Luxembourg firms are leading the EU in sustainability, with 97% reducing emissions, and are making significant investments in sustainability and innovation. However, they face challenges in finance, digitalisation and gender equality, according to the 2024 European Investment Bank Group Investment Survey, which polled 183 firms in Luxembourg. While the main EU-wide results were in October 2024, a detailed country-specific report, on Wednesday, provides further insights into Luxembourg firms’ environmental and investment activities, highlighting both their progress and the challenges they face in an increasingly dynamic business environment.
Sustainability efforts
The survey revealed that Luxembourg’s corporate sector is at the forefront of environmental sustainability. Almost all firms (97%) in Luxembourg have implemented measures to reduce greenhouse gas emissions, exceeding the EU average of 91%. Additionally, 74% of Luxembourg firms have already invested in actions to mitigate climate change impacts, compared to 61% across the EU. These actions include waste minimisation and investments in energy efficiency, though Luxembourg firms are less likely to have invested in energy efficiency (58%) than the EU average (65%).
Investment outlook
Despite strong sustainability measures, Luxembourg firms express a generally negative outlook on several investment drivers. The survey indicated a growing pessimism among businesses regarding political and regulatory conditions, the economic climate and the availability of both internal and external finance. More firms in Luxembourg expect deterioration than improvement in these areas over the next 12 months. Luxembourg firms share similar views to their EU counterparts in terms of business prospects, economic climate and availability of external finance, although they are less negative than EU firms about the political and regulatory environment, and more negative about the availability of internal finance.
Replacement investments
Investment activity among Luxembourg firms remains stable, though some gaps remain. A notable 82% of firms were satisfied with their investment over the past three years, though 13% identified investment gaps, a decrease from the previous year’s survey. The focus of investment in Luxembourg continues to be on replacement rather than capacity expansion, with the share of firms investing to expand operations 8 percentage points lower than the EU average. Luxembourg firms dedicated 46% of their investments to intangible assets, a significant increase from 32% in the previous year’s survey, and surpassing the EU average of 37%.
Future investment plans
Looking ahead, Luxembourg firms plan to prioritise investments in replacement (37%) and the development of new products or services (34%), signalling a preference for strengthening existing operations and innovating offerings. Furthermore, Luxembourg firms exhibit a higher level of integration into global value chains than their EU counterparts, with 75% of firms engaged in international trade, compared to the EU average of 63%. However, concerns regarding supply chain disruptions have declined, and firms reported that logistical challenges, access to raw materials, and compliance with new regulations are their primary trade-related issues.
Climate change
Despite Luxembourg’s stronger environmental performance, there is a distinct gap in future climate-related investments. Only 42% of Luxembourg firms planned to invest in climate change mitigation over the next three years, a decrease from 53% across the EU. Furthermore, while 59% of Luxembourg firms reported being directly impacted by physical risks associated with climate change, only 19% had taken steps to mitigate these risks, lagging behind the EU average of 29%.
Innovation and digitalisation
Innovation and digitalisation also remain critical to competitiveness, though Luxembourg firms are behind the EU average in adopting advanced digital technologies. Only 57% of Luxembourg firms reported using such technologies, compared to 74% across the EU. However, larger firms in Luxembourg were more likely to adopt these technologies than their smaller counterparts.
Investment barriers
Investment barriers in Luxembourg largely mirror those in the EU, with the availability of skilled staff, future uncertainty, and energy costs identified as significant concerns. Additionally, Luxembourg firms faced regulatory burdens, with half of those exporting within the EU reporting the need to comply with different regulatory standards across member states, which is lower than the EU average of 60%. About 80% of Luxembourg firms employ staff to manage regulatory compliance, with a particularly high burden on smaller firms.
Access to finance
Regarding access to finance, Luxembourg’s firms have become less finance-constrained, though they remain slightly more reliant on external finance than their EU counterparts. Bank financing continues to be the primary source of external funding, but Luxembourg firms rely on it less than their EU peers (73% compared to 81%). In addition, 17% of firms reported receiving policy support through concessional bank finance, while 13% accessed grants or subsidies to support their investments.
Gender equality
On the issue of gender equality, Luxembourg firms trail the EU average in terms of women’s representation in senior management positions. Only 15% of firms in Luxembourg had more than 40% of women in senior management, compared to 23% across the EU. However, Luxembourg’s share of firms with women owning a majority stake in the company (13%) is slightly higher than the EU average of 11%.
The EIB Group has committed €250m in new financing for projects in Luxembourg in 2024.
The full 34-page Luxembourg specific report is available .