As ESG assets top €6.2 trillion globally, Luxembourg is leading the charge in blended finance—strategically leveraging public and private capital for sustainable impact.
Backed by a triple-A rating and a robust, diversified financial ecosystem, the country has emerged as a global hub for sustainable finance and innovation. With strong political and regulatory foundations, Luxembourg offers an agile, transparent environment for investors committed to ESG. Finance Minister Gilles Roth outlines the nation’s roadmap for advancing its leadership in sustainable finance.
What do you see as the key factors that have enabled ESG growth?
We are reliable, we have political stability, a triple-A credit rating, and of course, real expertise in global finance such as in banking, insurance, and reinsurance as well as in the fund industry. Globally, Luxembourg funds account for more than €7.3 trillion in assets under management and around €3.2 tn in sustainable fund assets, representing almost 40% of the European ESG fund market. Much of this growth has been enabled by the regulatory frameworks and standards. In the fund space for example, the European SFDR created a structure for sustainable investment at scale. As Europe implemented ESG rules, asset managers chose Luxembourg to launch and distribute these types of funds. We play a key role as the largest cross-border fund hub in Europe, and second globally after the US, Luxembourg already had the infrastructure, expertise, legal certainty, and fund toolbox in place.
How has your ministry created an ecosystem where sustainable finance initiatives can thrive?
We have used our expertise in the fund industry to further deepen our expertise in sustainable finance. We started by creating public-private partnerships, for example, LuxFLAG, an initiative that started in 2006 to label sustainable finance related products. In 2017, we launched the International Climate Finance Accelerator, and more recently the Social Finance Accelerator, both designed to support the next generation of impact fund managers. And five years ago, we established the Luxembourg Sustainable Finance Initiative, the LSFI, which now plays a central role in coordinating our national efforts. Just last year, I launched a 10-point Sustainable Finance Action Plan for the Ministry of Finance as well, which lays out our roadmap across scaling more capital as a force for good, product innovation, education, gender finance, and international engagement.
How does the ministry encourage partnerships between public institutions and private actors?
The collaboration of public and private entities is essential for leveraging billions of euros or dollars. That is not possible with public money alone. The private sector has also benefited from sustainable finance investment. We have more than 4,700 ESG funds in Luxembourg. Our Stock Exchange lists more than €1.2 tn in green, social, and sustainability bonds. Luxembourg aims to be a global leader in sustainable finance. That’s why we have co-developed, and co-funded, accelerators like ICFA and ISFA, with the private sector, helping new fund managers bring innovative climate and social finance strategies to market. That’s also why we partnered with the EIB on the Luxembourg–EIB Climate Finance Platform, to de-risk private investment into climate solutions. We’ve also launched initiatives like the Gender Finance Task Force, to bring public and private institutions together around the topic of gender finance. And we support the Green FinTech space, working with the Luxembourg House of Financial Technology (LHoFT) to help sustainable tech solutions scale.
What role do international institutions play in Luxembourg’s ESG finance strategy?
International partnerships are absolutely essential. Luxembourg may be small in size, but our connections, ambitions, and reach are global. We have been proud to host the European Investment Bank since 1965. I appreciated the broadening of the scope of action under President Calvino. We are interested in deepening the collaboration. A good example is that the EIB has used a Luxembourg-based platform, Orion from HSBC, to issue a digital bond for more than €100 m. We have used the same platform recently to issue the first digital treasury certificate. The collaboration with the EIB and the EIF, the European Investment Fund, goes far beyond that. Their expertise helped us to set up the Luxembourg Future Fund 1 and 2 dedicated to new emerging areas to boost promising scale-ups and start-ups. The same applies for sustainable finance, in particular for our stock market. Another example is our joint Luxembourg–EIB Climate Finance Platform.
This fruitful collaboration has already lasted several decades. It’s a win-win-situation. Institutions like the EIB bring credibility, technical expertise, and the ability to align public policy with private markets. We’re also working with the Global Green Growth Institute to help countries in Africa, Asia, and Latin America develop green bond markets. And through the SDG Impact Finance Initiative, we’re co-investing alongside partners like Switzerland and Korea to help scale capital for the SDGs alongside the private sector. When I go to Korea next year, this will be one of the topics.
Are there any upcoming initiatives or regulatory developments you’re particularly excited about in the sustainable finance space?
First of all, we are implementing the 10-point-action-plan the ministry launched recently on sustainable finance. That includes establishing a House of Sustainable Finance, a dedicated hub where actors can meet, innovate, and collaborate. We’re also looking at investing more in new areas of finance, such as blue finance, financing ocean protection and sustainable water management. And we’re backing more educational programmes: from professional training to new academic tracks at the University of Luxembourg in sustainable finance. We are also closely working with the European Commission to understand the scope of Article 8 and 9 after the latest orientation of the new Commission which wants a simpler framework.
What does success look like for Luxembourg in terms of its global impact through sustainable and blended finance and what is your future outlook?
I am optimistic that the future for Luxembourg as a leading financial centre is bright. We must remain stable, agile and seize new opportunities. In these geopolitical times, I truly believe that it is the hour of Europe – and it is also the hour of the financial centre of Luxembourg. We can mobilise capital for good. Mobilising private capital was highlighted in the Draghi and Letta reports. It is implemented now in the Savings and Investment Union.
Yet we should not rest on our laurels. The new focus is on sustainable finance and in new financial technologies. A strong regulatory framework will provide the necessary flexibility for everything related to digital assets. We must attract further talent and our recent government measures aim to do this. I think the future is bright for sustainable finance and the future is also bright for Luxembourg as a key player of sustainable finance.
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