Sustainable Finance in Europe and Luxembourg study 2025: navigating recalibration
This study Sustainable Finance in Europe and Luxembourg 2025 – Navigating Recalibration provides a comprehensive overview of sustainable finance across global, European, and Luxembourg markets, covering both public and private funds. It highlights key developments, market trends, and the impact of recent regulatory recalibrations since 2020. Published by the Luxembourg Sustainable Finance Initiative (LSFI) and ALFI, in collaboration with PwC Luxembourg, the report underscores Luxembourg’s strong position as a leading international hub for sustainable investment.
Despite recent geopolitical and economic challenges, sustainable finance has become a core component of financial decision-making, driven by growing awareness of climate, environmental, and social risks. The study emphasizes the increasing importance of directing capital toward sustainable and transition activities to support long-term resilience and value creation.
It also stresses the need for robust data, transparent reporting, and effective measurement of real-world impact to maintain trust and credibility. Overall, the report aims to foster dialogue among stakeholders committed to advancing sustainable finance.
What you will find on this page:
Research overview
In this section, we present some interesting findings, starting with a look at sustainable funds in the global context. We also present the European and Luxembourg sustainable funds landscapes.
For the study, funds of funds are excluded to avoid double counting. Money market funds are also excluded from public market figures due to their limited sustainability integration capacity.
European and Luxembourg figures are scoped to UCITS and their non-EU equivalents for public markets, and to private equity, private debt, infrastructure, and real estate funds for private markets. As a result of the above, the totals presented may not reflect the full market size or align with other sources.
Conventional vs. Sustainable funds trajectory globally (EUR tn)
Conventional vs. Sustainable funds trajectory in Europe (EUR tn)
At a global level, sustainable public market funds reached EUR 3.1tn in AuM at the end of 2025, representing 6.0% of total public market funds AuM. Their AuM have grown steadily from EUR 1.7tn in 2020, reflecting a CAGR of 12.5%.
In Europe, sustainable public market funds accounted for EUR 2.6tn out of a total EUR 14.0tn (excluding money market funds), representing 18.8% of AuM.
Conventional vs. Sustainable funds trajectory in Luxembourg (EUR tn)
As of the end of 2025, Luxembourg-domiciled sustainable public market funds held EUR 815.4bn in AuM, compared to EUR 3,495.4bn for conventional funds. Their AuM grew at a CAGR of 9.1% between 2020 and 2025, with their total number of funds reaching 2,327. Luxembourg remains the leading domicile for European sustainable public market funds in terms of AuM, representing 31.0% of the total sustainable public market funds AuM in Europe.
Sustainable Finance Disclosure Regulation (SFDR)
In terms of SFDR disclosures:
- 49.7% of total European public market funds AuM are disclosed under Article 8 or 9 of the SFDR, representing nearly EUR 7.0tn at the end of 2025.
- 71.5% of total AuM of public market funds domiciled in Luxembourg are disclosed under Articles 8 and 9.
Sustainable public market funds in Luxembourg
AuM of Luxembourg-domiciled public market funds, conventional vs. sustainable split (EUR bn)
In Luxembourg, conventional funds held EUR 3,495.4bn at the end of 2025 – more than three quarters of total public market funds AuM in Luxembourg – while sustainable public market funds held EUR 815.4bn.
AuM of Luxembourg-domiciled sustainable public market funds, split by asset class (EUR bn)
Luxembourg-domiciled sustainable public market funds grew at a CAGR of 9.1% between 2020 and 2025, rising from EUR 527.5bn to EUR 815.4bn. Equity remains the largest asset class among these funds, with EUR 442.7bn in AuM as of end-2025, while fixed income continues to expand, rising from EUR 255.6bn in 2024 to EUR 285.0bn in 2025.
Luxembourg sustainable private market funds
AuM of Luxembourg-domiciled private market funds, split by sustainable vs. conventional (2024)
In 2024, sustainable private market funds accounted for 40.1% of the total private market AuM domiciled in Luxembourg, amounting to EUR 855.6 billion. Sustainable private market funds in the country have navigated on a strong growth trajectory, with AuM increasing from EUR 190.2bn in 2020 to EUR 855.6bn by the end of 2024.
AuM of Luxembourg-domiciled sustainable private market funds, split by asset class (EUR bn)
Private equity funds lead among sustainable private market funds domiciled in Luxembourg, reaching EUR 385.1bn in AuM in 2024 and representing 45.0% of the total Luxembourg-domiciled sustainable private funds market. This is followed by infrastructure funds with EUR 258.1bn (30.2% of AuM), while real estate and private debt funds account for a smaller share of this market segment.
While conventional public market funds and conventional private market funds dominate Europe respectively with EUR 11.4tn in AuM and EUR 3.0tn in AuM, sustainable funds are gaining momentum across both markets, reaching EUR 2.6tn (8%) in public markets in 2025 and EUR 1.1tn (27.4%) of private markets AuM in 2024.
As of the end of 2024, the total AuM of sustainable public and private market funds in Luxembourg stood at EUR 1,632.7bn.
Luxembourg remains the leading domicile for European sustainable public market funds, representing 31.0% of total sustainable public market funds AuM in Europe. This corresponds to EUR 815.4bn in AuM at the end of 2025, growing at a CAGR of 9.1% since 2020. Luxembourg also leads sustainable private market funds in Europe, with EUR 855.6bn in AuM of the total of EUR 1.1tn, representing 77.0% of total sustainable private market fund AuM in Europe at end-2024.
Methodology
Funds of funds are excluded from the analysis in order to avoid double counting. Moreover, when referring to public market figures, money market funds are also excluded, given that their capacity for material sustainability integration is restricted by their short-term, high-liquidity nature.
Regarding the European and Luxembourg figures for public market funds, the analysis takes into account UCITS (for EU jurisdictions) and their equivalent (for non-EU jurisdictions). As for European and Luxembourg data on private market funds, the figures include all private market funds that invest in private equity, private debt, infrastructure and real estate.
As a result, the total figures presented for these markets might not reflect their full size or match other sources, given that certain types of funds are excluded from the analysis.
Over the past five years, the global sustainable finance landscape has evolved from rapid growth and regulatory development toward greater market maturity and clarity. AuM in sustainable public funds grew from EUR 1.7tn in 2020 to EUR 3.1tn in 2025, while private market funds expanded even faster, reaching EUR 1,366bn in 2024.
Europe continues to play a leading role, driven by strong regulatory frameworks and the urgency of climate and sustainability challenges. Despite potential regulatory adjustments, such as the European Commission’s Omnibus package, the core drivers of sustainable finance remain firmly in place, with further opportunities emerging through initiatives like SFDR 2.0.
By 2025, Europe held the largest share of sustainable public market fund AuM globally, with steady growth across both public and private markets. Luxembourg has been central to this expansion, establishing itself as Europe’s leading hub for sustainable funds.
In 2025, Luxembourg accounted for a significant share of global sustainable public fund assets, while its private market segment saw particularly strong growth, driven largely by ESG integration and energy transition strategies.
Overall, sustainable finance continues to strengthen despite geopolitical and market challenges, becoming increasingly embedded in financial decision-making. Luxembourg remains at the forefront of this transformation but must continue to innovate and adapt to maintain its leadership in a rapidly evolving global landscape.