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Nicoletta Centofanti (LSFI): Luxembourg’s Sustainable Finance Hub

About Nicoletta Centofanti

Nicoletta is an environmental engineer and holds an Executive MBA from Bocconi university in Milan. She has extensive experience in in-depth Corporate Social Responsibility review and implementation within companies around the globe. Nicoletta is committed to enhancing individual and corporate sustainability and is enthusiastic about impact investing, social businesses, and Environmental Social Governance drivers. In short, anything that contributes to a better world.

Awareness & promotion, unlocking potential and measuring progress are the three overarching pillars of The Luxembourg Sustainable Finance Initiative. Nicoletta Centofanti, Sustainability Adviser deep shares the mandate of the initiative. Interview.

The Luxembourg Sustainable Finance Initiative has been recently launched. Could you first of all let us know what your mission is?

The Luxembourg Sustainable Finance Initiative (LSFI) is a public-private partnership that has the mandate to design and implement the Sustainable Finance Strategy for the Luxembourg financial centre. Our mission is to raise awareness, promote and help develop sustainable finance initiatives in Luxembourg while also promoting Luxembourg's role as an international hub in this field.

Having a coordinating entity that helps find synergies and leverages expertise from the different actors that compose this ecosystem is of utmost importance for Luxembourg,given the global shift towards sustainable finance and the ambitious regulatory agenda at EU level. In this regard, we also aim to be a coordinating entity and a central point of contact for all sustainable finance actors.

“Data allows you to understand where you are investing, how you are contributing to the intended objective and is fundamental to track progress.”

Considering your core role is focused on sustainable finance, how would you define sustainable finance and why there is the need for increased sustainability?

Understanding what sustainable finance is and how financial services can support a more sustainable transition of the economy is a question we have been posed frequently. If we focus on its theoretical definition, sustainable finance can be described as financial services that are used to finance the transition of the economy towards a more sustainable and equitable future. Going more into practice, investors can contribute to protecting our planet, play a part in creating a socially responsible economy and participate to a fair governance of public and private institutions. For example, through their investment decisions they can help reduce CO2 emissions, promote labour standards and diversity, and enhance equitable and diverse board structures and compositions.

The need for increased sustainability results from the pressing environmental, societal and governance matters that we urgently need to address. To tackle these issues successfully, we need the financial institutions to embark on this journey: sustainability and sustainable finance has to become the new normal.

What are the main challenges that you have identified so far in Luxembourg and within the final institutions?

Sustainable finance is rapidly developing, as a consequence, there are several challenges which financial institutions are going through. Part of our role is to help navigate them and face these issues. One of these, is the fast-evolving regulatory landscape, for example the Sustainable Finance Disclosure Regulation (SFDR) or the EU taxonomy constitute a challenge as these are new norms the sector needs to adapt to. In particular, these new requirements foresee a substantial mindset and knowledge shift which was not common for financial actors, and this always requires time and expertise. In line with this, there is still the necessity to increase awareness concerning sustainable finance and, in particular, sustainability.

Both at the level of understanding what it is but also at a deeper level with regard to how to apply it within the financial decision process: for example, what are the different investment strategies that you can embed into your portfolio, and what are the key metrics and performance indicators you should look at and report against. In addition, we can also mention the importance of collecting reliable and quality data: understanding how to measure the relevant data, how to effectively analyse it, and which to include in meaningful reporting is still a matter that needs to be developed further.

Finally, and closely related to data and the lack of measurement, we can also refer to the existent myths associated to sustainable finance such as lower returns or market demands. The uncertainty and lack of historical data some actors may have around these can pose a challenge and a barrier to the transition.

You have mentioned data. Why is data so relevant and how can data be used to increase sustainability?

Data availability, but most importantly, understanding how to measure, analyse and report the data that is considered relevant for a sustainable investment strategy are paramount for ensuring the transition towards a more equitable and sustainable future. Data allows you to understand where you are investing, how you are contributing to the intended objective and is fundamental to track progress. If we want to invest sustainably, we first need to examine our portfolios through the use of meaningful and reliable data to understand where our investments stand. This would allow us to be able to transition and afterwards to track over the years the progress made thanks to our investment decisions. Technology will play a key role to help solve this challenge.

What are your commitments and what success should look like?

The Luxembourg Sustainable Finance Initiative's action plan is structured around three overarching pillars: awareness & promotion, unlocking potential and measuring progress. Each of the pillars includes short-, medium-, and long-term concrete actions and objectives, as described in the Luxembourg Sustainable Finance Strategy. In this regard, we are committed to becoming a central and easily accessible information hub about sustainable finance and to promoting existing and upcoming public and private sustainable finance initiatives. We also have the objective to support the Luxembourg financial sector by creating a knowledge and experience-sharing platform, providing toolkits, use-cases and guidelines. And finally, we aim to help the financial industry in Luxembourg in measuring and monitoring progress.

We are committed to developing these goals and helping the different actors to navigate this environment and embed sustainability. Achieving these objectives would be a success for us, but most importantly for sustainable finance and our planet as a whole.


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