For decades now, Luxembourg has taken the initiative to provide certainty and clarity on regulatory matters and this approach has encouraged the gigantic flight to register funds under the Undertakings for the Collective Investment in Transferable Securities (Ucits) framework from the 1990s onwards--establishing Luxembourg’s global position as a fund centre on the international financial stage.
Since then, the country’s regulators and industry association have lobbied carefully on regulatory matters, most recently in alternative investments funds with drafts of both the Alternative Investment Fund Managers Directive and the European Long-Term Investment Fund both now reflecting the very real needs of this asset class.
On 2 December, the CSSF published a Q&A document on Sustainable Finance Disclosure Regulation. This will have two effects: Number one, it will provide the financial sector with the certainty needed to make the correct disclosures in sustainable finance. Something that cannot be underestimated when the industry in Europe is crying out for clarity in this area. Second, armed with that certainty, Luxembourg’s management companies will be able to attract investment funds and financial instruments to structure in Luxembourg, creating a virtuous circle where ’ expertise is enhanced with every deal and more funds flock.
When sustainable finance is so crucial to the future of our planet, it is important that the mechanics of it are made easy. I look forward to seeing an ecosystem for sustainable funds thrive in Luxembourg in the same way that they have for . It will ultimately change what investors are rightly able to demand from their investments.
However, for every positive step forward there are also some that sadly slip backwards. One of these is the European Court of Justice’s recent ruling on databases of beneficial owners. These valuable tools once allowed the public to view the beneficial owner of any company, exposing in many instances money laundering and corruption while also creating a transparent trading environment and enhancing trust in government.
The ECJ’s November judgement invalidated this public access. What the implications are of this step are as yet unclear, but I hope that Luxembourg can find a way to balance the privacy concerns raised by the ECJ with the public’s very legitimate interest in disclosure of beneficial ownership. I’m no idealist, but I do believe in tools to hold governments and the powerful to account--and owning a company is not an inherently private matter.
With this in mind, I hope Luxembourg can continue to move forward in 2023 in the spirit of disclosure, not just in sustainable finance, but in the tools to scrutinise that disclosure too.