FinTechs: a catalyzer of the sustainability transition

Luxembourg financial institutions (FIs) face growing pressure from consumers and regulators to adopt transparent decision-making and consumption processes. As this requires data and technology solutions, FinTechs are uniquely placed to help FIs with their sustainability challenges.

The study is based on interviews with 27 entities from FinTechs to FIs, associations and other public establishments, complemented by desk research. It finds that while there are many untapped opportunities in Luxembourg’s sustainable finance ecosystem, FinTechs also face barriers that must be removed.

While the study draws from findings across the EU overall, it explores the status of Luxembourg’s sustainability finance strategy and provides concrete proposals to catalyze the local Green FinTech industry.

The study’s main findings

• The Luxembourg FinTech sector’s ESG offerings are on the rise, and FIs grasp the need for FinTechs’ knowledge and technology to tackle the complexities of sustainable finance.

• FIs’ biggest sustainability challenge is the availability and proper management of ESG data for disclosure and reporting. Here, FinTechs can support data collection, integration and consolidation, quality assurance, and report production.

• The pace and uncertainty of regulatory changes and the topic’s novelty among traditional actors mean FIs lack the necessary education and talent to reach their sustainable finance goals. FinTechs are well-positioned to help, thanks to the knowledge and technical expertise gained in creating their solutions.

• A collaborative, multi-stakeholder approach to sharing information and best practices is essential to realize the opportunities and mitigate the challenges identified in the study.

• Regulator and government initiatives are also vital. Luxembourg’s administrative processes could be further aligned with FinTechs’ current window of opportunity, and specific measures could allow FinTechs to safely test their ESG solutions on the market.