In the transition to sustainable finance, delivering measurable positive outcomes for society and the economy is essential – and impact investing is a key driver of this journey. In 2024, the LSFI launched the Impact Investing Advisory Board (IIAB), marking a milestone in its mission to accelerate a more sustainable, inclusive, and equitable global economy. By bringing together impact investing experts, the IIAB aims to chart a clear roadmap to further advance impact investing in Luxembourg.
One of the IIAB’s first initiatives has been to develop a definition of impact investing tailored to Luxembourg’s financial ecosystem. To ensure the definition reflects the needs of the industry, the IIAB is currently seeking feedback. Contributions can be submitted until 1st June 2025.
To learn more about the IIAB’s role and its proposed definition of impact investing, this month, we interviewed Laura Foschi, Executive Director of ADA Microfinance, and Stephan Peters, Chief Executive Officer at Accelerating Impact (formerly ICFA), both members of the IIAB. We discussed what led the IIAB to prose a definition of impact investing, its main added value, and some common misconceptions.
LSFI: Why did the IIAB decided to define impact investing? Why was it important for the advisory board to have a shared definition for the Luxembourg ecosystem?
Laura Foschi, Executive Director – Appui au Développement Autonome at ADA
Laura Foschi (L.F.): The IIAB’s mission is to promote, support, and inspire the development of impact investing within Luxembourg. A clear, shared definition was seen as the first essential step to ensure that all actors in the ecosystem understand and align around the same concept before engaging in further initiatives. Drafting an impact investing definition tailored to the Luxembourg ecosystem is also an important milestone in preparation for several of the IIAB’s upcoming initiatives. In particular, it is the basis for mapping the impact investing landscape in Luxembourg, as well as to be able to conduct a market sizing exercise to better understand the scale and scope of this sector.
Stephan Peters (S.P.): With a growing number of overlapping terms in the financial sector related to sustainability and impact, defining ‘impact investing’ helps to cut through the noise and create a solid foundation for action and communication. A shared definition will provide common language, allowing all stakeholders to collaborate more effectively and avoid misunderstandings.
LSFI: What has been the process for developing this definition and the sources used? Were there any key debates or points of divergence during the process?
Stephan Peters, CEO at Accelerating Impact
S.P.: The IIAB’s intention was not to reinvent the wheel. Instead, we leveraged the extensive work already done at the international and European levels, especially by the Global Impact Investing Network (GIIN) and the European Impact Investing Consortium (led by Impact Europe), which we consider as authoritative sources in the field.
Starting from these existing definitions, our working group focused on how these would be relevant and applicable given the specificities of the Luxembourg financial ecosystem, and assessed whether adaptation was necessary to reflect these specificities.
L.F.: Within the IIAB, we held a deep and open dialogue to highlight how each term could be interpreted differently depending on the type of institution, sector, and historical background of each stakeholder involved.
These discussions were summarized in our concept note, to acknowledge that impact investing is a multifaceted idea. Great care was taken to reflect this complexity while still aiming for clarity and alignment with other definitions.
LSFI: What is the unique added value of the IIAB’s definition of impact investing?
L.F.: Although the definition itself may not be “unique” in content, its real value lies in offering a harmonized and inclusive framework that can be used as a common point of reference for actors across sectors in Luxembourg, while recognizing the relevance of the wider ecosystem beyond the investment decision makers.
S.P.: The IIAB’s definition is a tool to foster dialogue, shared understanding, and collaboration across financial and social sectors, rather than creating a rigid standard.
LSFI: In what ways will this definition guide the IIAB’s recommendations to the LSFI?
S.P.: This definition acts as a launching pad for deeper engagement with the sector. It encourages the LSFI to align its recommendations with a commonly accepted vision of impact investing.
Rather than being exclusive, the definition invites contributions and feedback from various stakeholders. It is meant to evolve with the ecosystem and be co-owned by all relevant actors. That’s also why we are currently seeking feedback, to ensure it adapts to the Luxembourg financial sector’s needs and specificities.
L.F.: As such, we hope it will serve as a strategic compass that helps institutions and investors understand the ultimate goal of impact investing and how to align their practices accordingly.
By embedding this definition into its future workstreams, the IIAB aims to support the financial industry to pursue more impactful, sustainable investment practices over time.
LSFI: If you could clarify one misconception about impact investing, what would it be?
L.F.: Many investors assume that pursuing social or environmental impact requires a financial trade-off. Increasingly though, research shows that impact investing can generate strong risk-adjusted returns while achieving positive real-world outcomes.
S.P.: There is growing evidence that impact investments can perform competitively with, and even exceed, traditional investments. The key is to carefully analyse and select investments that align and reinforce their financial and impact objectives.
Impact investing is not just a passing trend. The GIIN estimates the worldwide AUM to be USD 1.571 trillion in 2024, with rapid compound annual growth of 21% since 2019. Many actors consider impact investing a forward-thinking approach that aligns financial success with meaningful social and environmental outcomes.
