This year’s Banking Trends & Figures report takes a deep dive into the ESG subject and identifies factors that are driving the growth of ESG in Luxembourg’s banking industry. The Banking Industry in Luxembourg has proven its incommensurable success over time, able to become a stable international hub for European, American and Asian banks.  It has also been resilient to the different waves of disruptions that have been analysed in this series, coming from the entrance of non-bank financial players, to digitalisation and the regulatory changes.

Thus it should come as no surprise that PwC decided to analyse the ESG wave, discovering notably that:

• 77% of institutional investors are ready to stop investing in non-ESG products by 2022
• 14% of asset managers planned to stop launching these products by the same period
• 73% of local banks’ CEOs are willing to invest more in the green transition of the banking sector

Roxane Haas, Banking & Capital Markets Leader, PwC Luxembourg, said:

“The ESG revolution has underpinned massive changes within the European financial industry. Banks, given their dual positions both as financial market participants and sources of financing, will be impacted twice as much by this paradigm shift and bear double the responsibility for taking active concrete steps towards increased sustainability. The Luxembourg banking sector has not been exempted from this shift, with various banking groups adapting accordingly to remain competitive. Thus, the first part of this year’s report takes a deep dive into the subject of ESG and what it means for banks. It assesses banks’ current sustainability initiatives and highlights the urgency for a transformation approach that integrates ESG at both the organisational and products/services level. To this end, our report has identified a number of factors that are driving the growth of ESG in Luxembourg’s banking industry.”

In this report PwC Luxembourg has identified six factors that are catalysing the surge of ESG within the banking industry:

• Regulation is institutionalising change in the banking industry
• Retail clients are taking sustainability seriously – a new dimension for advice
• A majority of institutional investors consider ESG risks
• MIFID target market and sustainability preferences
• High-net worth individuals are driving the ESG transformation of portfolios
• Corporate clients are looking to banks for Green Financing

With mounting pressure from stakeholders and regulators alike, banks are increasingly realising the need to pursue the total sustainability transformation of their core businesses. However, the attainment of this transformation is a long process that will likely require guidance. In this context, PwC sees the following steps as relevant:

• Incorporating ESG into the bank’s strategy is not yet the status quo
• Organisational structure could facilitate ESG integration
• Continuous adaptation is key to successful change management
• Progress must be quantified by developing KPIs and non-financial reports

In addition to these aforementioned steps, banks must also consider what ESG means for their risk assessment and management frameworks. The current challenges faced by banks in this area are outlined in the report as well as two key strategic product positioning actions that would catapult banks on their journey as they set out to carve a new path towards long-term value creation.

For more full details on the above, download the full report

A dedicated Banking Trends & Figures Event 2021 occurred on October, 26, with a “fireworks of thoughts for thought leaders” keynote speech delivered by Anders Indset – Business Philosopher – on how to become leaders of change.

Anders Indset gave an impressive motivational speech and shared new thoughts on leadership, our society and ESG. Indset, who is also nicknamed ”Rock ‘n’ Roll Plato” by the media, was quite different from the  usual suspects when it comes to topic and delivery. He shook  up the audience up with his radical notions but this just might be the right time for people to hear his message.

Luxembourg’s Banking Sector Evolution

Every year, Banking Trends and Figures measures the evolution of the Luxembourg banking sector. With 128 authorised banks at the end of the financial year 2020, the number of banks rose by one.

As in previous years, you will also find in this publication an analysis of the financial statements of the largest country segments of banks present in Luxembourg. This review aims at better understanding the dynamics within the different country segments, as well as their relative development against the overall Luxembourg banking market. Quite naturally, PwC came to the conclusion that the Luxembourg banking sector has proven to be a stable international hub, able to offer a wide range of products and services: Private Banking, Corporate Banking, Retail Banking and Asset Servicing.