Luxembourg’s Ambitions for 2025: Financing a Sustainable Future

Since the publication in January 2020, barely six months ago, of the first edition of this brochure, the world has witnessed a truly global crisis. Covid-19 started
as a health crisis triggered by a pandemic, but the lockdowns which were imposed to halt its spread will cause lasting economic damage the world over.

Continuing on this path of qualitative growth, Luxembourg will be working around the six following commitments:

1. At the heart of Europe
2. Complementarity to other EU centres
3. Leading on sustainability
4. Pushing innovation
5. Responsible governance
6. Nurturing the human dimension

At the heart of Europe

By 2025, Luxembourg’s ambition is to further expand its role as a cross-border centre of excellence and EU hub. This status has been underlined by the fact that, in the context of Brexit, more than 60 financial firms including banks, insurance firms and asset managers, have decided to strengthen their existing activities or establish a new EU hub in Luxembourg to ensure continued access to the EU single market.

Fulfilling the fundamental purpose of financial services in financing a stronger European economy, Luxembourg will contribute to job creation and sustainable growth, at home and in the EU overall.

Committed to support the EU in achieving the goals of the Capital Markets Union, Luxembourg is looking forward to playing a lead role, given its capital market strengths and its expertise in cross-border capital raising.

Complementarity to other EU centres

Over the years, Luxembourg has become the go-to hub for financial institutions operating on a cross-border basis in the European market. Strengthening its role as a centre of excellence for international finance by creating value through multi-jurisdictional expertise and cross-border strategies is another objective for 2025.
This expertise will also be vital in expanding Luxembourg’s role in wealth management and alternative investments, notably by further developing Luxembourg’s offer in terms of family office and multi-family office service as well as seizing onshoring trends in alternative investments to increase its status as a European hub in the sector.

With increased specialisation, Luxembourg’s financial industry has also been climbing up the value chain of financial services over the years, growing into a regulatory, risk management and compliance competence centre for financial firms and their groups, in particular in the asset management industry. As a result, the functions performed in Luxembourg are becoming central to the operations of those groups.

Leading on sustainability

By 2025, investment in the sustainable finance sector will be worth trillions of dollars versus the billions counted today. Luxembourg will contribute to this drive by strengthening its position as a key hub for impact investment and blended finance, thanks to its efficient fund ecosystem and toolbox.
The Grand Duchy has already been at the forefront of green finance for several years, with around 35% of assets invested by European investment funds into renewable energy projects managed via Luxembourg investment funds. Luxembourg remains the world’s largest listing venue for green bonds, with 50% of the world’s green bonds listed at the Luxembourg Stock Exchange.

The taxonomy developed at the EU level provides a further opportunity for Luxembourg’s financial centre to a be a first mover and develop new frameworks for sustainable financial products and be a pioneer in the area of green and climate funds.

Pushing innovation

Digitalisation is set to play an increasingly important role. In order to build on its proven track record of product and technological innovation, Luxembourg will continue to create a favorable environment allowing the financial center to innovate and develop new products and services.

Over the last years, Luxembourg has emerged as a key European payment and e-money hub, underpinned by the recent relocations of major brands in the context of Brexit. With the advent of PSD2, Luxembourg aims to strengthen its role as home to one of the largest open banking platforms in Europe with specialised providers of API gateways catering to the needs of banks.

Luxembourg is committed to adapt its legislative framework in order to encourage innovation by the financial industry and push for the development of European legal framework in new finance sectors such as tokenisation.

Building on its success in attracting many non-life insurance companies to set up their EU hubs in Luxembourg as a hedge against the risks arising from Brexit, Luxembourg will aim to consolidate this new cluster and strengthen its focus on developments in Insurtech.

Responsible governance

Luxembourg’s financial industry must be built on sustainable principles in taxation and regulation. An important factor in Luxembourg’s ability to continue to attract new business is its long-term stability.

By 2025, Luxembourg’s objective will be to safeguard its AAA rating and maintain a stable legal and political environment for the financial sector to grow, as well as build on its first mover advantage.

A key commitment for the next 5 years is to ensure compliance with international standards and continue to provide international investors with the highest possible standards of protection.

Luxembourg Law is increasingly being chosen by international public institutions in financial markets as a consequence of Brexit, as underlined by the recent choice of the European Union and the European Atomic Energy Community (Euratom) to switch the legal framework of their debt issuance programmes from English to Luxembourg Law.

Nurturing the human dimension

Luxembourg is working continuously to adapt and improve quality of life across the financial industry through infrastructure upgrades.

Luxembourg’s unique pool of multilingual, highly skilled talent provides the key to unlock Europe’s large and diverse single market. The country is committed to strengthen its attractiveness for international talent through the adaption of legal and fiscal frameworks for expats, and to ensure that the education and vocational training of the local talent pool is geared towards supporting the evolving nature of its financial industry’s activities.