Sustainable finance has entered a phase of ‘greater maturity and clarity’, according to a new report by the Association of the Luxembourg Fund Industry (ALFI), Luxembourg Sustainable Finance Initiative (LFSI) and PwC Luxembourg.
As the report, Sustainable Finance in Europe and Luxembourg 2025: Navigating recalibration, noted, Europe stands at the forefront of this shift, with Luxembourg, the second largest investment fund domicile in the world, a ‘key hub’ in the sustainable finance landscape.
‘A key driver of resilience’
“The need for sustainable finance not only persists but is intensifying, as it serves as a key driver of resilience and long-term value creation,” commented Nicoletta Centofanti, CEO of the Luxembourg Sustainable Finance Initiative (LSFI).
“Beyond addressing environmental and social challenges, sustainable finance strengthens the robustness and stability of financial systems, enhancing their capacity to withstand global shocks stemming from climate change, governance gaps and increasing social issues, and the long-term risks these challenges pose to economic stability and prosperity. In this evolving landscape, Luxembourg has firmly positioned itself as a leading international financial centre for sustainable finance.”
At a European level, sustainable public market funds totalled €2.6 trillion last year (out of a total of €14 trillion, excluding money market funds), while private market sustainable funds reached €1.1 trillion.
Luxembourg remains the leading domicile for European sustainable funds in terms of assets under management, representing 31% of all European sustainable public market fund assets and 77% of private market sustainable fund assets.
As of the end of 2025, sustainable public and private market funds domiciled in Luxembourg reached a combined €1.63 trillion in assets under management, with some €815.4 billion of this held in public market funds, while sustainable private market funds accounted for €855.6 billion, or 40.1% of the total private market funds domiciled in the country.
Asset management industry
“Although the Omnibus ‘simplification’ measures suggest a scaling back from previous regulatory ambitions, the asset management industry continues with its commitment,” added Geoffroy Marcassoli, partner and sustainability assurance leader at PwC Luxembourg.
“The emphasis is increasingly placed on robust data, measurable sustainability achievements, and enduring resilience. Luxembourg’s influential position within the European sustainable finance landscape continues to drive progress, guaranteeing that sustainability remains a fundamental strategic focus as frameworks such as the SFDR evolve.”
Globally, sustainable public market funds reached €3.1 trillion in assets under management as of the end of 2025, representing around 6% of the total public market fund. This has grown steadily, from €1.7 trillion in 2020, representing a CAGR of 12.5%, with Europe playing a key role in driving this growth.
“Sustainable finance remains a key pillar of the European asset management industry,” added Serge Weyland, CEO of ALFI. “Recent reviews of sustainability rules are a welcome opportunity to ensure that the framework delivers real impact rather than unnecessary complexity.” Read more here.
