembourg Green Exchange, the world’s first platform exclusively dedicated to green securities only one year ago, the Luxembourg Stock Exchange has also recently expanded the platform to social and sustainable bonds, based on the overwhelming success and demand from bond issuers and investors.
Sustainable fund industry
As Europe’s leading fund centre and having developed an unparalleled level of sophistication in the area of cross-border fund distribution as well as fund structuring, Luxembourg has also become a leading international centre for the sustainable fund industry and is today home to 1 out of 3 responsible investment funds in Europe.
Luxembourg Climate Finance Task Force
The country is fully committed to the goal of a national transformation as well as assisting others in the transition to a sustainable global economy. Since 2015, the Luxembourg government and private sector partners from Luxembourg’s financial services industry have been working together in a dedicated Climate Finance Task Force, implementing a coherent and fully integrated Climate Finance Strategy with the dual objective of contributing in a meaningful way to the international fight against climate change and cementing Luxembourg’s role as an international centre for sustainable and climate finance.
The HLEG responses, including those from Luxembourg’s public and private sector contributors will be published on the EU Commission’s website: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance_en.
 ABBL, ACA, ALFI, LuxFLAG, Luxembourg Stock Exchange