This joint study of the Luxembourg House of Financial Technology (LHoFT) and Deloitte Luxembourg explores the role that financial technologies (FinTechs) can play in supporting financial institutions (FIs) in their sustainable finance efforts. Based on interviews with 27 entities ranging from FinTechs to FIs, associations and other public establishments, and complemented by desk research, this study demonstrates several opportunities which, to be realised, require the removal of certain barriers and mitigation of certain challenges. While the study draws from findings across the EU overall, it is strongly focused on the status of and implications for Luxembourg.
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"As the impetus in addressing the ESG challenges we face has accelerated over the past few years, Luxembourg has sought, with the capabilities and tools we have, to do what we can to help the world change and ensure a sustainable future. Critically, the sector of sustainable finance, with its set of financial regulations, standards, norms and products aimed at enabling the transition to a sustainable global economy, in particular with a focus on the much-needed energy transition, has become a strategic pillar of Luxembourg’s financial services sector and its agents," said Nasir Zubairi, CEO of the LHoFT.
Globally, the FinTech ecosystem is expected to play a leading role in the sustainable finance transition by leveraging artificial intelligence (AI) and data analytics. Indeed, Green FinTechs are thought to improve the global carbon footprint by developing innovative solutions: “FinTech development is helping economies advance towards the low energy transition”.
Although the impact is said to vary across regions, FinTech innovation is nevertheless recognised as one of the main drivers of green economic growth and highlevel economic development, thereby accelerating improvements in the ecological environment and economic structure. As emphasised by the European Commission in the EU Green Deal, FinTechs are a vital enabler for achieving the sustainability goals on a crosssector scale as they can accelerate and maximise the “impact of policies to protect the environment and deal with climate change”.
"Since the EU Action Plan was launched, we at Deloitte Luxembourg have closely observed the plan’s impact on the financial sector and how its institutions have reacted. Whether ‘only’ focused on complying, or regarding the EU Action Plan as an opportunity to revise their strategy to integrate sustainability, or simply continuing upon a path already long characterised by sustainable finance, we have seen how all financial institutions have quickly responded to and taken onboard the changes and requirements," said Francesca Messini, Sustainability Leader at Deloitte Luxembourg.
Luxembourg, with its tech-friendly regulatory environment, is not only a premier wealth centre and the second largest fund centre in the world, but also home to cutting-edge FinTech solutions. Worldwide, Luxembourg is known as a leading location for FinTech development. To exemplify, FinTechs with the desire to reside in Luxembourg are given opportunities from day one, with the LHoFT right at their disposal.
The LHoFT is a public-private initiative that enables technology innovation to develop and thrive within Luxembourg’s financial services industry. In doing so, the LHoFT plays a crucial role in growing FinTechs’ presence and integration within Luxembourg’s economy. Owing to the unique composition of its board of directors, the LHoFT can rely on broad industry experience and representation, thereby facilitating start-ups’ entrance into the Luxembourg market. The LHoFT proactively supports the development of FinTechs that hold potential for the transformation of the Luxembourg’s financial sector.
In this context, this report focuses on Luxembourg’s FinTech ecosystem and investigates whether it could serve as a sustainability enabler.
Order the report on the LHOFT website
