ESG funds account for 67.3% of Luxembourg’s overall Ucits assets under management, reaching €2.8 trillion in assets by the end of June 2023, according to a study.
The study by the Luxembourg Sustainable Finance Initiative (LSFI) and PwC Luxembourg also showed that Article 8 funds have seen a 34% YoY increase, comprising 43% of Ucits funds.
The assets under management proportion of Article 9 ESG involvement funds dropped from 43% in Q2 2022 to 20% in Q2 2023, indicating a broader transition towards Article 8 disclosure.
Of the analysed management companies, banks, and insurance firms, 57.2% met the “comply or explain” obligation of the Sustainable Finance Disclosure Regulation (SFDR) for reporting Principal Adverse Impacts (PAIs) on sustainability factors. Meanwhile, 35% opted to declare their decision not to report on PAIs.
Despite net outflows of €76.9bn in 2022, ESG funds displayed greater resilience than non-ESG funds, which experienced net outflows of €98.6 billion.
The investment fund industry stood out as the sole sector with accessible (paid) data.According to the study, the leading ESG managers in Luxembourg are headquartered in the US and France.
The majority (59.1%) of ESG Ucits assets belonged to funds that only applied the ESG exclusions strategy. Of these, 72.8% applied at least three exclusions, predominantly to the weapons, tobacco and fossil energy sectors.
Only 8% of Luxembourg entities participate in the Partnership for Carbon Accounting Financials, while the Glasgow Financial Alliance for Net Zero and the Science-Based Targets Initiative exhibit differing degrees of adoption in climate initiatives.
Nicoletta Centofanti, CEO of the LSFI, commented: “The study underscores the sustained growth and evolution of sustainable finance. Challenges and limitations persist, with a notable focus on data, standardisation and disclosure. Moving forward, crucial steps include further data availability and comparability.”
Frédéric Vonner, sustainable finance and sustainability leader at PwC Luxembourg, added: “Initiatives like the official adoption of the United Nations’ Sustainable Development Goals and the Paris Agreement, the EU Sustainable Finance Action Plan and the European Green Deal aim not only to position Europe as the inaugural climate-neutral continent, but also to play a pivotal role in fostering the worldwide shift toward a sustainable economy.”
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