Luxembourg-domiciled ESG funds have experienced a rebound, with assets under management increasing by 12.3% from H2 2022 to June 2024, according to the Luxembourg Sustainable Finance Initiative (LSFI), a coordinating entity based on public-private partnership on sustainable finance, and professional services firm PwC Luxembourg.
Retail investors played a key role in driving ESG fund inflows, contributing €12.6 billion in net flows to ESG Ucits funds during H1 2024. In contrast, institutional investors withdrew €7.8 billion.
The EU’s Sustainable Finance Disclosure Regulation (SFDR) framework remains pivotal, with 68% of Luxembourg Ucits funds classified under Article 8, followed by Article 6 (27%) and Article 9 (4%).
ESG private market funds achieved a compound annual growth rate of 95.2% between 2019 and 2023. Private equity led the charge, accounting for €267.5 billion in assets under management, followed by infrastructure (€188.9 billion), real estate (€107.7 billion), and private debt (€58.7 billion).
The debut edition of Funds Europe’s Asset Manager’s Carbon Impact Research Report 2024 sheds light on the key trends shaping decarbonisation projects, carbon footprints, sustainable fund allocations, and the responsible investment strategies adopted by European asset management firms. Download the report here: https://funds-europe.com/carbon-impact-research-report/
Nicoletta Centofanti, CEO of LSFI, said: “Sustainable finance is essential for Luxembourg’s financial centre to address climate and nature-related risks and take an active role towards the current social and environmental challenges. Sustainable Finance is also an opportunity for financial institutions related to funding, talent, and reputation, among many others. In short, embedding sustainable finance is key to the future resilience and competitiveness of our financial centre. However, it is a complex journey requiring new skills, metrics, and processes.”
The report also noted Luxembourg’s leadership in simplifying retail access to sustainable investments through the updated European long-term investment fund (Eltif) framework. Luxembourg hosts 84 of Europe’s 132 Eltifs as of September 2024, representing 63.6% of the total.
Frédéric Vonner, advisory partner, sustainability at PwC Luxembourg, said: “The evolution of frameworks like Eltif 2.0 and SFDR will open new doors for retail and institutional investors to align their portfolios with meaningful environmental and social goals. Embracing AI-driven data analytics and blockchain-based traceability can unlock new opportunities and drive sustainable growth. By collaborating closely with international partners, Luxembourg can continue to set the standard for how financial markets drive the transition to a more equitable and sustainable world.”
