THE INTERNATIONAL PLATFORM FOR SUSTAINABLE FINANCE
Luxembourg’s sustainable finance expertise
Luxembourg has been at the leading edge of these European developments, thanks to collaboration in the relevant EU working groups and in public consultation exercises involving the banking, investment fund and insurance industry associations.
But the Grand-Duchy has also pioneered sustainable finance practices on its own account, thanks largely to close cooperation between the public, private, and civil society sectors. It has also built an ecosystem, which is uniquely adapted to raising international capital for responsible investments. Furthermore, the country is home to the European Investment Bank (EIB), the world’s largest green lender and an expert in public-private investment projects.
Luxembourg ranks among the world’s top green financial centres in the latest Global Green Finance Index (GGFI) published in 2021, which measures how financial centres contribute to the creation of a more sustainable global economy. The Grand Duchy remains the market leader in terms of sustainable investment funds, with a third of all European sustainable fund assets being domiciled in Luxembourg.
In sustainable finance, Luxembourg is:
- The Green Bond capital of the world
Over 50% of all worldwide sustainable bonds (green, social and sustainability bonds) are listed on the Luxembourg Green Exchange (LGX). The world’s first platform dedicated exclusively to sustainable securities and a trading point for issuers and investors.
- The leading European sustainable investment funds domicile
Luxembourg is the European leader in responsible investment fund assets, accounting for 32% of all assets under management in European responsible investment funds.
- Home to LuxFLAG:
A commitment to quality Luxembourg is home to LuxFLAG, the pioneering finance-labelling agency, providing clarity and confidence to investors in sustainable. LuxFLAG labels around 350 financial products from asset managers in over 17 countries.
- A leader in microfinance vehicles
Luxembourg has a history of commitment to the microfinance sector since the early 2000s, and is home to over 50% of all assets in microfinance vehicles making it a world leader in the sector.
- Enabling philanthropy
The Fondation de Luxembourg, a public-private partnership provides a third-party facility for the establishment of private philanthropic foundations, providing advice and guidance to donors. Projects fall under one of five themes: health, social cohesion, diversity, universal education and climate change.
- Helping others through financial knowledge transfer
Luxembourg hosts the ATTF-House of Training, which co-finances training programmes around the world, strengthening financial structures, capacity building, and supporting sustainable development in 40 markets.
Luxembourg’s sustainable finance strategy
Luxembourg has set up a coherent sustainable finance strategy to help globally leverage public and private sector investment. Each sub-industry of the financial sector is becoming increasingly active in sustainability: banks, asset managers, insurers, capital markets and FinTechs.
The Luxembourg Green ExchangeIn 2016, the Luxembourg Stock Exchange launched the first platform dedicated to green financial instruments – the Luxembourg Green Exchange (LGX), the only such platform of its kind worldwide, where issuers and investors can come together to fulfil their green objectives. In 2017, the LGX opened new segments for social and sustainability bonds, an industry estimated to be worth $31 trillion globally.
Luxembourg-EIB Climate Finance PlatformThe Luxembourg-EIB Climate Finance Platform, a joint project of the European Investment Bank (EIB) and the Luxembourg government, aims to mobilise investment for projects which will have a high impact in the fight against climate change. It is the first time the EIB has entered into such a partnership with a member state. The Luxembourg government is contributing €30 million as a first-loss guarantee to mitigate the risk for the private sector when co-investing in funds dedicated to climate change mitigation and adaptation.
Climate Finance and Green Bond labelsLuxFLAG labels around 350 financial products from asset managers in over 17 countries and offers five different types of labels for ESG financial products. In 2016, the labelling agency launched a dedicated Climate Finance quality label to guarantee that investment funds focused on climate in the implementation of their investment policies. In the same spirit, the agency launched a specific Green Bond label in 2017.
UN Financial Centres for Sustainability (FC4S)Luxembourg is a proud founding member and lead donor of the UN’s network of Financial Centres for Sustainability (FC4S) and actively supports its work. These 30 plus financial centres work on cooperative tasks and knowledge sharing, aiming to push the financial industry towards greater sustainability.
IFC / Amundi Planet Emerging Green OneAs a strategic partner of the International Finance Corporation, the Luxembourg government contributes €6 million to the technical assistance facility of the Amundi Planet Emerging Green One, the largest green bond fund in the world. This Luxembourg-based investment fund targets green bonds issued by banks in developing countries and, at the same time, helps develop green bond policies, training programs and best practices in such markets through the technical support facility. The fund thereby deepens new green capital markets and facilitates the adoption of the Green Bond Principles across the globe.
The International Climate Finance AcceleratorThe International Climate Finance Accelerator facility helps innovative fund managers specializing in climate action by offering various forms of support, including help in fund raising from institutional and public investors, as well as financial and operational support during the launch phase of a new fund structure.
The Luxembourg Sustainable Finance RoadmapDrafted in partnership with UNEP, it establishes a comprehensive sustainable finance strategy, principally by leveraging Luxembourg’s inherent strengths as an international financial centre, to contribute to Agenda 2020 and the objectives of the Paris Agreement.
First European country to launch a sustainability bond frameworkLuxembourg became the first European country to launch a sustainability bond framework. It is also the first framework to comply with the new recommendations of the EU taxonomy for green financing, while also meeting the highest market standards (e.g., the ICMA Principles). The new framework is designed to comply with the draft European Green Bonds Standard (EU GBS) and will contribute to growing the sustainable bond market on a global scale.
The world’s first legal framework for green covered bondsThe new law from 2018, created the world’s first legal framework for covered bonds, a new instrument to finance facilities that generate renewable energy. The law contains strict criteria relating to the purpose of the infrastructure financed and security for the banks providing the loans.
Inclusive finance NetworkInFiNe.lu builds on the former Luxembourg Microfinance Round Table, an informal initiative launched in 2004, set up to facilitate the dialogue on microfinance among a variety of state institutions, civil society organisations and financial firms.
Financial inclusion through FinTechThe Luxembourg House of Financial Technologies (the LHoFT), holds an annual training and networking bootcamp for Fintech companies from all over Africa, focusing on financial inclusion and building bridges between Africa and Europe.
Defining characteristics of the Luxembourg financial centre
The success of Luxembourg as an international financial centre is founded on:
- decades of experience in dealing with an international client base and serving clients on a cross-border basis;
- economic, political, social and financial stability;
- a legal, regulatory and tax framework that caters to the specific requirements of all types of international finance;
- a state-of-the-art IT infrastructure focused on providing the financial centre with a service which is fast, secure and reliable;
- a culture of investor protection and rigorous anti money Laundering policies;
- a strong working relationship between the public and private sectors
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