But the most recent update from Luxembourg Finance Minister Gilles Roth, which dates back to April, shows that not a single investment firm has sought that tax benefit.
Roth said the lack of interest in the tax benefit reflects the state of EU sustainable finance regulations. Advisers had previously warned that a lack of data combined with confusion around how to interpret ESG rules made it difficult for funds to prove their sustainability credentials.
The upshot is that the cost of documenting ESG claims may outweigh the benefit of the tax break.
See also: UOB enhances sustainable financing frameworks, granting SMEs easier access
The EU is currently in the process of overhauling its ESG investing rulebook — the Sustainable Finance Disclosure Regulation. It’s also worth noting that Luxembourg won’t allow funds to call their nuclear or gas holdings sustainable, a decision that goes against the EU’s green taxonomy.
The apparent failure of Luxembourg’s ESG tax perk to draw interest coincides with a wider retreat from the investing strategy.
Against a backdrop of higher interest rates, political backlash and the risk of greenwashing allegations, this year has seen evidence of a global cooling to ESG.
In the US, ESG funds saw a second quarter of withdrawals in the three months through June.
In Europe, however, ESG funds continued to attract new money, according to data compiled by Morningstar.
Charts: Bloomberg
