Luxembourg for Finance (LFF) has released its "Ambitions 2025" paper laying out a five-year vision for the further development of a sustainable financial industry.
This plan centres around six main components that are already at the core of Luxembourg’s role as a centre of excellence in cross-border finance: at the heart of Europe; complementarity to other EU centres; leading on sustainability; pushing innovation; responsible governance; and 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 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 supporting the EU in achieving the goals of the Capital Markets Union, Luxembourg is also 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. 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. According to LFF, 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 (LuxSE).
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.
In addition, 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 thus continue to create a favourable environment allowing the financial centre 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.
The country is also committed to adapting 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 the Grand Duchy 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.
According to LFF, 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 five 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
Finally, Luxembourg is working continuously to adapt and improve quality of life across the financial industry through infrastructure upgrades. The country's unique pool of multilingual, highly skilled talent provides the key to unlock Europe’s large and diverse single market. The Grand Duchy 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.
The full report can be read on https://www.luxembourgforfinance.com/news/luxembourgs-ambitions-for-2025-shaping-a-sustainable-future/.