6.1%

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1.6%

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Claude Marx (CSSF): Don’t See ESG As Just Another Piece of Regulation

CSSF’s Director-General Claude Marx, says ESG is no longer about philanthropy, but about the future of the planet. He urges the finance sector to be a “first mover”, seizing ESG opportunities that are proving more profitable than investments yet to meet the regulations.

Please introduce yourself and the CSSF?

 I’m a lawyer by training. I’ve worked in the tax practice of an accountancy firm, for a bank and in insurance before I became head of the CSSF in February 2016. The CSSF supervises our financial sector, excluding insurance. The CSSF has two missions. Firstly, contributing to financial stability alongside the Luxembourg central bank, and our second role is investor and consumer protection. With our administrative departments, our headcount is 1,000. We are organized by theme: banking supervisory, financial markets,payment institutions and fund supervisory – which with about 300 agents is our largest team – to name a few. That sounds large for a public institution, but it reflects the large financial sector that we have in Luxembourg. Unusually for the public service, 50% of CSSF staff are from the rest of the EU and that is a good thing to have.

Ultimately, adopting ESG is about making your company survive.

What do you see as a CSSF’s role in the ESG area?

Our primary role is to make sure that the actors in the finance center are aware of the ESG regulatory requirements and how they should be applied. New regulations will not be perfect on day one. Initially, we have requested self-certifications of funds’ prospectuses. But we are not going to punish those who don’t have things 100% correct on day two. We’ll give it some time, then we will go after those who try greenwashing. We have embarked on a journey – it’s a journey to save the planet, nothing less, so it’s irreversible. It’s not a choice, it’s mandatory. Our big ambition is education. It is one thing to make sure that the people we supervise embrace the new rules and apply them correctly, but it is equally important to make sure that consumers are also properly educated.

What do you see as the risks and opportunities of ESG?

 Ultimately, adopting ESG is about making your company survive. I can guarantee you that if you don’t take this subject seriously, there are chances that five or ten years from now your company will not exist. Your company will be taking immense risks – operational, financial, and reputational. These risks will be factored into regulation and if you don’t respond, it will make your life miserable. You will also not be able to recruit young people because ESG will be very important in their choice of employer. You will not have clients anymore because they will not want to work with you if you don’t get ESG right. We are now in a situation where sustainable investments deliver a better return than non-sustainable businesses. Those who get it right early will be the winners. Today you still have the opportunity to be among the first movers.

What ambitions do you have for the CSSF and Luxembourg in that regard in terms of climate change mitigation?

Limiting global warming cannot be achieved by public finance alone; we need private finance. Luxembourg’s fund industry, private banking and insurance are worth about US$6 trillion. The private financing required to mitigate climate change in the EU is estimated at €200 to €500 billion a year. If you take 10%, 20% or 30% of the total assets under management, Luxembourg can make a significant contribution. You know we’ve been talking about this for 30 years, but we’ve been doing nothing. Sustainability is no longer about philanthropy or giving up part of your return to do something good for society. Don’t think of ESG as just another ordinary piece of regulation with which have to comply. This is very different. This is about the future.