The High-Level Expert Group (HLEG) on Sustainable Finance issued its final report at the end of January, setting out strategic recommendations for a financial system that supports sustainable investments.
The European Commission is now finalising its strategy, taking into account HLEG recommendations, and will issue its action plan this month.
Luxembourg has always been a fast mover in the financial sector, which has kept the country ahead of the game over the last 30 years. The recommendations of the HLEG final report bring opportunities for financial sector professionals in the Grand Duchy.
The first and most important strategic recommendation in the report was the building of a common sustainability taxonomy, which is considered the backbone of success for other proposals. The second recommendation, which touches the heart of Luxembourg’s green finance initiatives, was the proposed EU Green Bond Standard (EU GBS), a trend in which Luxembourg has been a pioneer. The EIB’s listing of the first Climate Awareness Bond in 2007 and the launch of the Luxembourg Green Exchange (LGX) in 2016 are just some examples.
The third area of interest for Luxembourg’s financial sector was that of fund labels. LuxFLAG’s suite of labels addressing investment funds and bonds helps position it as the leader in the sustainable finance labelling landscape. Other recommendations likely to drive cross-cutting change include clarifying the fiduciary duty to help raise interest at board level of companies and thus lead to increased consideration of ESG issues in organisations. Extending the traditional focus on investment risk and return, so that it also encompasses ESG values and their appropriate embedding in investing mandates, will be another driver of change.
