Moving From ESG Integration To ESG Impact

Nicoletta Centofanti, general manager at the LSFI (Photo © LSFI)

Since March 2023, Nicoletta Centofanti has taken up the role of general manager of the Luxembourg Sustainable Finance Initiative (LSFI). Silicon Luxembourg talked to her about her ambitions and the state of sustainable finance in Luxembourg.

You were recently appointed as general manager of the LSFI. What skills do you bring to this position and what do you hope to achieve?

My background is in environmental engineering and I also have an executive MBA from Bocconi University in Milan. I’ve covered different roles both in consulting and in corporates, from auditing and due diligence to CSR. When I arrived in Luxembourg, I had just completed my MBA and started to get interested in sustainable finance because I realised it was important to be able to make the business case for sustainability and that finance was key to transitioning. So in the summer of 2020, I joined the LSFI as a sustainability adviser, was then appointed interim manager in May 2022 and got the confirmation of my new position this March. 

I want to execute the LSFI’s mission which is very simple but complex to achieve. Our mission is to raise awareness about sustainable finance and help the financial sector become more sustainable. This means working together with all the local and international actors, leveraging synergies and assessing the areas of improvement. Also, we have been mandated by the government to execute Luxembourg’s sustainable finance strategy, the action plan for which can be found on our website

Making your company’s processes and supply chain more sustainable requires a lot of resources. How do you suggest SMEs and startups with less capital tackle this problem?

Larger companies may have more resources but they are also more complex to manage. It’s true that they can afford consulting firms which can help them become more sustainable but this shift is more cumbersome for them because they have to deal with more processes and employees.

For small companies, I believe that the real area of improvement is within the mindset of the founder or partners themselves. Because once they decide that they want to become more sustainable, all they have to do is to assess the materiality of their operations and understand the impact of their product or service and make some adjustments. Ideally, this is something founders should do at the very beginning, aligning as soon as possible their products or services with ESG criteria because that is the way of the future.

“The challenge is to ensure that sustainable finance is fully integrated within companies.”

Nicoletta Centofanti, LSFI General Manager

What are the LSFI’s next steps towards executing Luxembourg’s sustainable finance strategy?

The LSFI action plan is composed of three pillars. The first is awareness and promotion, the second is called unlocking potential and the last one is measuring progress. Within the first pillar, we want to give visibility to best practices and solutions that may help address the challenges regarding sustainable finance.

For the second pillar, we provide guidelines and support for the financial sector to transition: for example, we established two working groups, the first one covers sustainable finance training and education, it assesses the skills needs and whether the current training offering matches these. The second one is on Climate Measurement and Reporting, this works towards proposing practical tools and exercises on climate measurements and reporting for Luxembourg financial institutions as a follow-up to the Climate Scenario Analysis we conducted in 2021.

Furthermore, we have compiled a list of instruments that are available for financial institutions. These include initiatives, frameworks, standards and tools that are available for their use. As such, the LSFI’s website really acts as a central point of information which aims to support the financial sector in becoming more sustainable. The third pillar aims to assess the progress made in sustainable finance by establishing a monitoring framework; in this context, last year we conducted a Luxembourg sustainable finance study, which provides a quantitative and qualitative overview of the status of sustainable finance in the country.

Where does the Luxembourg financial sector stand in its sustainable transition?

As I just anticipated, last December, we conducted a study in collaboration with PwC to assess where we stand. We observed that almost half of the investment funds in Luxembourg are ESG funds. While we did not have enough data on the banking and insurance sector, the results from the investment sector are already promising. Now the challenge is to ensure that sustainable finance is fully integrated within companies and that they move from ESG integration to ESG impact. 

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