Sustainable Finance

Beyond financial return.

Environmental, Social and Governance inclusion.

Sustainable Finance at a glance

Sustainable finance generally refers to the process of taking due account of environmental, social and governance (ESG) criteria when making investment decisions. In this respect, the investment decision does not only rely on the possible financial return on investment and the usual risk management criteria, but also on ESG factors.

ESG Criteria

Environmental

Climate change mitigation and adaptation, broad environmental aspects and issues, preservation of biodiversity, pollution prevention and circular economy.

Social

Inequality and inclusiveness matters, labour relations, investment in human capital and communities, as well as human rights issues.

Governance

Of public and private institutions, management structures, employee relations and executive remuneration. To ensure the inclusion of ESG in the decision-making process.

Why Sustainable Finance

Sustainable finance has been identified as an opportunity to shift financial flows from environmentally and socially harmful investments to alternatives that can help transition the world to a low-carbon and fair economy. In order to tackle this situation, a number of initiatives have been put in place around the globe, with further ideas being added to governments, institutions and investors agendas.

  • In 2015, the United Nations adopted the 17 Sustainable Development Goals (“SDGs”).
  • In December 2015, the signatories of the Paris Agreement agreed to keep the global temperature increase in this century well below 2°C above pre-industrial levels.
  • Institutional investors expect sustainable investing to grow in importance over the next five years.
  • Fast regulatory developments have also taken place at European level, in this respect, the European Commission published the European Green Deal on 11 December 2019.
Sustainable Finance in  Luxembourg
  • Luxembourg has been actively engaged in the microfinance industry since the early 1990s with the establishment of the first Luxembourg microfinance institutions.
  • The Luxembourg financial centre acts as a leading international platform for sustainable finance, supporting a range of activities from responsible investment funds and blended finance to green bond listings and ESG fund labelling.
  • The Global Green Finance Index places Luxembourg in 2nd place worldwide for the depth of its green finance.
Luxembourg’s Key Facts 

Leading European market share of responsible investment funds

of AuM in European environment strategy funds

Luxembourg’s market share in global AuM in Microfinance Investment Vehicles

The Luxembourg Green Exchange: the world’s first and only green exchange

Luxembourg Sustainable Finance Initiatives 

The Luxembourg Sustainable Finance Roadmap

In 2018, Luxembourg developed a Sustainable Finance Roadmap in collaboration with the United National Environment Program Finance Initiative. This document establishes a comprehensive sustainable finance strategy and gives recommendations in regard to how Luxembourg can seize the opportunity to mainstream sustainable finance.

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National Plan for Sustainable Development 2021-2030

In December 2019, Luxembourg launched the “Luxembourg 2030: 3rd National Plan for Sustainable Development” in order to implement the 17 Sustainable Development Goals (SDGs) of the UN Agenda 2030. The plan highlights that the 169 targets and 17 SDGs are integrated and inseparable.

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Luxembourg – EIB Climate Finance Platform

This joint initiative of the Luxembourg Government and the European Investment Bank (EIB) is designed to mobilise investment for climate related projects by combining a stop-loss guarantee with technical assistance.

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Luxembourg Finance Labelling Agency (LuxFLAG)

LuxFLAG was founded as an association in July 2006 by the Government of Luxembourg and 6 other founding partners. The Agency aims to promote the raising of capital for sustainable investments by awarding a recognisable label to eligible investment vehicles amongst others.

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The International Climate Finance Accelerator (ICFA)
This public-private partnership was set up in 2018 by 10 private entities of the Luxembourg financial sector, the Ministry of Finance and the Ministry of the Environment, Climate and Sustainable Development. The Accelerator provides financial and operational support to fund managers launching innovative climate action funds.
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Luxembourg Sustainability Bond Framework

On 2 September 2020, Luxembourg became the first European country to adopt a reference framework for sustainable bonds. The  framework is also the first in the world to fully comply with the new recommendations of the European taxonomy for green financing.

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Luxembourg Green Exchange

In September 2016, the Luxembourg Stock Exchange launched the Luxembourg Green Exchange (LGX), the world’s first dedicated platform for green, social and sustainable securities. The LGX lists more than half the world’s green bonds.

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The Amundi Planet Emerging Green One Fund

This joint venture with the International Finance Corporation invests in green bonds emitted by banks in developing countries.

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University of Luxembourg

In early 2020, the Luxembourg government entered a strategic partnership with the University of Luxembourg in order to create a Master Track on Sustainable Finance, as well as professional certificates and fundamental and applied research in sustainable finance.

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Investing for Development – Luxembourg Microfinance and Development Fund (LMDF)

It is a Luxembourg social investment fund which was created in 2009. The creation took place thanks to a Luxembourg commitment aimed at contributing to the reduction of poverty through microfinance around the world.

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Investing for Development – The Forestry and Climate Change fund (FCCF)

The Forestry and Climate Change fund is a pioneering impact fund aiming to demonstrate that sustainable forestry within secondary & degraded tropical forests generates economic, ecological and social value and contributes to healthy landscapes, climate change mitigation & adaptation and local economic development.

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