As we realize with the financial crisis in 2008 which massively effected our economy, countries across the world are battling to find a solution that may provide a better resolution to avoid such calamity in the near future.
Internet finance, Green Finance, and Sustainable finance are some of such hot topics emerging in the financial world which is seen as a promising solution to combat any sort of financial crisis and sustainably handle the major crisis.
So, what is Green finance? It is considered to be a logical complement to sustainable development and it is supported by more than 170 countries, as per UN data. The World Financial corporation has released that a worldwide momentum has been gained by the “green” financial activity. However, there is no financial instrument been classified as “green” and no involvement of any intergovernmental agreements. As per Zadek and Flynn (2013), green finance is often used as an interchangeable word for green investment.
Labatt and White (2003), defines Green finance as “encompass all market-based instruments designed to deliver environmental quality and to transfer environmental risk” however, as per Brand (2012) termed it as a “new buzzword in sustainability discourses”.
As many countries from Eurozone are moving towards this initiative, Luxembourg is also hosting financial center which is dynamic and internationally recognized and leading to a future path with two pillars “green/social” and “digital” finance. Many international financial institutions, infrastructures with skilled labor and with financial regulations which are strongly controlled is providing a lucrative market for green finance. IFC (International Finance Centre) got definitive expertise in the investment funds which are globally distributed as well as LUXSE stock exchange is specialized in trading securities, both with the strong foundation providing an interest in innovation related to green bonds and funds being traded.
The single European market for financial products and services, created in 1990, shaped the growth of Luxembourg’s financial industry which is supported by the easy access to the business environment. The authorities are also famous for taking or making any decisions quickly which helps to simplify the bureaucratic process and thereby incorporation of new EU directives into national law becomes quickly.
Even though in the global race, competition to highly ranked Asian rivals is making them fall behind but still it is considered to be important in Eurozone. The financial measure of the strategic decision is driven by interest whereby the measures are orchestrated to brand and reposition the country on the world’s financial and investment map.
One of the internationally recognized projects in Luxembourg Green Exchange (LGX) which is exclusively dedicated to list and trade green securities, made an investment of more than 50 billion Euros in green projects by listing green bonds from all over the world. The procedure is designed completely transparent which is in line with international standards to ensure the credibility of further green issuers.
KFW (German Kreditanstalt für Wiederaufbau), the Nordic Investment Bank, the Bank of China and EIB (the European Investment Bank) are some issuers who are prominent with LGX. Among the new plans, the introduction of sustainable and social bonds is playing a major role which is leading to optimization that will abolish investment barriers and risks so that other renewable projects can be released at a much-needed rate.
The initiatives indicate Luxembourg to be playing a major role in the world of “green financial centers”.
Zadek, S., and C. Flynn. 2013. South-Originating Green Finance: Exploring the Potential. Geneva: UNEP FI, SDC, and iisd
Labatt, S., and R. R. White. 2003. Environmental Finance: A Guide to Environmental Risk Assessment and Financial Products. Hoboken, NJ: Wiley.
Brand, U. 2012. “Green Economy — the Next Oxymoron? No Lessons Learned from Failures of Implementing Sustainable Development.” GAIA – Ecological Perspectives for Science and Society 21 (1): 28–32.
Dörry, S. 2015. “Strategic Nodes in Investment Fund Global Production Networks: The Example of the Financial Centre Luxembourg.” Journal of Economic Geography, 15 (4): 797–814. doi: 10.1093/jeg/lbu031
Dörry, S. 2016. “The Geographies of Industrialised Finance: Probing the Global Production Networks of Asset Management.” Geography Compass, 10 (1): 3–14. doi: 10.1111/gec3.12256
Tageblatt. 2017. Der Finanzplatz auf neuer Spur. 22/23 June, p. 2.