This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/green-funds-and-sustainable-finance-options-in-luxembourg
What are social impact funds?
Social impact and green funds are investment funds that have integrated environmental, social and governance factors (ESG) into their investment process. These ESG funds invest into businesses that are environmentally friendly and have a positive impact in society.
The sustainable and impact investing asset class has recently emerged as a new and growing class of investments. There are different forms of investing to create a social impact, and these include environmentally friendly businesses such as solar or wind energy, start-ups with an ESG agenda or investments in a blue-chip company that largely fulfils ESG criteria.
This sector has seen a considerable growth, as institutional investors and sovereign wealth funds have been under increasing pressure by governments worldwide, to integrate ESG criteria into their investment allocations.
Why set up an ESG fund in Luxembourg?
Luxembourg has been at the forefront of social impact investing and has a long-established track record as a domicile of choice for ESG funds. Luxembourg is also ideally positioned for fund managers to make use of the European passporting rights to distribute the fund across the EU, and also to other markets worldwide. Also, most globally-recognised service providers have a presence and offer services in Luxembourg.
In fact, Luxembourg has a documented strategy for growing the impact investing sector, and this includes focus on leveraging Luxembourg’s expertise in asset management, alternative funds and sustainable finance. As a result, the country has seen a total market share of over 30% of all social impact investment funds in Europe, over 62% of European impact funds, over 65% of global microfinance assets, as well as being amongst the top four jurisdictions globally, for Islamic funds.
The Luxembourg Government, the Luxembourg Stock Exchange and the European Investment Bank have together established LuxFlag, an independent association for the labeling of funds that invest in the ESG sector.
