Luxembourg: a financial centre at the heart of sustainable finance
Meeting the ambitions of the Paris Agreement on climate change and reaching the sustainable development goals will require unprecedented levels of investment over the coming years. Using Luxembourg as an example, this film explores how financial centres can contribute to moving from billions to trillions of sustainable investments, notably by leveraging private and public investment and channelling investment into sustainable and climate-friendly projects.
From listing the world’s first green bond to labelling sustainable investment funds: When it comes to sustainable finance Luxembourg has indeed long been a pioneer and a first mover. As one of Europe’s leading international financial centres, Luxembourg is today globally recognised as an ideal platform to assist companies, governments and investors around the world to meet their sustainable development targets, supporting a range of activities from responsible investment funds and blended finance to sustainable development bond listings and ESG fund labelling.
Luxembourg is the primary centre for listing green bonds, with a global market share of more than 50%, and the leading European domicile for responsible investment and impact funds, accounting for 39% of European responsible investment funds and 45% of European environment strategy funds.
Since 2016, the Luxembourg government, under the lead of the Ministry of Finance and the Ministry for the Environment, has launched several innovative projects in partnership with the financial industry as well as international institutions. These initiatives include:
An innovative climate finance platform with the European Investment Bank to mitigate the risk of climate investments and thus allowing the private sector to co-invest in funds dedicated to climate change adaptation and mitigation;
the International Climate Finance Accelerator, which supports innovative climate fund managers action in their fund raising and provides operational support in launching their investment funds;
the Forestry and Climate Change Fund, a pioneering impact fund aiming to demonstrate that sustainable forestry within secondary and degraded tropical forests generates economic, ecological and social value.
In 2016, the Luxembourg Stock Exchange also launched the Luxembourg Green Exchange (LGX), the world’s first platform exclusively dedicated to the listing of green, sustainable and social bonds as well as sustainable and responsible investment funds. LGX, with its enhanced transparency and reporting standards, channels investment into sustainable projects and, through stringent eligibility criteria, also contributes significantly to the definition of a global sustainable investment taxonomy.
For more than a decade, Luxembourg has moreover been contributing to setting best practices and increasing transparency in the responsible investment sector through its fund labelling agency LuxFLAG, reassuring investors that a product invests in the given sector in a sustainable and transparent manner. It confers labels for specific investment fund strategies such as microfinance, ESG, environment and climate finance.
As nodes connecting public, institutional and private investors with financial products and services, financial centres have an important role to play as catalysts to help mainstream sustainable finance.