The study “Sustainable Finance in Europe and Luxembourg 2025 – Navigating Recalibration” identifies key developments and provides insights into prevailing trends, while underscoring the importance of measuring and tracking progress over time. It aims to contribute to this ongoing transformation by offering a comprehensive overview of the current state of sustainable finance in Luxembourg, Europe, and globally.
Published by the Luxembourg Sustainable Finance Initiative (LSFI) and the Association of the Luxembourg Fund Industry (ALFI), in collaboration with PwC Luxembourg, the report builds on previous editions by analysing the growth trajectory of sustainable finance since 2020 and assessing the implications of recent regulatory recalibrations. It also highlights Luxembourg’s role as a leading international hub for sustainable investment funds and sustainable private assets.
Key Findings
The study’s major findings are set out below:
At a global level, sustainable public market funds reached EUR 3.1tn in AuM at the end of 2025, representing 6.0% of total public market funds AuM. Their AuM have grown steadily from EUR 1.7tn in 2020, reflecting a CAGR of 12.5%.
In Europe, sustainable public market funds accounted for EUR 2.6tn out of a total EUR 14.0tn (excluding money market funds), representing 18.8% of AuM.
As of the end of 2025, Luxembourg-domiciled sustainable public market funds held EUR 815.4bn in AuM, compared to EUR 3,495.4bn for conventional funds. Their AuM grew at a CAGR of 9.1% between 2020 and 2025, with their total number of funds reaching 2,327. The Grand Duchy remains the leading domicile for European sustainable public market funds in terms of AuM, representing 31.0% of the total sustainable public market funds AuM in Europe.
Regarding the EU Sustainable Finance Disclosure Regulation, there is an almost equal split: public market funds disclosing under Articles 8 and 9 held EUR 7.0tn in AuM at the end of 2025, nearly matching the EUR 7.1tn held by conventional funds. In Luxembourg, funds reporting under Articles 8 and 9 accounted for 71.5% of total AuM of public market funds domiciled in the country.
Within the global private markets universe, sustainable private market funds represent approximately EUR 1.4tn out of EUR 15.2tn, or 9.0% of the total. In Europe, sustainable private market funds held EUR 1,110.8bn (27.4%) of total European private markets AuM as of the end of 2024. They recorded a CAGR of 41.8% since 2020.
Sustainable private market funds domiciled in Luxembourg have been on a growth trajectory. By 2024, their AuM reached EUR 855.6bn – or 40.1% of the total private markets domiciled in the country. The Grand Duchy remains the leading domicile for European sustainable private market funds in terms of AuM, representing 77.0% of the total AuM in this cluster.
In terms of asset classes, private equity funds claim the top spot, with EUR 385.1bn (45.0% of AuM), followed by infrastructure funds with EUR 258.1bn (30.2% of AuM), real estate funds with EUR 107.5bn (12.5%) and private debt funds with EUR 104.9bn (12.2%).
Regarding sustainability strategies, the ‘ESG Integration’ strategy claims the lead by a large margin, as funds following it account for EUR 449.8bn of AuM, or 52.6% of all sustainable private market funds AuM domiciled in the country. The ‘Renewables/Energy Transition’ strategy comes next with EUR 90.2bn in AuM, followed by the ‘Impact’ (EUR 15.0bn), ‘Thematic’ (EUR 12.0bn), and ‘Microfinance’ (EUR 0.7bn) sustainability strategies. Sustainable private market funds without a clearly defined ESG strategy account for EUR 287.9bn, or 33.6% of sustainable private market AuM in Luxembourg.
Sustainable finance has come a long way since 2020, evolving from a period marked by regulatory uncertainty to one of greater maturity and clarity.
Despite recent regulatory recalibrations as exemplified by the Omnibus package, Europe stands at the forefront of this shift, driven by pioneering regulations and reinforced climate commitments. As the second largest fund domicile in the world, Luxembourg stands out as a key hub in the sustainable finance landscape.
While challenges persist, sustainability is becoming integral to financial decision-making. Luxembourg is continuously adapting to maintain its leadership through close-knit collaboration with all relevant stakeholders in the Luxembourg financial centre.
