The
The European Investment Bank president on fresh challenges to its energy lending policy Hoyer: need for gas in a transition in English
No. 93 OCTOBER 2022
Luxembourg
Sustainable finance business report €45010015 453000 93 Werner
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Living in its most beautiful form
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One thing is certain, Luxembourg’s government faces yet another crisis that will hit the public purse less than a year after it ended aid to businesses suffering from the fallout of the covid pandemic. Fortunately, the grand duchy’s coffers are in a fairly healthy state compared to those of other countries. Nevertheless, unless there is some remarkable turnaround in strategy from Russia over its supply to the EU via Nord Stream 1, Bettel and his cabinet will be faced with tough choices as winter hits. Decisions that could impact next October’s parliamentary elections.
The European Commission under Ursula von der Leyen is considering a windfall tax on energy companies, which would surely gain the support of many EU citizens, even if some governments are opposed to such a move.
But for now, the government motto of “Saving together, staying together,” (“Zesummen spueren, zesummenhalen”), unveiled on 8 September by energy minister Claude Turmes (déi Gréng), seems rather anodyne. 35% of Luxembourgers think the energy crisis is currently the biggest challenge facing the EU, according to a Eurobarometer poll published in early September. 55% says the biggest issue for Xavier Bettel’s government is the rise in the cost of living. No wonder, with the cost of an annual average bill for Enovos natural gas due to rise by some 75% on 1 October. That is just days after the tripartite sessions are scheduled to have reached some sort of conclusion--though the mood that the unions are in right now means that there is no guarantee of the traditional conciliation that stems from the so-called Luxembourg model of social negotiation.
But there are risks that come with windfall taxes and price caps. Energy companies slighted by the additional hit on their profits may trim down investment in infrastructure or new, cleaner technologies. And private consumers welcoming a price cap may not be so motivated to reduce their consumption.
When even a free market conservative like new UK prime minister Liz Truss decides that a price cap on energy bills is the only way to stifle spiralling inflation and temper the cost-of-living crisis, the signs are surely ominous that a truly harsh winter is coming. Throughout her leadership campaign, Truss dismissed the idea of “handouts” and was banking on tax cuts to help households facing soaring bills.
Tough winter, tough choices
DUNCAN ROBERTS
Editorial #EnergyCrisis ELECTI O N S 2023
What measures the Luxembourg government will take to help households and businesses in the face of the energy crisis will only be revealed after the three-day tripartite meetings with union and employer representatives, 18-20 September.
But one thing the EU and its allies cannot do is kowtow to Putin’s attempt to divide and conquer by cutting off gas supplies. Sanctions must be continued and even sharpened. And for those who claim sanctions aren’t working, then why has Russia said it will only turn the taps back on if they are lifted?
Editor-in-chief, Delano digital
Conversations
KnowThyBrand
06 #POLITICS - ANNAÏK GARIN “As a resident, you will be affected by what’s decided” 08 #BUSINESS - NANCY THOMAS “Check your strategy, and bring sustainability into it” 10 #FINANCE - AYMERIC THUAULT “Always a delay in the art market reaction” 12 #CULTURE - VALÉRIE QUILEZ “Giving artists more tools to themselvespromote”14 Dashboard Back to school 38 Head to head TOM WIRION VS MICHEL-EDOUARD RUBEN The impact of shorter workdays 40 Essay 44inUnpredictabilityconstruction Gusto Moselle matches 46 Business club 50 Pick’n’mix tourismLuxembourg’sallure p. 22
Ristretto
p. 16 Hoyer
on how the EU bank will honour its green bank during an energy crisis
EIB president Werner
16 FINANCE - WERNER HOYER “ We will need gas for a transition which will be not short” 22 BUSINESS - GIULIA IANNUCCI “ We are for-profit but reinvest in a social cause” 30 Business report Sustainable finance
2022OCTOBER5Contents October 2022 IllustrationWolff,GuyPhotosSaloméJottreau
founder Giulia Iannucci on the impact and challenges of social entrepreneurship p. 40 What impact is the price of raw materials having on construction--and what recourse is there for builders?
How difficult is it to interest people who cannot vote, whether that’s foreigners or teenagers who aren’t yet 18?
Election programmes tackle big problems and issues in Luxembourg. There are many suggested solutions, and as a resident, you will be affected by what’s decided in theYouend.can
look at our offer. Many other different organisations provide information and work on projects to make it as acces sible as possible. One part is informing yourself about the elections--how a mayor is voted, how a government is formed. But you can also think about why it’s relevant for you and why you should care. And people who want to get Luxembourg citizenship will have to vote once they receive it, so it’s good to take a look at what’s happening in the country politically.
For first-time voters, it’s also interesting to know what to do--not to cross the lines, not to sign the paper, not to cross something out. It should help everyone to prevent their vote from not being valid.
Our main goal is participation--active participation of citizens in society. The first step to be able to participate is to be informed and to understand the system, how political decisions are made in Luxembourg.
What other practical barriers do people struggle with?
“As a resident, you will be affected by what’s decided”
ELECTI O N S 2023
It’s definitely more difficult to motivate people when they don’t feel concerned because they cannot yet vote or don’t have the right to vote. For teenagers, we try to be very active in schools and youth centres to awaken their interest in politics. Voting has been made easier for foreigners in local elections now that the residence clause has been abolished. But if you live in Luxembourg, you are affected by what happens here. Elections aren’t the only way to participate. There are civil society organisations where you can get involved. Showing these options can also motivate people.
The centre itself isn’t political, but how do you work together with other institutions? We work together in a network with civil society organisations and political institutions, such as the Chamber of Deputies or the judiciary. We enrich each other and include different perspectives. But we don’t promote anyone’s election programme or political convictions. Our aim is for people to develop their own opinion.
It’s one year to go until the next national elections. What would be your advice for people who cannot vote to prepare and seek information?
The biggest tip is to look at the parties and their programmes, even if you cannot vote, because you will know who you’re dealing with once the results are in.
6 Ristretto #Politics
Languages are always a topic in Luxembourg. What does the country’s multilingualism mean for your work and being in contact with different communities?
We invest a lot of time and money to make our content available in different languages. Everything we offer in principle is available in German, French and English. It’s important that the information is as accessible as possible. In the context of the elections, we are trying to produce more content in other languages.
We are developing a flyer that people can take into the voting booth to ensure that the ballot is filled in correctly. This is a problem, especially when you’re used to a different system from your home country.
Interview CORDULA SCHNUER Photo ROMAIN GAMBA
whether you can vote or not, Annaïk Garin
The Centre for Citizenship Education (Zentrum fir politesch Bildung) helps people learn about politics in Luxembourg. Why is it so important to understand the system?
The Centre for Citizenship Education is a source of information about politics in Luxembourg. Annaïk Garin, who works on the organisation’s publications, discusses getting involved and understanding the political system.
says
LikediscoverPioneerstheunknown.wheretoinvestnext. Pictet & Cie (Europe) SA 15 Avenue John F. Kennedy 1855 Luxembourg +352 46 71 AlternativeAssetWealthAssetgroup.pictet711ManagementManagementServicesInvestments
The real change [we see] now is that people understand what sustainability is. Also, with what we see in the media regarding climate change, I think fewer people doubt there are issues that we need to tackle together. The issue now is that lots of people don’t know how they can be involved in what they can do to act sustainably. We say that you need to check your strategy, and bring sustainability into it. It’s not something you put in place that one person has to manage alone.
Our target is always organisation. We want to change the way [companies] work and to bring sustainability, and there is no limit because the objective of our association is to have a sustainable country with sustainable organisations.
What does the recently launched sustainability academy represent in IMS’ development?
When we exchange with companies or carry out IMS activities, it seems that the participants are the same each time. For example, we have a CEO, people from HR or a facilities manager. And then [comes] the issue of how can we mobilise all employees from an organisation or how can we raise awareness. The idea was to do training in companies and to launch an academy. For us, this is a huge development because the objective is that we understand that we don’t go as fast as we need to in changing companies and their systems. If we train more people and they understand that sustainability is really important, we will see change quicker.
We don’t think it’s difficult to mobilise companies to go beyond that. For example, in 2018, the European Commission drafted a directive on removing single-use plastics. We took that text and, at that moment, there was a list of 12 or 13 products. We used that in our manifesto and asked our companies’ CEOs to remove those products by the end of 2020. Lots of companies took part
For me, it would be the third industrial revolution project we launched in 2016 because it was a national project.
Interview TEODOR GEORGIEV Photo GUY WOLFF
We mobilised over 300 stakeholders in nine working groups, bringing ideas from different participants to form a common strategy for Luxembourg with the objective of having a sustainable country for 2050.
What does IMS need to continue evolving?
What are your targets for the near future?
8OCTOBER2022 Ristretto #Business
As Inspiring More Sustainability (IMS) prepares to celebrate its 15th anniversary, director Nancy Thomas takes stock of the network’s evolution.
in the project--around 70--and we’ve estimated that we avoid 150 tonnes of plastic each year, thanks to that initiative. The Commission enacted the law a year and a half later, and none of the products in the draft were in the final text. And this proves that by having a common agreement and working with companies, without an obligation, we can have real success.
In the coming years, our challenge is the academy’s development. If we develop quality training, we can share it with our European network. So, for the academy, we won’t be limited to Luxembourg. For IMS, we are, but for the academy, I think we won’t be.
How do you convince companies to go beyond the minimum set by the legal framework?
Nancy Thomas guides IMS’ efforts in promoting businesssincesustainability2011
What was the biggest leap for IMS in the last 15 years?
“Check your strategy, and bring sustainability into it”
How has sustainability in Luxembourg changed over the last 15 years?
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Rather than considering the impact of interest rates on the art market, it makes more sense to think about real interest rates. Studies based on past observation show that periods of low real interest rates have often coincided with rising art prices. Indeed, art does not pay a dividend or generate any income stream, but just ‘consumes’ revenue due to insurance, storage and maintenance costs. Thus, it is really at times when real interest rates are rising that the opportunity cost of owning art is higher. Furthermore, the incentive for art owners to switch to interest-bearing investments also becomes more relevant in times of rising real interest rates.
Clearly, this segment is at risk of a steep correction, similar to what we observed in financial markets for overblown, speculative stocks.
What role does the fear of a recession play in the art market?
Rising inflation and interest rates and an economic slowdown could impact the art lending market, as Aymeric Thuault, director at Link Management, an art wealth management firm, explains.
Many economic studies have highlighted the outperformance of art versus all other asset classes in an inflationary context, whether the economy is growing strongly or stagnating, stagflation. Unfortunately, these studies are all based on old data, as there has been little inflation over the last two decades....
Interview AARON GRUNWALD Photo ROMAIN
What impact could rising interest rates potentially have on the art market?
Whether there will be a full-blown recession or not, it is important to acknowledge that liquidity dynamics are reversing fast, and we are just starting to see how the increasing cost of money
Ristretto #Finance10OCTOBER2022
The first half of the year was marked by a frenzied demand for young upcoming artists, with a focus on female artists and artists of colour. There were some extreme price increases and exuberant bidding that has become disconnected to art-historical relevance for a surprisingly large number of ultra-contemporary artists.
Historically, there has always been a delay in the art market reaction to economic downturns and brutal corrections on traditional assets classes. As an example, in May 2008, the art market was still running hot but cooled down massively towards the end of the year and in early 2009.
“Always a delay in the art market reaction”
Given the current context, negative real rates are bound to stay for quite some time, which should remain overall supportive for art prices. Of course, I am discounting the speculative sections of the market.
Does inflation change how art deals are financed?
will impact the real economy and various asset classes. If capital becomes more expensive, then spending priorities are bound to change.
Generally speaking, is inflation positive or negative for the art market?
As an art lender, inflation has pushed us to provide financing with floating rates. We do not provide loans anymore with fixed interest rates, since the beginning of the year, which means borrowers, who leverage their art, could now be more exposed to continuous interest rate increases.
Furthermore, the current economic context and the huge amount of money printing issued by central banks over the last two years makes the situation very unique. Thus, past observations need to be taken with caution, as the current circumstances are quite unprecedented.
GAMBA Aymeric Managementco-foundedThuaultLinkin2009
That said, the high-end and ultra-high-end of the market--above $10m--have shown exceptional results and a huge increase in liquidity over the last year, as seasoned collectors continue to consider high-end quality artworks as a store of value in times of economic uncertainty and looming inflation.
B30775LuxembourgR.C.S.Luxembourg,L-1930Metz,dePlace1,autonome,publicétablissementLuxembourg,l’Etat,ded’EpargneCaisseetBanque SPUERKEESS.LU/logement
Let’s housing!talk
By far the most requested support is for mobility, for artists who are going to perform or for a work in circulation--an exhibition or a play, for example. We can finance transport and hotel and so on. We can also help with fees when needed. But basically, when our artists are invited on a tour or by a foreign venue, it’s very important that the partner institution engage in part of the financing. So we offer support, but we don’t fully finance theWeexport.also have requests for mobility grants. They are smaller but enable artists to go abroad to take part in a conference or a festival just to network and make connections. This is a brand that we developed to enable artists to be more proactive in benchmarking what’s going on internationally.
Kultur | lx is a member of the International Federation of Arts Councils and Culture
Are there any exciting developments happening over the next 12 months that you can already tell us about? We are working on an international strategy for different territories. So we took advantage of the state visit to Portugal in May, when we took the directors of Luxembourg institutions to meet their Portuguese counterparts, to explore the possibility of more collaboration, co-productions and artist exchanges.
“Giving artists more tools to promote themselves”
We are going to do the same in Montreal in October when we take advantage of the Film Fund presence at Cinemania to present artist showcases over one day. But to make sure this is a sustainable visit, not just flying in and out for the showcase, we have two authors who will have residencies after Cinemania and a musician who has been invited to another festival.
A little over two years since Luxembourg arts council Kultur | lx launched, Valérie Quilez explains how it helps artists expand their horizons
Have we reached the stage where international festivals approach you for recommendations?
To encourage foreign festivals to be curious about our artists and productions, we have started to be very active in terms of inviting professionals to Luxembourg. We are very aware of what’s going on in terms of programming here, so we can get people from abroad to see shows, meet artists and the directors of cultural institutions at an appropriate time. And when they get to see the quality of work and the process of the artists, they get an image of Luxembourg that doesn’t really exist abroad. This helps build a very enthusiastic and trustful relationship, so that when they are programming artists for a festival, they will naturally call Luxembourg.
We are also taking over the organisation of the Luxembourg pavilion at the architecture biennale in Venice in 2023. And we have a new partnership for a playwriting residency for Ian De Toffoli at Francophonies en Limousin.
As we emerge from the covid pandemic, more and more Luxembourg artists are again performing abroad. What sort of financial support does Kultur | lx provide for those artists?
Ristretto #Culture12OCTOBER2022
You obviously work closely with your national promotion colleague,
Yes. Basically, Diane looks at what’s happening inside the country, but we work on projects together--for example, giving artists more tools to promote themselves. You cannot act internationally without
been the coordinatorinternationalatKultur|lxsinceFebruary2021
Interview
DUNCAN ROBERTS Photo GUY WOLFF
Agencies. Have any concrete examples of collaboration resulted from this? No real collaboration because we are the newcomers. But the meetings we have online help very much to see the various challenges that arts councils are facing in different countries. A lot of institutions have had to re-reflect on the way they were funding, supporting artists and acting internationally, within the pandemic.
28 – 31.31.2022 | 2 – 7.01.2023 Le Bal de Paris de Blanca Li DECEMBER 13, 14 & 15.01. 2023 The Nature of Forgetting THEATRE 18,JANUARYRE21,22,24, 28, 30 & 31.03. 2023 | 01.04. 2023 The Writer ELLA 21MARCHHICKSON&22.04.2023 The Indian Queen HENRY PURCELL (1659-1695)11APRIL&12.05.2023 Drive Your Plow Over the Bones of the Dead OLGA TOKARCZUK MAY 25, 26 & 27.10.2022 Treemonisha Scott 24OCTOBERJoplin&26.11.2022 Lady in the Dark Kurt Weill (1900-1950) 17.11.2022 Subnormal Europe Óscar Escudero & Belenish Moreno-Gil NOVEMBER www.lestheatres.lu Discover the entire season 22 • 23 on: Your english-language season 22 • 23 27, 28 & 29.10.2022 Faith, Hope & Charity Alexander Zeldin UnsenJeannine©
The language question
Over the past years, Luxembourg has opened six public European schools, which offer education in English, French and German-language sections following the principle of the EU’s private schools. Some also offer courses in Italian, Portuguese and Spanish. The number of students enrolled has grown to 3,924 for the 2022-2023 “rentrée” from just 160 when the first school opened in 2016.
EXAMS
14OCTOBER2022 Dashboard
Out of 3,483 students who sat their end-of-school exams at the end of the 2021-2022 academic year, 2,612 passed their tests. The number of students who had to sit additional exams in a second attempt rose from 14% for the class of 2021 to 16% this year. The rate of students who failed remained stable at 9%.
Source Ministry of education 9% 75% 16% Students who had to retake tests Students who passed their exams Students refused from graduating
Source Ministry of education
Back to school
3,483
Three quarters of students succeed
CORDULA SCHNUER
MY TAKE
Dropping into the linguistic maze of Luxembourgish, German and French in the local school system as an outsider can be a significant disadvantage. Almost 60% of children from Portuguese families, for example, do not reach the required level of reading German by age nine, according to a European Commission study. And pupils struggling with languages are more likely to drop out of school without a qualification. In the 2018 Pisa study, a skills assessment carried out by the OECD, Luxembourg ranked below the average performance of almost all European countries. The results were so poor that the education ministry said it would take part in the survey only every six years in future instead of every three years, arguing that Pisa doesn’t take Luxembourg’s specificities into account.
The state-funded European schools outsource some of this problem into a parallel system, a band-aid providing relief for immigrant families. But they also beg the question: how will local schools live up to the language challenge in the Wordslong-term?
Popular choice
students *Data for the current school year is preliminary and subject to change Number of pupils for the 2022-2023 school year* Primary school Primary SecondarySecondaryschoolschoolschool Number of pupils the year the school first opened International School of Differdange and Esch-sur-Alzette (EIDE) 2016-2017DIFFERDANGE2022-20231,002103635572018-2019Edward Steichen International School (EIES) CLERVAUX 2022-20233501622020-202111930 Gaston InternationalThornSchool LUXEMBOURG CITY 2022-2023162130
How important are the public European schools for the Luxembourg education landscape?
Thanks to the public European schools, our school system has gained a solid experience with French and English literacy, alongside our traditional schools, in which children learn to read and write in German. This enables us to explore further possibilities for adapting and diversifying our school offer for the benefit of all pupils.
2016-2017JUNGLINSTER2022-20235523725881
Photo KortumSIP/Yves
International School of Mondorf-les-Bains (EIMLB)
2021-2022MERSCH2022-20231544174
As pupils return from the summer break, Delano looks at the growth of the country’s six public European schools since the year they first opened in an effort to make education more accessible to families who don’t speak one of Luxembourg’s official languages.
Yes, a pilot project for French literacy will be launched at the beginning of school year 2022-2023 in four communal schools, which were selected based on the heterogeneous composition of their pupils. The aim is to better accommodate the country’s cultural, linguistic and social diversity within the traditional system.
These schools, as well as those offering the International Baccalaureate and Cambridge degrees, are an integral part of the public school system. With the rapid evolution of enrolments, they respond to a real demand from our school population. With different schools for different pupils, our ambition is to respond to these very diverse profiles of all children and to improve their chances for success.
Lënster Lycée International School (LLIS)
Are any more alternative education offers under development?
Anne InternationalBeffortSchool(EIMAB)
15OCTOBER2022
3 QUESTIONS TO CLAUDE MEISCH (DP) Minister of education, children and youth
What can the local system learn from the European schools?
MONDORF-LES-BAINS2022-20232081862018-20194833
EIB president Werner Hoyer photographed at the bank’s headquarters in Kirchberg
EU’S CLIMATE BANK
“We will need gas for a transition which will be not short”
ing in gas-importing infrastructure to secure Europe’s energy supply?
The EIB Group’s (which includes the European Investment Fund) Climate Bank Roadmap prohibits the EIB from investing in facilities dedicated to the transport and storage of fossil fuels.
In 2020, the EIB invested €24.2bn in climate action, representing 37% of all EIB financing in that year
In 2019, the bank’s board of directors took the decision to increase the EIB’s cli mate ambition, including ending the financ ing of unabated fossil fuel energy, aligning all financing activities with the goals of the Paris Agreement by the end of 2020, dedicating at least 50% of EIB financing to climate action and environmental sus tainability by 2025 and supporting €1trn of green investment in this decade.
“We will need gas for a transition which will be not short.”
Green Bonds
Words JOSEPHINE SHILLITO Photo GUY WOLFF
Werner Hoyer has just come off a trans atlantic flight when we meet. Although president of the European Investment Bank for over ten years, with political responsibilities as well as financial, he cuts a surprisingly unintimidating figure dressed in his casual clothes for flying.
17OCTOBER2022
Activity in 2020
Yet Hoyer presides over a powerhouse of a multilateral bank which, at the end of 2021, was responsible for a portfolio of €556.4bn in outstanding loans in Europe and worldwide. And on top of its already considerable heft, the EIB, as the EU’s Climate Bank, has the responsibility of being one of the world’s main financiers of climate action.
The EIB issued the world’s first green bonds on the Luxembourg Stock Exchange in 2007 and, since then, has issued over €48bn of green and sustainability bonds across 21 Activitycurrenciessince2012
“I remember vividly the day when we presented the new energy lending policy to the board of directors in 2019… it caused a certain shock and awe,” said Hoyer. “They did not really comprehend, so we had a full-day discussion about this and later on, on the climate bank roadmap [“Climate Bank Roadmap” 2021-2025 sets out how the EIB will deliver on this]. And I remember that board meeting, I
Headroom for the EIB Meeting net-zero greenhouse gas emis sions by 2050 requires, amongst other things, the phase-out of unabated fossil fuels. Hoyer himself has been vocal on the EIB’s climate plans, quoted at the January 2021 press conference of the EIB’s 2020 financial results as saying, “gas is Butover.”in2022, with Russia’s war in Ukraine, how does Hoyer see the challenge of bal ancing that previous comment with invest
“We have to see that [this is] the big gest challenge which we have in front of us right now,” said Hoyer. “So, when I hear transition, then I look very precisely: are we really talking about transition, or are we talking about the perpetuation of old technologies, old energy sources?
Nonetheless, the bank’s Energy Lend ing Policy, approved in 2019, leaves head room for the EIB to support the gas sector in a transition to low-carbon gas, ranging from the production of low-car bon gases, transportation and distribu tion to integration within the power and heat sector alongside a phase-out of sup port to energy projects reliant on ‘una bated’ (in the case of gas-fired power plants, defined as fossil fuels resulting in GHG emissions above 250g CO2 per kWh of electricity generated).
Conversation Werner Hoyer
Since 2012, the EIB has provided €197bn of finance for green investment, supporting over €670bn of investment to deliver climate action and environmental protection
When asked, following the interview, if there were any investments planned in this area, for example, new liquefied natural gas import facilities or charters of floating storage and regasification units at ports or maritime facilities in Europe, the EIB said no.
had a practically [constant ringing] tele phone line with some heads of govern ment to try to convince them.”
The EIB is the world’s largest multilateral lender and the EU’s Climate Bank. Delano sits down with president Werner Hoyer to see how the bank will honour its green bank promise at a time of precarious gas supply to Europe.
No significant harm
“If one wants to bring credibility to the justifying idea of transition, then you must make sure that the gas infrastruc ture that you set up now, for instance, liquefied natural gas terminals, is able one day also to transport green hydrogen,” he
“[Green bonds] were first seen as a luna tic idea,” said Hoyer. “So, this is why… our colleagues in the financial department did not only invent the idea, the product green bonds, but also developed with more and more outside partners, the so-called green bond standards, making sure that the inves tor who entrusts us with her or his money would know that… this bond is not only labeled green, it contains green.”
The proposed conversion of LNG ter minal facilities to carry green hydrogen has come under some criticism in the press as the technology to do this is untested. Storage tanks are not designed for hydrogen molecules, and not all pipe lines can handle pure hydrogen as it can weaken the metal structures and cause leaks, to paraphrase Bloomberg. And, at present, no LNG terminal in Europe has yet been adapted to import or transport greenFollowinghydrogen.the interview, the EIB com mented that “the green hydrogen sector is still in its very early stages… when we look at hydrogen, it is in the context of bringing down the cost curve of hydrogen produc tion. And in order to scale it up… not all pipelines are equipped to do it. I think the sector expects a lot of innovation.”
Hoyer highlights that the EIB is not only active in financing of projects through the participation of investors. It is also active in mobilising money on the capi tal Inmarkets.2007, the EIB issued the world’s first green bond. The global green bond market has since surpassed the threshold of €1.5trn in cumulative issuance and is supplemented by around €720bn of social and sustainability bonds.
The green hydrogen question European countries are exploring the conversion of liquefied natural gas (LNG) facilities to transport green hydrogen in order to reconcile the present gas pro curement emergency with their longerterm net-zero plans.
“As the EU Climate Bank, the EIB group cannot support the [Paris agreement] with 50% of green finance if, at the same
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Hoyer believes that to produce green hydrogen at a much lower cost than today, Europe needs to develop and export its technologies, in particu lar to the developing world.
4
The EIB has committed 50% of its financ ing to green finance with the remaining 50% to its other policy goals by 2025. As the EIB acknowledges itself, the two can not be in conflict.
Four messages
The importance of aggregation, scalability and replicability in ensuring investment at scale; this is particularly relevant for adaptation, energy efficiency and sustainable agriculture
To substantially increase climate adaptation efforts, with specific actions, prioritisation and initiatives
For Hoyer, development, climate and inno vation run right through the EIB’s roots.
Indeed, on 23 August 2022, German chancellor Olaf Scholz signed an agree ment with Canada’s prime minister Jus tin Trudeau to import green hydrogen to Europe as early as 2025. This could be a credible approach to avoiding stranded assets, Hoyer said. That is, assets that are devalued or have become a liability.
“And today… more towards sophisti cated products and innovation. So climate is, of course, a particularly important path here, because the achievement of the cli mate objectives of the United Nations and the EU requires an enormous input intoTheinnovation.”EIBhashistorically supported projects or investments that reach policy goals but might not otherwise find pri vate sector backing.
Conversation Werner Hoyer
And the scale of the climate change prob lem requires private market participation.
Furthermore,said.
To increase investment in inno vative green technologies--from early-stage research through to pilot demonstration of technologies, complemented with support for new business models (battery storage, demand response, low-carbon hydrogen, e-charging)
THE EIB GROUP’S CLIMATE BANK ROADMAP
“For some of these [sustainable and cli mate] projects, it is extremely difficult to find private-sector partners… to [offer] the loan,” said Hoyer. “When they [see] that the EIB… has checked the projects, it helps to make the project bankable. Then it might be interesting for private sector financiers to join as well. Then we arrive at what is very, very desirable: a combina tion of private and public financing.”
However, Hoyer pointed out in the interview that any gas infrastructure financed now need not retain a fossil fuel focus in the future.
“If we want to produce green hydrogen in enormous amounts, which the chem ical or steel industry and our households will need, then we will need to produce hydrogen at a much lower cost than today with huge amounts [of] absolutely top technologies,” he said.
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“The bank is financing the political objectives of our European societies for almost 70 years, and at the beginning of the exercise, it was, of course, reconstruc tion after World War II, providing neces sary infrastructure for everything and with a specific focus on those projects which otherwise would not come about,” he said.
Driving down the long-term cost of capital in capital-intensive green infrastructure--urban public transport, rail and energy networks, waste and water networks as examples
18OCTOBER2022
The Climate Bank Roadmap 2021-2025
“It is simply a total illusion to believe the sustainable development goals of the United Nations could be financed by public money. So we are a ‘crowding-in’ [encouraging the participation of private sector financing] institution. That makes it so interesting for me, as somebody who is a convinced and confessed market economy man, to see exactly where the market economy needs a little bit of help.”
However, Hoyer cautioned that the role of the EIB is not to do the work of the private sector. “It’s not our job if the private sector can do something then the private sector should do it. But there are issues where it is riskier or more difficult.”
1
An example is the EIB’s investment in a floating wind farm off the coast of Portugal. The technology of WindFloat Atlantic’s floating platforms allows the turbines to operate much farther away from shore where wind supply is more powerful and constant.
When asked about the alignment of the Bologna Airport project with the EIB’s climate goals, the EIB commented that “the Bologna Airport operation entered the EIB pipeline in April 2020, before the Climate Bank Road Map was adopted, and therefore as such it is covered by the transitional provisions.”
In terms of highways, the EIB signed two projects for highways in Poland in 2022. One, concerning a €400m EIB financing for the construction of the S1 Expressway sections between Pyrzowice and Dabrowa Górnicza and between Kosztowy and Bielsko-Biala, including the Óswiecim bypass, is described as going through an environmentally sen sitiveMeanwhilearea.
However, the EIB’s €90m financing of Italy’s Bologna Airport development plan, signed on 28 December 2021, was met with dismay by non-governmental organisations. The project is described as “intending to create additional airport capacity to accom modate future traffic growth at Bologna Airport, as well as increasing operational resilience, passenger service standards and improving safety and security performance” in the EIB’s project summary sheet.
However, the EIB’s climate plans have come under scrutiny, most infamously, from global campaigning network Green peace, who, in November 2021, erected a banner at the EIB headquarters in Luxem bourg accusing the bank of greenwashing.
European Investment Bank WernerpresidentHoyeris seen with Microsoft and Breakthrough Energy founder Bill Gates and European Commission president Ursula von der Leyen during the UN Cop26 conferenceclimate
“Wenetworks?don’tinvest in new airports any more,” said Hoyer. “But, on the other hand, when it comes to efficiency measures at airports, of course, we are [participating] in that. [In terms of] making airports more efficient, there are a couple of airport pro
time, it undermines the goals with the remaining 50%. In line with the princi ples of sustainable finance, the EIB group needs to ensure that all its activities do no significant harm to the low-carbon and climate-resilient goals of the agree ment,” it says in its Climate Bank Roadmap.
jects that target exactly this efficiency, so not airport capacity, but their efficiency to make the airport more functional.”
When asked following the interview about the two Polish highway projects and how they contribute to the improve ment of emissions, the EIB commented: “At the EIB, road capacity expansion pro jects are subject to an adapted economic
Among the criticisms levelled at the bank were its recent investments in trans port projects and fossil fuels. At the time, the EIB welcomed the peaceful protest and responded with a statement that set out its alignment to the EU Taxonomy to avoid greenwashing and said it will sup port the European Green Deal using cri teria established under the EU Taxonomy.
20OCTOBER2022 Conversation
PhotoEuropeanCommission
the other, the construc tion of the sections of the S3 expressway between Swinoujscie and Troszyn as well as between Brzozowo and Szczecin, crosses several environmentally sensitive areas classed as Natura 2000 sites.
How does the EIB meet the challenge of investing in fossil fuels or in trans port
In a general comment about the financ ing of highways in the interview, Hoyer said: “So I would say freeway introduc tion itself is not a bad thing. You have to prove that this contributes to the improve ment of [emissions]. For instance, emis sions have a price. This is why the CO2 price that we calculate will go up expo nentially until 2050.”
Hoyer’s comments are supported by the Climate Bank Roadmap, which says that “the EIB group will therefore focus on improving existing airport capacity including safety, security, rationalisation, resilience and decarbonisation invest ment. Support will be withdrawn from investment in airport capacity expansion and conventionally fuelled aircraft.”
Therefore, we continue to support road investments that remain justified under the EU 2050 decarbonisation scenario and that deliver sufficient benefits to society. This is the case for the above-men tioned Polish projects.”
And Hoyer clearly expresses his view on those intermediaries that do not ful fil requirements: “If you don’t have a credible path towards transition, then it’sInover.”terms of its own transition, the EIB has an emission-reduction pathway in place to align its internal operations with the goals and principles of the Paris Agree ment, which aims to restrict the global warming scenario to 1.5°C by achieving net zero by However,2050.while some global banks have committed to an earlier target for net-zero emissions in their own opera tions--for example, HSBC is targeting 2030--the EIB has not committed to an earlier target than 2050 for its own oper ations. When asked about this compar ison following the interview, the EIB said: “It comes down to the definition of the net zero and what emissions are meas ured. For [other banks], we do not know what emissions they are measuring (if all or a part), and it is unclear if they are compensating their emissions. We aim to compensate significantly.”
However, for Hoyer and the EIB, tran sitions are important. The EIB supports the EU’s Just Transition Mechanism, ensur ing that “no people or places are left behind along the transition pathway,” according to the Climate Bank Roadmap. The idea
is one of cohesion, to support regions that currently rely on carbon-intensive industries as a major source of local employment and income, and to those sectors and livelihoods most at risk from climate change impacts.
Acknowledging the need for gas, even as part of a transition to green fuels, is a difficult balancing act for a climate bank.
21OCTOBER2022
A “just transition” and a climate bank
“I’m not naive when it comes to the winter,nextforinstance,andtherewillbehugepressures”
“I think in an environment, political environment in which we live, we must in this respect stay the lighthouse not on ideological grounds, but on economic grounds,” Hoyer said. “This is why pric ing is so important. If things don’t have a price, if emissions are cost free, then we are going to ruin the world within a couple of years.”
The increased demand for transpar ency and the high stakes of meeting net zero by 2050 will continue to put the EIB under scrutiny to walk the walk as it oper ates as the EU Climate Bank, both in the projects it finances and in its own oper ations. How does it feel about getting not just net zero, but net positive?
Werner Hoyer
test consistent with the 2050 climate neutrality target for the transport sector.
The EIB was due to make a mid-term review of its energy lending policy in early 2022 in order to discuss the impli cations of the EU sustainable finance taxonomy and further policy develop ments in the context of the European Green Deal and the EU external action.
For the environmentally sensitive areas bisected by the proposed highways, the EIB said that a full environmental impact assessment had been done and that par ticular attention will be placed on com pliance with the environmental and social standards and impacts on specific con servation
A review of policies
It’s a tough dialogue, yet as far as the demands of NGOs go, Hoyer is optimis tic: “I think our dialogue with the NGOs has improved tremendously over time. I cannot expect the hardcore fundamen talists in this field to be excited about an institution like ours. But I think, when it comes to the overall objectives, we are pretty close.”
“The last coal miner… out of the deep… coal mine in upper Silesia [in Poland] will not be the head of a digital startup in two weeks. It will take time and help in order to make this transition possible. So, this is why the idea of the green transition always was accompanied by the commit ment to contribute to the fair transition, the ‘just transition’,” said Hoyer.
“I’m not naive when it comes to the next winter, for instance, and there will be huge pressures. On the politicians to say okay, in view of the fact that the stand ard of living is going to suffer tremen dously, the increase in electricity costs for the individual households will probably make it impossible to finance the next vacation plan. So in these times, it’s very, very difficult to stay the course,” said Hoyer.
The bank already reviewed its trans port lending policy in July 2022 follow ing a public consultation with over 3,500 individuals and organisations. Revisions included, among other things, an adapted economic test for large road capacity expansions of €25m or greater, incorpo rating carbon prices and traffic profiles compatible with the 2050 climate neu trality target. However, it stopped short of ending the financing of large road capacity expansions and port expansions in Europe as demanded by a group of NGOs including BioWatch, Counterbal ance and the Global Forest Alliance in January 2022.
This concept of transition also applies to the financial intermediaries and part ners with whom the EIB works, includ ing technical assistance through its climate action support facility to support finan cial intermediaries to engage in green lending and build capacities enabling sustainable lending.
Nonetheless,objectives.Greenpeace made the point in its 2021 media briefing that a new economic test and carbon pricing used during project appraisal is insuffi cient to meet the goals of the Paris agree ment. It added that the ongoing financing of certain fossil fuel projects and the long transition period--new cri teria in the EIB’s Path Framework will not apply to operations already under appraisal or approved by the end of 2022-means “the EIB calling itself a climate bank is hypocrisy.”
It remains to be seen what changes, if any, take place in the policy in view of the changing face of Europe’s energy mix.
Giulia Iannucci has over 18 years’ experience in branding. She has also lived and worked in Spain, andAustralia,Belgium,SingaporetheUK
22OCTOBER2022
never understood why there was such a misogynist society. When I was in Italy, I thought it was because it was a Catholic country. And then I went to Vietnam and realised that it was the same, and it’s a communist country. I did more research and [discovered] it’s everywhere; there is no country where we have equality.
What’s the story behind KnowThyBrand Women?
How does personal branding translate towards a corporate audience? This translates in the way we communi cate our strengths, and I call it our inner
We are for-profit but reinvest in a social cause. To be a social enterprise across the world, you need to reinvest at least 50% of the profits. In Luxembourg, if you invest 100% of the profit--which kind of makes you an asbl--you don’t get to pay corporate taxes because you don’t keep profits.
“We are for-profit but reinvest in a social cause”
What makes a societal impact company (SIS) a true social enterprise?
It started as a traditional branding and marketing agency, and then we moved to London, and I continued. For me, it has always been very important to give back to the community, and I used my skills in marketing and branding to support causes, entrepreneurs and startups, and then we moved to Luxembourg.
Part of a personal branding [exercise] with my clients [entails] reminding them of their value. I make them list everything they’ve done and remind them of what they’re capable of and [point out] their transferable skills.
On top of that, a lot of my clients are women. I was really impressed by the impact personal branding was having on women versus the impact it was hav ing on men. When I talk about the challenges women face in business, I always point to two components. First, the external barriers--gender bias, pay gap, micro aggressions, sexual harassment, unpaid work--but then there is the internal bar rier, which is partly a result of the external barriers and partly engrained in our nature. We tend to think our jobs demonstrate our value, we underestimate ourselves and downplay our strengths.
Conversation Giulia Iannucci
Why the focus on women?
The brand was originally born in Singapore in 2014. I became a freelancer after I decided to quit my corporate job. [At the time], Singapore did not allow having more than one client, and I was getting several clients, so I had to urgently come up with a name and company.
Before launching, I discovered that you can’t just try to help everything and every one. If you really want to have a strong impact, you need to go where you think you can really make a difference.
Six years after the creation of the societal impact company (SIS) legal framework, founder of KnowThyBrand Women Giulia Iannucci says people are yet to realise social enterprises are not just for impact, but also for-profit.
The moment that really changed my career was working with a female entre preneur who had lost everything through covid, and as they didn’t have a website, there was no way to sell. So here I was this Friday evening, giving her tips on how to do marketing, and I realised how unfair it is that this lady has to wait for my Friday evening because my paying clients are the priority. For me, it was a great injustice. [But] learning about social entrepreneurship at the university, I real ised I could kill two birds with one stone.
23OCTOBER2022 Interview ABIGAIL OKORODUS Photo GUY WOLFF
Supporting women has always been something very important for me, and I
A social enterprise is a for-profit organ isation. It is not a non-profit organisation [association sans but lucratif--asbl]; it’s not a charity, and it’s not a non-govern mental organisation.
First, it’s legal. You need to be accredited, and it takes quite some time. If you already have a company and want to make the switch, you need to rewrite your articles of incorporation to make sure that the purpose is very clear. I had two lawyers helping me and the labour ministry was very supportive. And then every year you need to submit two reports, your finan cial and non-financial reports that highlight all the activities that have been imple mented that year.
What is the main social objective of ProActif?
[Second], asbls are becoming social enterprises, and this is because as an asbl, you cannot charge. Some--not all, as it depends on the size--tend to have prob lems because you constantly ask for money and depend on others before you can work. And that’s why I never wanted to go down that route. SIS companies are for-profit because we charge like any other company, offer products or services and are independent. It’s up to us to cre ate products and services that are good enough for people to want to buy them. But then what do we do with the money? That’s when the magic happens.
Earlier, you said social enterprises are the way forward. Can you elaborate on this? Does this explain why more Luxembourg companies are embracing the SIS status? There are two key things. [First], people are starting to catch up and are realising that we can’t continue the way we did in the past. When you have to choose between a normal enterprise or an enterprise that actually benefits society, I think a lot of people will choose the latter. There is also a push from the European Union and from the labour ministry. By the end of September, a new incubator and online portal for SIS companies in Luxembourg will be announced, and by October the ministry will launch a new label.
What is the most challenging part of running an SIS?
2022OCTOBER24
3 QUESTIONS TO Georges François
Conversation Giulia Iannucci
What will be the aim of this new label, and what will it do for the industry? What we discovered when we met with the SIS community last year was that there’s a lot of misconception about what an SIS is. Some people approach us with this misconception that being a social enterprise means that you are an asbl and you don’t charge. The second thing is a lot of companies call themselves social because it looks good, but they’re not. To explain what it is, think about the Made in Luxembourg label. It is the same concept--to explain to the world what a social enterprise is and recognise what we are actually set to achieve and inspire others to do the same.
“Profitability is solely a means at the service of the social project”
The mission of ProActif is primarily to integrate or reintegrate jobseekers into the labour market and secondly to train them by putting them to work within a team.
Our revenues are entirely reinvested into the development of the activity of the company. Through the reinvestment of our profits, our infrastructure is constantly being improved. People can gain experience in different professions using modern machines. The more experience you can gain during your contract, the better the chances are [for finding work later]. The gained professional experience increases the motivation of the employees.
There are many satisfying reasons to run an SIS. However, there are also challenging parts. One of them is that you always have to adapt to new situations. Depending on which crisis occurs in any part of the world, we have to develop new ways to welcome new people. An example is the war in Ukraine.
SàrlXero-SchmitMarcPhoto
How do you remain profitable by reinvesting your profits for impact? As an individual, I remain profitable because I get paid for my services. As a company, it works because there are many ways of doing social enterprise, and mine is a circular one. I have different categor ies of target audiences, and I charge differently depending on their needs. I always try to charge a little bit because otherwise people take advantage and don't see the value of what you offer to
superpowers. As soon as you identify your inner superpower, what matters to you, your goal and what success looks like to you, you also think about your audience, how to present yourself and the best way to optimise their perception of you.Another thing is that, usually, when a company starts, the vision of the person who started the company might get lost over the years, especially in big corpora tions. So [branding] cannot just be dictated from the top-down because your people know your brand better than you think and deliver it every day. That’s why I get frustrated when I see massive rebrand ing campaigns by agencies. And once it’s done, they go to the staff and say: ‘Okay, this is our new brand promise, go and deliver it.’ People should be involved in defining the company’s brand. Of course, there must be direction from the topdown, but if you just go in that direction, and the company staff on the field goes in a completely different direction, it will take quite a long time for the two to align. It needs to be engrained in the company’s culture. Make sure everybody under stands what the company stands for and how each individual can contribute to that goal.
At the moment, if you want to become a social enterprise, MyGuichet.lu explains the technicalities of becoming a social
GEORGES FRANÇOIS Director,ProActif
them. But that's how it works… Nobody needs to know which of my clients pay and which of my clients don't. That stays between us and them.
How do you remain profitable while maintaining impact?
People are starting to realise that there is something more important than profit, and they’re expecting companies to do more, and companies want to really grow and be relevant in 10 to 20 years. I get a bit frustrated because everybody thinks ESG and sustainability is just about the
Why did Nouma make the switch to become an SIS?
environment. But environment and social rights go together, and you need govern ance to make it real. It’s called the planet-people-profit because they are not mutually exclusive, in fact, they rein force each other.
From the beginning, the legal perspective is quite a challenge [and] also tracking and making sure that you report back. But the biggest challenge is getting people to under stand that we are for-profit, because there is this mismatch between you wanting to do good and charging for your services. As entrepreneurs, a challenge in Luxem bourg is that support is given only if you’re reinvesting 100% and I think this needs to change. In the UK it’s not like this. You already get support and a lot of help if you’re reinvesting at 50%. And I think lowering the requirements will attract more [entrepreneurs].
For future social entrepreneurs, go for it and don’t give up. Entrepreneurship is not easy, but it is totally worth it because knowing that your work will improve the world gives you so much strength when you face obstacles.
What should entrepreneurssocialconsiderbeforestrikingout?
What’s the most rewarding part of running a social enterprise?
You mentioned misconceptions about social enterprises. With corporate social responsibility and everyone doing ESG, how does this blur the lines further?
EMMA ZIMER Founder and Noumadirector,
Can you summarise the main challenges social enterprises face?
enterprise, [but] there are no stories of success or push towards becoming one. My job, because I work in branding, has been to develop the label [together] with ULESS [Union Luxembourgeoise de l’Économie Sociale et Solidaire]. The labour ministry and ULESS gave me the mandate to do this, and they will take charge of the implementation.
2022OCTOBER26
What’s your advice for prospective social entrepreneurs, and where are the main gaps in Luxembourg where they can really play a role and rise to the occasion?
We need to put it out there that if you decide to become a SIS, you can have this amazing label, but most importantly, you become part of [a] community. Already, I’m meeting more people who say that they are social enterprises, and I love it because we’re getting momentum. I feel it’s the beginning of something big.
Entrepreneurs see opportunities and gaps and social entrepreneurs should do the same. Find the gaps where you can have the most impact. [Bridging] the gap between the ultra-rich and the poor [is] an area people could look into.
A lot of people call themselves social, but that’s not true. What they do is that occasionally they do something good, which is great, rather than doing nothing. But being a social enterprise means that you are required to do something, you don’t just say you do it. [Also] an annual report tracks what has been done in a year and that accountability is very important.
My wish from the very beginning was to be a social impact company. The moment it became possible to register as an SIS, I put in my request. To me, every company should be a social impact company and have as an objective to create positive impact and not just to generate profit.
If you feel it, then just do it! We are a growing community of SIS companies in Luxembourg, and I believe we’ll become a very interesting network to follow.
Conversation Giulia Iannucci
3 QUESTIONS TO Emma Zimer
Being an SIS adds administrative work but there are resources to help within the social business incubator MeSIS and the SIS network.
How innovative are the new projects undertaken by these SIS companies? Are they daring and out of the norm? We’re seeing different kinds of projects, from supporting immigrants with lan guage skills to [catering for] the holistic well-being of farmers. Honestly, the vari ety is incredible. In terms of technological innovation, I haven’t come across one that is really pushing the innovation agenda, [but] I think that’s something we should really look into.
“We are a communitygrowingofSIScompaniesinLuxembourg”
CostaDaFlavioPhoto
For me, it is very important that my company aligns with my values. Being an SIS makes this a possibility for me. I love being an entrepreneur, but it only makes sense if the value I create helps the world become a better place. Being an SIS provides a label that consolidates this position.
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Banks
The challenges of sustainability in the financial landscape
The expansion of sustainable and responsible finance
Mélanie Mortier, Senior Portfolio Manager at Banque de Luxembourg
28OCTOBER2022
Sustainable and responsible investment is gaining traction globally and is set to grow further in the coming years. Financial services providers face numerous challenges when offering solutions that meet their clients’ expectations in terms of sustainability. Knowledge and transparency are the watchwords.
over recent years is linked to the very evolution of society with regard to the issue of climate change,” says Mélanie Mortier, Senior Portfolio Manager at Banque de Luxembourg. “However, it is also a consequence of other impor tant issues taking centre stage, such as gender equality and equality between people of different ethnicities, driven for example by the Black Lives Matter movement.”
Moderne)(MaisonKrinsEvaPhoto
Societies have undergone profound changes in recent years. Scientific studies and warnings from experts regularly highlight climate change, and its associated natural disasters have become daily topics of discussion. This theme, which is also driven by changing regulations, has finally percolated into the sphere of finance.
“
Integrating ESG criteria into financial analysis ESG analysis of companies is complementary to the fundamental analysis of financial criteria. “Our aim is to gain an in-depth understanding of the companies we invest in, and one aspect of this analysis is the consideration of the risks companies face,” explains Mélanie Mortier.
characteristics to a greater or lesser extent. By the end of 2022, this figure had risen to 50.9%. This shows that the market has already adapted to the new regulato ry situation and this is a trend that is set to continue,” says Mélanie Mortier.
For private banks, the changes are equally numer ous and require efforts in terms of transparency and clients’ knowledge. “The challenge is to open the discussion with our clients and understand what they are looking for in terms of sustainability, so this can be taken into account in the management of their portfolios.” This process of discussion creates an opportunity to explain sustainable and responsible products. Reporting on investments also helps ensure maximum transpar ency. The challenge is to provide useful, under standable and relevant information. “As a commit ted economic player, we support our clients offering a responsible approach to their investments. We offer sustainable and responsible solutions that will ensure a lasting positive impact on the society and the environ ment,” concludes the Banque de Luxembourg expert.
Harmonisation is necessary Analysis of ESG criteria is based in part on the ESG ratings of companies, which in itself raises a raft of questions. The fact that these rating systems are not
and diversify our energy sources. In this context, companies that offer alternative energy and develop less polluting solutions at a local level also have a card to play.
“The tothisweenough – today,notransitionecologicalislongeralsoneedtransitionbefair”
The European Commission has an ambitious plan to promote the transition, including regulations to direct capital flows towards sustainable investments, improve transparency and integrate sustainability into risk management. In 2021, the Sustainable Finance Disclosure Regulation (SFDR) paved the way in this respect, with very clear effects. “In March 2021, according to Morningstar, 20% of European funds had declared themselves to come under article 8 or 9 of the SFDR, i.e. environmentalpromotingorsocial
Sustainable finance fuelled by crises
Covid is another factor that has had an impact on the development of sustainable finance. “The crisis high lighted a whole series of problems linked to our economic model, such as the need to source certain products from distant countries,” explains Mélanie Mortier. “Worker protection also became critical during the crisis, and companies that took steps to deal with this aspect stood out from the crowd.
“Looking at risks through the ESG prism enriches this analysis, without a doubt.”
The percentage of EU funds declared under article 8 or 9 of the SFDR, i.e. promoting environmental or social characteristics to a greater or lesser extent, increased from 20% in March 2021 to 50.9% by the end of June 2022. 50.9% 0 March 2021 June 2022
harmonised between the various data providers is fuelling the debate but also poses a problem in terms of the transparency of the rating methodology. “Tesla was excluded by S&P from its ESG index as it was disqualified by several factors (absence of a low carbon strategy, code of conduct, cases of racism and poor working conditions, etc.). However, MSCI, another major data provider, considered that the product proposed by Tesla was more important, in terms of sustainability, than these other considerations,” Mélanie Mortier points out.
Whereas historically, there was a strong focus on the environmental side of things, which is easier to quantify, now the social aspect is increasingly being taken into account. “This is linked to changes in our society,” points out Mélanie Mortier. “The ecological transition is no longer enough--today, we also need this transition to be fair.”
Clarity for investors
6030 29OCTOBER2022BRAND VOICE More information
A year full of regulatory changes
“Governmentsarenolongerjustaskingwhattheycandotocounterclimatechange,butalsowheretheenergytheyusecomesfrom”
Another” crisis that could bolster the fight against climate change and play an unexpected role in the development of sustainable finance is the conflict in Ukraine. Apart from the humanitarian aspects, it has highlighted the depend ence of European countries on energy supplies, espe cially from Russia. “Govern ments are no longer just asking what they can do to counter climate change, but also where the energy they use comes from,” says the Senior Portfolio Manager at Banque de Luxembourg, who points to the European REPowerEU plan that is intended to save energy
20%
2022FEBRUARY Business report €150bn€120bn€0€90bn€30bn€60bn Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Sustainablegrowth
1 sustainableDe-riskingfinance
A look at the ways of making this asset class less risky, through the participation of public sector financing in the junior tranches and through proving the business case p. 32
Asset managers should, and probably will soon, stop referring to their funds by their Sustainable Financial Disclosure classificationRegulation p. 36
Source Morningstar
As investors push more cash into ESG-themed funds, investment firms need to adapt and innovate. This report looks at three issues that could push through major changes for Luxembourg’s fund sector.
€2.0trn€1.0trn€1.5trn€2.5trn 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022
€0.5trn€0 Flows RestUSEuropeof the world Assets RestUSEuropeof the *Open-endworldfunds and exchange-traded funds listed in Morningstar Direct’s database that make intentional sustainability; impact; or environmental, social and governance claims
SUSTAINABLE FUND FLOWS AND ASSETS According to the fund research outfit Morningstar, sustainable fund* flows and assets declined in the first half of the year, globally and in Europe, owing to investor concerns over a global recession, inflation and interest rates, and due to “market depreciation”. However, the drop was “less pronounced” than for the broader market.
The International Climate Finance Accelerator is helping climate-oriented funds raise funds and structure their operations p. 34
3 Articles 8 and 9 are not labels
31OCTOBER2022Sustainable finance
2 Climate structures
32 Business report 2022OCTOBER
Blending public finance with private investment encourages investment in climate finance in a number of ways. “Many of the most impactful climate finance
“The goal is to help accelerate and scale investments that contribute to the tran sition to carbon-neutral, resilient and sustainable economies,” said Jennifer de Nijs, who works as a special adviser for sustainable finance at the ministry of finance. “Our flagship activities in blended finance are the Luxembourg-European Investment Bank Climate Finance Plat form, together with the ministry of the environment, climate, and sustainable development, launched in 2017; the inno vative Forestry and Climate Change Fund, launched in 2017; and an upcoming vehi cle with asset manager Schroders and impact investment manager BlueOrchard.”
“De-risking investments in climate finance can scale up private investments and close the climate finance funding gap. This means that with a relatively ‘small’ public investment, we can have a very large impact on the overall size of the investment and project financing.”
*Sustainable bonds include green, social, sustainability and sustainability-linked bonds **As of 30 June 2022 SUSTAINABLE BONDS IN LUXEMBOURG Total number of sustainable bonds* listed on the Luxembourg Green Exchange (LGX), at year end. The figure surpassed 1,000 in May 2020 and is fast approaching 1,500. Source Luxembourg Stock Exchange financeofMinistryPhoto Climate financing vehicles
1
The ministry of finance is not yet dis closing the target size of its new vehicle. However, it plans to do so “as soon as possible,” said de Nijs. management
“This can already be seen with renew able energy projects such as solar, which are much easier to finance now than 20 years ago. In other areas, such as climate adaptation, we are still at the very beginning.”
Luxembourg likes to innovate, and its blended finance activities (which de-risk investment into un-bankable projects) aim to dramatically increase private investment in sustainable finance.
The importance of blended finance
The World Bank estimates that lowerand middle-income countries will need to invest at least 4.5% of their GDP in developing and maintaining key infra structure if they are to meet the 2030 sustainable development goals by mid-cen tury, noted de Nijs.
“This is exactly where blended finance helps: it uses public capital to lower the risks for other investors, or to increase their returns. By assuming first losses (de-risk ing), or foregoing returns (more return for others), public funding mobilises private capital to make the investments more attrac tive and the projects ‘bankable’.”
projects are ‘un-bankable’, as they take place in locations with a perceived highrisk rating,” said de Nijs.
Given the limits of public capital and the climate crisis, scaling as much capital as possible into climate finance projects is crucial, says de Nijs.
Asset
The role of de-risking investments in climate finance
Words JOSEPHINE SHILLITO
Climate projects often have a limited track record. With blended finance, these projects can build this track record, so that blended finance is no longer neces sary in the future, pointed out de Nijs.
Focusing on carbon-neutral and resilient economies
“By targeting emerging countries, we have the biggest impact on improving the environment.”
We catch up with the ministry of finance’s Jennifer de Nijs.
Of the last vehicle, de Nijs explained “We are setting up the new impact strat egy vehicle to support sustainable growth in emerging markets, with a focus on cli mate mitigation, climate adaptation, and the protection of water and biodiversity.”
“Emerging markets and developing coun tries are severely impacted by climate change and at the same time struggle to attract private capital where it is most needed,” said de Nijs.
Jennifer de Nijs
privatepublicBlendingandcapital
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The ministry of finance in Luxembourg is increasingly using public money to transform climate projects into an attrac tive investment proposition.
“The public sector cannot finance this alone,” she said.
Acting now to preserve biodiversity
+352 691 340 solene.garnavault@fil.com683
Senior Manager - Client Support and Marketing
chain weaknesses where issues such as deforestation and threats to species are acute. Biodiversity is one of the largest investment megatrends in our lives and the theme is at an inflection point. There is a ready set of solutions that can slow down the loss of biodiversity and these are rapidly being adopted.
Investors will need to be prepared for changes in governmental and regulatory policy, initiatives to stand ardise and measure biodiversity risks, more rigorous auditing and assessment of portfolios for biodiversi ty-related exposures, new approaches to critically eval uate companies, and increasing awareness of supply
Biodiversity is emerging as one of the largest investment megatrends for our generation.
CONTACT US SOLENE GARNAVAULT
The unsavoury truth is that as the human popula tion grows, our demands for food, energy and resourc es will increase, and greater strain will be placed on our natural capital. To manage this and preserve bio diversity, fundamental changes across industry, supply chains, technology, economies and society are required.
If we harness our research and analytical capabili ties, relationships with companies, and partnerships with clients to move beyond discussion and aspiration, we can make genuine, quantifiable, and enduring chang es to prevent the destruction of our natural capital.
Biodiversity is our life support mechanism - our livelihoods, well-being and key economic activities all depend on well-functioning ecosystems.
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where public support is so important, explains Stephan Peters, who runs the ICFA, which supports climate finance funds in Luxembourg to reach their first “Governmentsclose. have deep pockets, deep enough to de-risk investments in climate finance and to take concessionary returns,” says Peters. “This is so important because many small funds investing in crucial projects struggle to get to first close. This is because they don’t have the track record, so investors will say ‘come back when you have a third or fourth fund.’ It’s a chicken-or-egg scenario.”
De-risking climate finance
Centre of excellence
It’s not easy being a climate finance fund, particularly when you have no proven track record. The projects you are invest ing in are important for the planet but risky for the investor, and you’re running out of working capital as you try to reach firstThisclose.is
34 2 Business report 2022OCTOBER
Financial and fundraising support
Stephan Peters
302010251550 2018 2019 2020 2021 2022
“Climate funds need a structures”toolkitwideof
Specific needs of climate funds
Words JOSEPHINE
He explains that there is a growing competence in Luxembourg financial services for supporting climate finance funds. “We work with climate funds focus ing on brownfield plants and optimising them. Private equity fund service pro viders in Luxembourg have a depth of knowledge on secondary transactions and can tweak this knowledge to apply to brownfield sites.”
“This ‘de-risking’ of climate finance [by the public sector] is crucial to creating sustainable, long-term investment in climate finance from the private sector. They start to see a track record and then it is easier for private sector investors to make the investment case to their board,” saysThePeters.ICFA supports 28 funds, selecting a new cohort of funds to support every year. The 2022 cohort is Energy Peace Partners, Katapult, Olduvai Capital, Sustainable Links and Incofin.
However, the non-financial support to the funds is equally important. The ICFA provides funds with training, coach ing, service provider discounts, and access to working space and to support networks to help accelerate the fundraising pro cess. This networking effect does more than to help the individual fund. It also helps generate a climate fund services ecosystem in Luxembourg.
Fundraising for climate finance in Luxembourg is easier thanks to the latest round of working capital and support from the International Climate Finance Accelerator.
It does this by providing a working capital loan of €250,000 to the fund while
The ICFA works off a blended financ ing model, where public money is invested to enable the funds in the cohort to get off the ground, but it is private investors who are the fundraising target.
Since the inception of the ICFA in 2018, it has supported four fund managers reach first or second close with a total of $219m in assets under management, with more on track to close later this year: an impressive achievement, given just how difficult it can be to fundraise for climate finance.
CLIMATESHILLITOFUNDS
The International Climate Finance Accelerator is a “two-year acceleration programme for aspiring climate fund managers”. The programme includes training, coaching, workspace, financial and networking support, and a working capital loan. The ICFA has cumulatively helped just under 30 funds so far. icfa.lu
CEO Stephan Peters tells Delano about some of the sector’s challenges.
it tries to achieve first close, and an enve lope of support services of up to €80,000 to receive specialist advice. The working capital loan in particular helps small funds weather the often longer-than-expected lead time between launch and first close.
According to Peters, funds focusing on climate finance have specialist financial services needs. “They need a wide toolkit of structures and vehicles,” he says. Cli mate finance funds can be extraordinar ily diverse; debt focused, like microfinance; or project-finance focused, involving a mix of debt and equity; or a pure equity play such as a venture capital fund invest ing in climate technology.
Source
AIDED BY THE ICFA
Sustainable finance
“Climate finance funds tend to be alter native investment funds,” says Peters. “And for alternative investment fund struc tures, no other jurisdiction is as interest ing in Luxembourg.”
ZenariMikePhoto
For microfinance, Peters cites exist ing services providers, like BlueOrchard Asset Management, which can angle their offering to climate adaptation.
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Lebbe has seen a slight slowdown in arti cle 9 fund introductions this year, as some firms wait for further clarity from regu lators and signals from the market. But this is a short-term blip. While fund law yers have been “cautious” in advising firms, “because we don’t want them to get into trouble, we’re certainly not hold ing them back when it comes to going far into SFDR and into commitments regarding sustainability.”
Regulation areArticles8and9notlabels
By assetsBy number
Convenient shorthand
The EU’s Sustainable Finance Disclosure Regulation requires asset managers to classify their investment funds as falling under SFDR articles 6, 8 or 9 (see graphic). How hard will regulators come down on fund firms whose documentation falls short?
Financial regulators have been “very clear in their communication that SFDR is a piece of regulation that they take very seriously,” and have stressed to fund exec utives to “make sure that it is properly implemented, in particular here in Lux embourg,” Lebbe says.
“We tell them that they have to make sure that they can deliver on the promise they make, because we see investors, we see regulators, we see competitors look ing very closely at those who go far into” SFDR, she says. “So it’s not going to be easy to oversell. I would say, in the future, less and less easy.”
Deliver on promises
There certainly have been recent cases of regulators cracking down on green washing, acknowledged Stéphane Badey, partner at Arendt Regulatory & Consult ing. But overall, “as of today, you can comply with the obligations. I mean, the SFDR is nothing else than a transparen cy exercise. So if you are transparent about what you do as a firm--obviously you have to comply with the obligations, even if they are a bit technical--normal ly there’s no reason why the regulator will come down hard on you.”
or driven by NGOs, both of “which are looking at what firms are doing and say ing.” Investors and activists are likely to discover if a portfolio does not match up with what’s written on the tin. “It’s more a reputational issue.”
“I’mdisclosure.”prettysure that in six months’ time,” as the rules come more into prac tice, “we’re going to talk about taxonomy aligned products, sustainable investment products and principal adverse impacts consideration. We’re going to move away from articles 6, 8 and 9.”
Stéphane Badey
36 3 2022OCTOBER Business report Medernach&ArendtPhotosWords AARON GRUNWALD
*As of April 2022 **Published by the Association of the Luxembourg Fund Industry, Morningstar & ArticleArticleArticleZeb896 FUNDS BY SFDR CATEGORY* Article 8 funds use sustainable criteria in their investment process; article 9 funds have a sustainable objective for their investments, while article 6 funds make no sustainability claims. Source European Sustainable Investment Funds Study 2022** 30%4%66% 43% 5% 52%
Isabelle Lebbe
3
Sustainable finance
Isabelle Lebbe, partner in the invest ment management practice at the law firm Arendt & Medernach, agrees that greenwashing “is very, very much a rep utational issue.” That said, if any funds “have been missold, you can be sure that regulators will follow up immediately, ask questions, make verifications and potentially impose fines or other types of sanctions. We clearly expect that.”
Badey believes the issue really “is not regulatory driven, but more client driven,”
Does this mean that fund firms might be hesitant to launch funds labelled as arti cle 9, to avoid making promises they can’t deliver on? Firstly, “you should not use article 8 or article 9 as a label,” says Badey. “They are not labels. The [European] Com mission has been very clear on that. It’s convenient now that we say ‘article 6, 8 and 9’, but the reality is that you do what ever you do in terms of investment strat egy, and then based on what you’re going to disclose, you’re going to fall under arti cle 8 disclosure, article 9 disclosure, arti cle 6
•ProgrammeWelcome (18:30)
On 26 October 2022, Maison Moderne will publish its first supplement Paperjam 100 Lawyers, which will highlight the 100 most important lawyers in the grand duchy. For the occasion, Nathalie Reuter will be in conversation with Sam Tanson, Minister of Justice.
APÉRO DÉMOCRATIETALK ET JUSTICE WITH SAM TANSON Registration and www.paperjam.lu/clubinformation:Luxembourg-KirchbergECCL,18:30Thursday27.10
• Conversation with Sam Tanson (19:00) Networking walking cocktail (20:00)
•
Sam MinistreTansondela Justice, Ministre de la Culture
Nathalie Reuter Director of editorial developments, Maison Moderne
cocktail
The reduction of working time is a subject that comes up regularly in politics, like in 2016, 2019 and now. Do you think it comes from the political world or from employees?
TOM WIRION Well, there are no statistics or studies that I know of that have scientifically measured this, but I think I can say that a good half of the business leaders in the sector I work for would like to see a more flexible framework, with or with out cutting working hours. But this work ing time reduction has to be considered on a case by case basis.
I think that there is a certain demand from young and not so young people who say, ‘I want to have more time with the family because I am a young mother or father,’ or ‘I want to work because it is interesting but I want to have a few half days where I can breathe.’ This is a reality, and therefore the debate is a real debate and not a fictional debate. But I’m not sure that politics is leading the same debate.
TW It’s not what we need now.
Since the start of the current legislation, 9 May [Europe Day] and one more day off were added too. Does this count towards reduced working time?
generaldirectoroftheChamberofTrades
Tom Wirion is the
The impact of shorter workdays
Tom Wirion and Michel-Edouard Ruben weigh in on the economic consequences of reducing working hours.
MR One size fits none here.
TW No, I think that if you really want to think about it, then you have to think about new ways. You can have sugges
Head to head
you look at it again, the question of the reduction and flexibilisation of working hours is the history of work. So it’s not surprising that demand exists, that offers areHavingmade. said that, today we are in a reality where we talk about a shortage of work. We need a framework that would be as flexible as all these possibilities and this framework does not yet exist. So, to say in a simplified way that we’re going to reduce working time from eight to seven hours a day is missing something.
TW If we say that we will make it more flex ible with an accompanying reduction of working time, we have to offer a frame work. But within that framework or sector, we need companies and their employees to find common ground and the modalities to apply it. And for that to happen, we need to simplify and prune a lot of things which today make it very rigid and no longer in line with the metamorphosis. That’s why it’s a real subject. We [at the Chamber of Trades] are going to come up with concrete proposals in a few months.
MICHEL-EDOUARD RUBEN I have a feeling that it is more political. And I think it might be the politicians offering rather than the voters asking. For me, the demands of the employees are flexibility of work ing time rather than reduction. I think people are more interested in salary increases than in work decreases, but these are an economist’s assumptions.
To categorically say that everyone has to work 32 hours...
“Working time reduction has to be considered on a case-by-case basis”
Politicians are pushing out slogans. Overall, we have an organisation of working time that isn’t adapted to the metamorphosis of the wage society. Friction, discomfort, desires, demands and offers result from this. But when
Michel-Edouard Ruben is an economist at the Idea think tank
TW And create productivity in the end.
So if we want to increase the country’s productivity, it’s not by reducing working time?
MR Yes, in the short term it can create friction, but in the long term, it contrib utes to the dynamism and fluidity of the economy and ultimately to productivity.
There have been studies that have shown that a reduction in working time could improve productivity at the economic level. Can a reduction in working time help increase Luxembourg’s productivity, or is that illusory?
tions for flexibility with or without reduc tion at the appropriate level and not try to regulate everything from above because otherwise it might not suit the needs of employers or even employees.
If some sectors can afford to offer this, wouldn’t it penalise other sectors?
employer and who often has require ments. I think that once we have a new model and freedom in companies to find the right solutions in terms of working hours, etc., then there will be companies that will take advantage of the opportu nity; others won’t. Then it’s the market that will regulate the rest. Today, due to the shortage, there are a lot of move ments within the sector. So it’s already a reality today that employees who are less qualified will move for one euro more per hour, and the qualified for other criteria in addition to the salary, but that will always be the case. This is where the competition comes into play.
TW I don’t think the time is right to con sider it now. We’ll have to see how things develop. The fairly positive economic trend that existed in recent quarters is changing. So we need to look at the third quarter and the forecast for the fourth. There is a risk that the trend will decrease for the activity indicator. And in this case, we are in another scenario. We are then in a scenario where, yes, there is a reduction in working time, or perhaps redundancies.
Photo ROMAIN GAMBA
Economy
TW The attractiveness of the employer is already an issue today. With the short age, it is the employee who chooses their
“There is more a demand for overtime rather than workingreducingtime”
MR The moment counts. We are living in a moment of tension on the labour supply. There is more of a demand for overtime rather than reducing working time. That being said, at the time of the pandemic crisis, we saw a forced reduction in work ing time. That’s why the notion of flexi bility is important. But this idea that would consist today in saying that we must reduce working time to boost productivity is, for me, voodoo economics.
MR The reduction of working time is cer tainly a consequence of the increase in productivity, not the other way round. When you are in a context where there are pro ductivity gains, well, they go into the econ omy. The best sector that shows this is the agricultural sector. The population con tinues to be fed today because there have been productivity gains. These have allowed wage gains, time gains and the develop ment of certain sectors, such as leisure and services. Productivity gains are distributed, and not in the other direction.
This interview has been edited for length and clarity.
MR What in the short term may seem like a threat, in the long term is what makes the economy dynamic. What will happen is that there will be sectors that are ahead, and sectors that will be behind, and which, in order to continue to exist, will continue to use their own flexibility, their own capac ity for innovation to catch up with the competition.
Moderated by TRACY HEINDRICHS
Overly expensive building materials have knock-on effects on the viability of existing contracts and future construction projects. But which alternative pathways could be explored to avoid a looming crisis for the building and construction sector?
Words ABIGAIL OKORODUS
Illustration SALOMÉ JOTTREAU
inUnpredictabilityconstruction
40OCTOBER2022 Essay
Construction
LUXEMBOURG HOUSING
Steel, iron, wood and cement are part of sanctioned products from Russia--the largest lumber exporter globally, accord ing to Wood Resources International. Wood
Köhler explains that while “there was a global peak in wood prices around the third quarter of 2021, prices are stagnat ing a little bit for some kinds of woods.” However, they remain higher than pre-pan demicAddinglevels.to the construction sector’s costs are high energy prices. The sector needs a lot of energy-intensive materials. Trauffler explains that cement, glass and steel, for example, require high tempera tures for production, powered by either gas or coal--gas prices have multiplied, and Luxembourg is one of 10 EU coun tries declared coal free as of 2021. “Oil and petrol prices are [also] high, and so trans portation becomes more expensive, affect ing [all] that needs to be transported, which is everything. So you can imagine that at the end of the day, these [costs are com pounded for the] final consumer which is the guy that wants to do his construction,” says Trauffler.
Between a rock and a hard place Contractors’ options are quite limited. Renegotiation or termination of private construction contracts in Luxembourg are not a given, even in the event of unfore seen difficulties. Contracts remain legally binding, except in cases where provisions in the initial agreement allow contracting
The past months have seen notable increas es in building material prices, especially those required for structural, roofing, building closures, technical facilities and finishing works. What exactly is driving this surge, and how long will it last? While the latter question remains a game of chance, experts have pointed to post-pan demic shocks and overwhelming demand for construction, supply-chain disrup tions linked to the Russia-Ukraine crisis, high costs or lack of labour and logistics issues as some of the main culprits.
parties certain flexibilities. “If you have a private contract with a fixed price and no contractual provision allowing for a price adjustment such as an indexation or a hardship clause [for example], the con tractor cannot renegotiate the price. So it's your risk as a property developer if there are any price increases in building materials,” explains Philippe Eicher, sen ior associate at law firm Allen & Overy.
“Some property developers have agreed to delete indexation or price revision clauses for their ongoing projects, and now they regret it. Before the current crisis, a major ity of the construction agreements were fixed price contracts. Nowadays, con struction companies try to avoid fixed price contracts or add a significant mar gin in order to anticipate any future price increase in construction costs or building materials,” adds Eicher. “For public mar kets, however, there are specific provi sions in the law allowing for an adaptation of the contract in case of unforeseeable events (e.g., unforeseeable variation in price or wages since the submission of the offer). Currently, there are no similar provisions for private contracts in Luxem bourg,” he France--andexplains.more recently Belgium starting in 2023--have introduced the hardship clause, allowing contracting par ties to come back to the negotiation table PRICES PER
Several events have unfolded rapidly for the sector in the past months, says Gas ton Trauffler, head of industrial policy at industry federation Fedil. He explains that during the pandemic, most compa nies had to cut their production capaci ty as demand was low. Before the energy crisis, demand was high--as countries invested in recovery funds to kickstart the economy--but there wasn’t enough building material offer. The number of apartments under construction in Lux embourg rose by 7.7% at the end of last year, attesting to a strong rebound. Now that production of building materials has ramped up, Trauffler reckons the situa tion has improved. “It's not that you come to the construction site and there is no building material. The problem is that they have to pay more [for] raw materi als than calculated [in the budget].”
But long before the recent energy crisis pushed commodity costs up, contractors had already raised the alarm on price esca lations that intensified shortly after the start of the global pandemic. Luxembourg real estate prices in the first quarter this year saw the third highest jump (131%) in the EU compared to 2010, according to Eurostat. The trends in the construction sector are not isolated but indicative of skyrocketing inflation rates on a global, European and national scale--at 6.8% at the time of writing--but massive altera tions in construction costs in Luxembourg’s already pricey housing market are conse quential. Will construction companies manage to accommodate costs extra to those stipulated in contractual agreements at the expense of their shrinking margins?
M2 Figures published in March 2022 for Q4 2021 showed that a flat under construction costs, on average, 10-20% more than an existing property with a comparable surface area--depending on the location. Source Land Registry and Topography Office, Statec, Observatoire de l’habitat Existing property Under construction €15,000€12,000€9,000€6,000€3,0000 Below 50m2 50-69m2 70-89m2 90-109m2 110-129m2 or130m2more Total
41OCTOBER2022
cluster manager at Luxinnovation Ralf
The contractor’s dilemma
Beyond contract renegotiation
“It’s your risk as a materials”inincreasesanyifdeveloperpropertytherearepricebuilding
should there be unforeseeable circum stances that may arise which could not have been anticipated when the contract was concluded. Belgium took it a step further, allowing the intervention of a judge when an impasse is reached or in cases of a refusal to renegotiate by one of theHowever,parties.
it is not the first time that a hardship clause is being proposed in Lux embourg. PwC Luxembourg had hinted in an article that the hardship theory has struggled for years to be recognised by case law in the grand duchy. So it remains to be seen whether there will be a change in Luxembourg law to enable renegotia tion possibilities for private contracts. Otherwise, construction companies stand at risk of continuing to lose funds on existing projects, and future clients risk bearing the brunt of losses incurred.
These measures include the provision of temporary financial aid; the setup of an energy cost cap at the European level to combat speculation and further increases; direct compensation to companies under existing contracts; the prioritisation of payments to construction SMEs by public authorities; lowering VAT rates to boost renovation and construction activity across the EU; the postponement of any planned measures to ban the use of certain fuels or to tax fuels for the construction sector; and temporal suspension of the EU steel safeguard measures and EU anti-dumping duties on steel products.
42OCTOBER2022 Essay Construction
Even if bigger players could afford to buy materials in bulk or have a stake in supply chain networks, others without the same capacity remain exposed to price fluctuations. 47 small construction com panies went bankrupt in the first half of 2022, and the possibility of bigger players following cannot be ruled out--Aquinno tec and Instaltec were two such examples thisThelenyear. explains that the Chamber of Commerce, together with business asso ciation UEL are working to ensure more predictability for companies and banks. However, this is difficult because “we have an imported inflation due to energy prices.” He estimates that Luxembourg will nev ertheless remain attractive for investors and immigrants, which would sustain the housing markets allure.
If demand drops, prices are expected to follow suit. The European Central Bank (ECB) increased interest rates in a bid to raise the borrowing costs, reduce demand and eventually cool down inflation. Low interest rates and shifts in housing pref erences--fuelled by the share of telework able jobs and a desire for more space--were also said to have contributed to higher housingAccordingprices.toStatec’s construction price index, the price of construction rose 8.6% over a seven-month period, and in resi dential property this was higher, 13.9% over a one-year period.
&
In the context of the Russia-Ukraine crisis, it has approved state aid “loan” pro grammes targeting various sectors, includ ing a €500m guarantee scheme for the grand duchy under the so-called Tempo rary Crisis Framework. Luxembourg has also adopted other aid schemes, and the share of loans and benefits granted to con struction works may contribute to recept iveness to budget renegotiation proposals.
But decreasing prices is not a one-sizefits-all solution, and it would need to be done cautiously and progressively. Lux embourg Chamber of Commerce director Carlo Thelen explains that “a big decrease of housing prices would not be a good sign because it would mean that [the market] is not attractive anymore, and demand is going down too quickly--and that would be a disaster.” The ECB has also warned that an abrupt repricing in the market-due to a reversal in housing demand or significant increase in real interest rates-could produce spillovers to the wider finan cial system and economy.
In response to a question by Euro pean parliament member Iskra Mihay lova on potential measures to manage the increase in building material prices and help European manufacturers remain competitive, the European Commission had indicated in March that prices were “stabilising” and that it is closely moni toring the supply factors affecting con struction material prices. Following its letter, the EBC confirmed a follow-up response from the European Commis sion directorate (DG GROW) director Gwenole Cozigou indicating that the “Commission is closely monitoring the impact of high prices on industrial eco systems, including construction.”
Philippe Eicher, senior associate at law firm Allen Overy
Still make hay while the sun shines Drawing parallels with the 1973 oil embar go on the US by 12 OPEC members, Uni versity of Luxembourg professor François Koulischer explains that central bankers have already understood that the costs of inaction surpass the benefits, and the elasticity of supply versus demand will impact real estate prices and the possi bility to continue passing on construc tion
In addition to modifying contracts--by applying the hardship or force majeure clauses, suspending penalties, postpon ing execution deadlines and including a price revision clause in all future con tracts--the European Builders Confed eration (EBC) in an open letter to the European Commission proposed sever al other measures that could be explored to help counter fuel and material price increases, especially for micro-, smalland medium-sized companies.
“Partcosts.ofthis increase in energy [prices] can be put into your end price but not eternally because, someday, your custom ers won’t pay anymore and they’d say: well, I can postpone my project also and wait until the prices come down again,” explains Trauffler.
No one-size-fits-all solution
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2022OCTOBER
Mesa Verde
Dipso
Dipso The Wine Republic
2
Tanja de Jaeger’s choice is a Riesling Domaine et Tradition by Duhr Frères, which she says is “fruity and elegant while still retaining crispness, thanks to its minerality.” To accompany it, Tanja recommends a Kachkéis (a traditional, cooked sour-milk cheese) made from scratch to famous chef Tony Tintinger’s recipe and dipped in bread.
Moselle matches
Owner Lucien Elsen has selected a 2016 Riesling vin moelleux from Domaine Mathis Bastian. It may be sweet, but it pairs well with seafood and sushi, so it’s well-matched to accompany the restaurant’s Repos au Bord de la Mer cocktail of algae, grilled fish and scampi.
1
Mesa Verde Luxembourg
Luxembourg vintners are producing some truly great wines, but what dishes go best with your favourite tipple from the slopes of the Moselle?
Words DUNCAN ROBERTS Photos GUY WOLFF, ROMAIN GAMBA
Pinot blanc: its delicately fruity and mineral notes make it a good match for fish, white meat, and egg dishes.
3
Arange of varieies
Rivaner: fruity, light and soft, it’s a good match for traditional Luxembourg foods.
Vins Fins
4
www.vinsfins.lu
W. Blake Gray, Wine Review Online
Elbling: a lively wine with aromas of citrus fruit and green apple.
Sommelier Grégory Mio has selected Domaine L&R Kox’s Riesling, Mosella, 2020 to serve with chef Fabrice Salvador’s Ikéjimé sea bass crudo with plankton and trumpet zucchini. Mio describes it as a “finely chiselled wine of great delicacy” with mineral and citrus notes that enhance the iodine touch of the plankton and its five-citrus vinaigrette. www.la-cristallerie.com
Down in the Grund, François Dickes plumps for gravlaxMarkusbiergSunnen-Hoffmann’sDomaineorganicRivaner.ThesimpleyetcomplexRivanerhasjusttheaciditytobalancethefatofthecarpaccioofsalmontroutfromtheOurdall,whichisservedwitholiveoil,ahome-madelighthorseradishcreamsauce,roastedpinenutsanddill.
Riesling: typical of the Moselle, this has intense minerality, often very complex, with notes of citrus, apple and quince and spicy aromas.
Auxerrois: crisp, fruity and full of flavour, this can even yield wines for cellaring that are not unlike Burgundy whites.
2022OCTOBER
“I’m ready to LuxembourgproclaimPinotGrisandRieslingsomeofthebestvaluesinEurope...”
Gewürztraminer: a balance of sweet and savoury, it can be drunk as an aperitif or to accompany a cheeseboard, foie gras or certain desserts.
Pinot gris: has a pleasantly fresh acidity and mineral notes. It goes well with poultry and fish.
La Cristallerie
Chardonnay: a relatively recent addition to vineyards.Luxembourg’s
back at this summer’s events at the Club: Christel Bony, president of SexTech for Good, and Torge Schwandt, founder of noted, discussed the topics of innovation and sextech during a talk. Hard skills as well as soft skills can be perfected or relearned throughout life: 10 speakers gave their best practices in upskilling in front of more than 300 people. We thank Cap Langues, Luxembourg For Finance and SD Worx for their support.
Finally, the last summer edition of Delano Live saw four leading expatriates compete for the title of “Luxembourg Guru of the Year”. A moment rich in networking as well as in fun supported by ING Luxembourg and Foyer
Group.1Cindy Arces (Unalome Legal) 2 Stéphane Di Carlo (EGB Interior Design) 3 Anne Oberlé (University of Luxembourg Competence Center) 4 Pierre Van Wambeke (Seezam) 5 Fleur Thomas (British Embassy) 6 John Parkhouse (PwC) 7 Israel Ramos (Syniverse) 8 Verónica Barros (BNP Paribas) 2 1
The number of annual training hours for your employees to develop their hard and soft skills: an additional benefit for you and useful extras for your
Ines Baer
Your events
The number of opportunities to network and learn, split into 120 shows, talks, social events and 130 advanced trainings, workshops and webinars.
teams.
Her Excellency, the Ambassador of the United Kingdom, Fleur Thomas welcomed this year more than 200 CEO members of the Club in her garden for a sunny garden party. We thank again Rcarré, without whom this event would not have been possible.
Business
“We learn that the skills that you as employer are looking for the most are the ability to adapt to change, teamwork communication”and
HOW TO ATTEND PAPERJAM+ DELANO CLUB EVENTS ? You’re already a member Please check the Club section on our website paperjam.lu. Select, among all the digital and on-site events listed, the ones you would be interested in, fill in the registration form at the bottom page and register. You’re not a member yet Please email the Paperjam+Delano Club via club@paperjam.lu and an account manager will be in touch to introduce you to all the perks offered by the largest business club in Luxembourg.
250
1,300
19,000
ClubthetoWelcome
The number of company members of the largest business club in Luxembourg.
46OCTOBER2022
In numbers
EVENTSHOURSCOMPANIESMEMBERS ClubFlashback
300
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50OCTOBER2022 Pick’n’mix
Summer and fall. During the former, visitors can take part in different wine events and meet locals. In fall, the grape harvest takes place, which is always a highlight.
Thanks to the Summer in the City festival, the city comes to life during the summer. Funfairs, open-air concerts and many other free activities await visitors all summer long.
Four regional tourist office representatives tell us what brings travellers to their communes or regions.
Tourists usually visit Belval, a place where the past meets the future and where this year the Möllerei and the Massenoire will host major exhibitions.Esch2022
HEAD OF TOURISM AT ESCH2022
Thierry Kruchten
What makes people come back?
MANAGER OF VIANDEN’S TOURIST OFFICE
The medieval charm, the fantastic nature, the hospitality andtheThegastronomy.pathbehindtheoldwallofthefortress,cloisterandchurches.
ShutterstockWolff,GuyEsch2022,Olszewski,EdouardSARL,ForesomePhotos
How to best stay informed of whichprogrammeEsch2022’sandits2,000events,canbefoundonourwebsite.
Itondependswhatonewantstoexperience.
The
DIRECTOR OF THE LUXEMBOURG CITY TOURIST OFFICE
The Moselle overwhelminglandscapesregion’saresothatsometimesguestsmissoutontheculture.Throughouttheyeartherearealotofinterestingexhibitionsandliveacts.Whenvisitingourregion,peopleusuallycometovisitourwineriesandtodiscovertrails,eitherbybikeoronfoot,throughthevineyards,alongtheMoselleriver.
Nathalie Neiers
What question do you get the most from tourists?
vibes and multicultural flair make visitors feel at home right away. A truly authentic visitor mustLuxembourg’sexperience!Exploringthecasemates,fascinatingundergroundworld,isawhenvisitingthecity.
Tom Bellion
Steve Warnier
The south of Luxembourg is a very lively and constantly evolving region, and those visiting it seem very passionate about its unique identity.
“Why do you speak so many languages in the country?”
Luxembourg’s tourism allure
beauty of the landscapes and views they get and
“What is your favourite hiking trail?”
The castle, the chairlift, the Victor Hugo Museum but also the many hiking trails around Vianden.
What do people miss out on when visiting your commune or region?
Since the Grand Ducal Palace is only open over the summer, people who visit the capital during the colder months miss out on this exclusive offer.
What do people come to see? What time of the year is best for a visit?
“How languagesmanydoyouspeak?”Thecity’sgood
warm summer days call for a discovery of hiking trails and cycling paths while the cultural institutions are open all year round.
MANAGER OF THE MOSELLE REGION’S TOURISM OFFICE
It is worthwhile to get immersed in the region, and not just the usual places. The south of Luxembourg is very diverse and can surprise with culture, nature and gastronomy.
From early March until the end of October.
