Luxembourg, 8 February 2021 – On the occasion of tomorrow’s presentation of the Luxembourg Sustainable Finance Strategy, Greenpeace calls on the government and financial actors to bring the investments made by the Luxembourg financial sector in line with the objectives of the Paris Agreement. Greenpeace welcomes the concept of a Luxembourg Sustainable Finance Strategy. However, a strategy that does not aim to align the financial sector with the targets of the Paris Agreement is bound to fail in the end.
While participating in the public consultation on the draft version of the Luxembourg Sustainable Finance Strategy at the end of 2020, Greenpeace Luxembourg had pointed out that the draft draft strategy focuses primarily on so-called sustainable financial products, although they represent only a small part of the investment activities carried out in Luxembourg. Greenpeace had further mentioned that the draft draft strategy does not contain any clear targets, measures or timelines to bring the entire financial sector in line with climate-protection goals.
A study published by Greenpeace at the end of January revealed the damaging effects of the current investment practices of the Luxembourg fund industry on the climate. The report exposed that the country’s 100 largest investment funds, including funds from Blackrock, Goldman Sachs and JP Morgan, finance carbon emissions that could bring global warming to more than twice the limit set by the Paris Agreement [1].
Reacting to the Greenpeace study, the Association of the Luxembourg Fund Industry (ALFI) argued, among other things, that the problem could only be solved on a global scale and that “the transition to a climate-neutral and climate-resilient economy is a long journey, and that we are only at the beginning of this process” [2].
However, time is of the essence. “We only have about 10 years left to prevent catastrophic climate change,” said Marttina Holbach, Climate and Finance Campaigner at Greenpeace Luxembourg. “Luxembourg’s investment fund industry, the second largest in the world, must rise to this challenge. Luxembourg could thus make a global contribution to climate protection.”
Besides fuelling the climate emergency, providing funding to emission-intensive sectors poses a significant risk for Luxembourg’s financial centre. Given the foreseeable drop in market demand for carbon-intensive assets, they are predicted to lose value in the near future. Financial actors who ignore this trend risk ending up with “stranded assets” [3].
“We expect that the Luxembourg Sustainable Finance Strategy does not ignore the challenges that our financial centre is facing,” added Martina Holbach. “Waiting for global solutions is not only wasting time in the fight against climate change. It also means Luxembourg would miss out on the opportunity to gain a competitive edge over other financial markets in terms of green finance solutions.”
[1] Find the report and supporting documents here.
[2] Source: ALFI
[3] A stranded asset is a resource that once had value or produced income but no longer does, usually due to some kind of external change, including changes in technology, markets and societal habits. Today, the term is most commonly used to describe coal, oil and gas resources that haven’t yet been extracted, but which appear as assets on companies’ ledgers. There is growing pressure on fossil fuel companies to “leave it in the ground” and avoid burning it. Scientists say that burning these reserves would vastly exceed the world’s “carbon budget” — that is, the amount of greenhouse gases that can be emitted and still stay within acceptable bounds of global warming.