The Grand Duchy is a frontrunner in international financial services and innovative financial solutions and ranked second in the world behind the USA for asset and fund management. Luxembourg also saw continued growth in ‘sustainable finance’ in 2017.
Last year alone over twenty top-ranked international institutions chose Luxembourg to set up all or part of their activities and benefit from the specialisation that exists within the Luxembourg financial ecosystem.
Incoming financial institutions on the rise
During 2017, five banks – Northern Trust, Citibank, JP Morgan, Julius Baer and China Everbright Bank – decided to establish or expand their presence in Luxembourg. A total of 139 banks from 28 countries are located in there, where they are developing activities essentially linked to the investment management, private banking and business and trade finance sectors.
More than a dozen leading global asset managers, including Blackstone, Carlyle, EQT Partners, Henderson Global, MJ Hudson and T Rowe Price, have also announced their decision to locate or consolidate their activities in Luxembourg.
Assets of funds with European UCITS status totalled 3.58 trillion euros at the end of 2017. When added to the 673 billion euros of non-UCITS assets, they mark a record high for this activity of 4.16 trillion euros at the end of the year. Overall, the Luxembourg asset management sector grew by 11.18% over the year.
Ten new global insurance players – AIG, Aioi Nissay Dowa Insurance, CNA Hardy, FM Global, Hiscox, Liberty Mutual, RSA, SOMPO, Tokyo Marine and Britannia – announced their intention to set up their European hubs in Luxembourg. The Luxembourg financial centre now comprises 46 life insurance companies, 42 non-life insurance companies and 207 independent or captive reinsurance companies. A rise of 13.66% in premiums was recorded in 2017: non-life operations saw a 4.43% increase, while those dealing with life insurance grew by 15.22%.
Luxembourg is expecting further announcements from businesses over the coming months, whether in the insurance, fund management, banking or fintech sectors.
Sustainable finance
In the field of sustainable finance, 49% of the global volume of green bonds was listed on the Luxembourg Green Exchange (LGX) in 2017, validating the strategic vision to create what is today the only leading platform worldwide devoted to listing securities with sustainable, socially responsible and green credentials. With 151 green bonds worth 72.89 billion euros, the Luxembourg financial centre consolidated its position over the year as a leader for green finance. This market is expanding rapidly and seeing both supply and demand established on a consistently more professional footing.
Luxembourg benefits from a long tradition of innovation in sustainable finance, successfully developed over the past ten years. To this end, in 2006 it launched an agency tasked with awarding a quality label to sustainable financial projects (LuxFLAG).
Part of the Luxembourg financial centre’s strategy involves ensuring the fund industry is also mobilised on the issue of climate change: 45% of European fund assets linked to the climate question and to efforts to eliminate global warming are registered in Luxembourg. The country is now home to a third of responsible European investment funds and more than 60% of assets from global microfinance funds.
Relations with China
A long-standing partner of the Chinese financial sector, Luxembourg hosts seven of China’s largest banks. As at October 2017, LuxSE listings included 116 dim sum bonds for a total value of 36 billion RMB and is therefore now leading the way in Europe for RMB denominated bonds. Luxembourg is second to Hong Kong for the number of funds investing in China, with 60% of European funds investing in China being registered in Luxembourg.
Digitalisation
2017 saw the launch of the Luxembourg House of Financial Technologies (LHoFT), a national platform created to bring together all players involved in digitalising financial services, i.e. start-ups, traditional players, academic research centres, government representatives, etc. A number of businesses, including Funds DLT, Scorechain and Infrachain, have jointly developed ways of implementing blockchain technology, with a focus on the investment funds industry. In addition, the fintech ecosystem has seen fresh input from both new start-ups and those recently established in Luxembourg from elsewhere in Europe, China, Japan, the USA and Africa.
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The first Sustainable Finance Forum Luxembourg will take place in Luxembourg on 30 May 2018. For more information, visit: http://www.sustainable-finance-forum.com/