In this live‑streamed episode of the Connector Podcast recorded at the Trends Investment Summit 2023 in Brussels, host Koen Vanderhoydonk interviews Nairi, a representative of LuxFlag, a sustainable‑finance labeling agency based in Luxembourg. Nairi explains that LuxFlag offers two families of labels – Impact Labels for funds with an already defined ESG strategy and Sustainability Transition (ESG) Labels for funds that are still on the path toward sustainable finance. The agency has labeled 341 financial products representing $183 billion in assets under management and operates in 17 countries, with plans to expand further, especially into the Benelux region. LuxFlag’s labels cover a wide range of asset classes, including equity, fixed income, real estate, private equity, insurance products, and discretionary mandates, the latter being a recent addition. All labels are aligned with the EU Sustainable Finance Disclosure Regulation (SFDR) Articles 8 and 9, but LuxFlag claims to add extra transparency and value beyond the regulatory baseline. The labeling process is quarterly and involves internal reviews, quality assurance, a CEO sign‑off, recommendations from eligibility committees, and a final board decision. For asset managers interested in obtaining a label, the first step is to contact LuxFlag’s operations team, complete a detailed ESG questionnaire, and demonstrate portfolio alignment. Nairi discusses the broader sustainable‑finance landscape, noting increasing regulatory pressure, data challenges, and the risk of greenwashing, positioning LuxFlag as a collaborative partner rather than a competitor. She also speculates on the future emergence of more country‑specific or possibly a pan‑European label. The conversation concludes with practical information – the website luxflag.com and various contact points – and highlights LuxFlag’s presence at the summit as an opportunity to meet potential clients and stay abreast of market trends.
Chapters
Welcome to the Connector Podcast, an ongoing conversation connecting fintechs, banks, and regulators worldwide. Join CEO and founder Koen Vanderhoydonk as you learn more about the latest available trends and solutions in the markets.
This episode is proudly sponsored by the Trends Investment Summit 2023, Welcome to another episode of the Connector Podcast, and again streaming live from the Investment Summit here in Brussels Zaventem Airport. And I have another guest with me, Nairi. Where are you from?
Hello, Koen. I'm Nairi. I'm from Luxembourg.
From Luxembourg. And now you represent LuxFlag.
Yes.
What is LuxFlag?
LuxFlag is a sustainable finance labeling agency. We have different types of labels. We have our impact labels and our sustainability transition labels. We currently have 341 labeled financial products and $183 billion assets under management.
Wow, that are nice figures.
Yes.
Well, can you explain a little bit maybe what are the differences between both labels? Because you said you have 2 types of labels. What does that mean?
Yes. So our impact labels are really for clients that already have, you know, their ESG strategy defined. They're really going for that strong kind of impact, whereas our ESG labels are more for clients that are on their sustainability transition label because our goal is really to promote sustainable finance, but also aid our asset managers in their journey, in their sustainability transition journey.
There's a couple of clues, right? Because you say LuxFlag, and you say asset managers, then immediately everyone says Luxembourg. But does that mean you're only in the Luxembourgish market or are you more global?
No. So that's a good question, Koen. So Luxembourg, Luxflag is international actually. We operate right now in 17 different countries and we do aim to extend. So Luxembourg is not the base. Of course we are, our offices are there, but we do operate internationally and we aim to expand for the future. So that's also why we are here to meet new potential clients from the Benelux areas.
Okay, interesting. So your clients are the asset managers? Are we then making the link that it's only the mutual funds that are labeled, or is it different type of instruments?
No. So it's different types. We have different types of asset classes. We have equity, fixed income, real estate, and private equity. And additionally, we have the ESG label that covers both insurance products and discretionary mandates.
Wow. So you also label a full discretionary mandate?
Yes, we do. That was our newest label, actually.
How do I have to compare your label with, for example, the more common Article 8 and Article 9 label?
Yes. So all of our labels are aligned with the SFDR Article 8 and 9 because it's very important to, you know, follow these jurisdictions. But we like to say that LuxFlag goes a step further. It allows clients to showcase their ESG strategy, and it is also a tool for them to showcase their sustainable finance transition. And it really gives that added value and shows the transparency of that fund, of that labeled fund.
And can you maybe make it even more crisper? So, I mean, a fund is labeled by SFDR. You also put a label on top of that. How do I have to visualize that? Is that a number? Is that a figure? Is that an A letter? How does the labeling work?
Yes. So we have quite a thorough process to get the label. We operate on a quarterly basis. And basically what we do is we review the strategy and the criteria used and also the portfolio. It's very important because the portfolio, we check if it is in line with the company strategy, but also if it is in line with the LuxFlag criteria and our own exclusion policy. So talking about the process, we have, first of all, a review internally, and we also have an internal quality assurance. And then our CEO does the final internal review. After this internal review, the funds are presented to the eligibility committees that give their recommendations to the board. And in the end, the final decision goes to the board. So they decide whether or not the label is granted.
And if I, if I was an asset manager and I would like to get started, what would then typically be the next step for me to take?
Yes. So you would get in contact with our operations team and they would send you the questionnaire and you would have to fill this questionnaire out. And it has very detailed questions about your ESG strategy. And then you would have to showcase your portfolio so that we see that it is aligned. So yeah, that would be the first steps for an asset manager.
Okay, makes sense. Now we're talking a lot about sustainability here, and we talk also about indirectly about what is the future in our finance domain. So what would be the future for you guys? How do you look at sustainable finance?
Yeah, so for us, sustainable finance is the future. You know, just how it is going right now, we see it continuing. And for us, I mean, we, we can all see around us that the regulations are increasing. And they're also changing very rapidly. So it's important for asset managers to be able to catch up. And sometimes we notice that they're struggling because there's so much going on.
Mm-hmm.
So we kind of think that players like Luxflag, but so many others around, are there to kind of help these asset managers and guide them through this sustainability transition. And we believe that we want to help the industry meet these challenges for the future. So there's great opportunities that come with sustainable finance, but a lot of challenges.
And yeah, one of them would be data in particular, because it's very difficult to somehow align. What would be the next step for you guys? Because earlier you said we're in 17 countries. Is it world domination?
You never know. But we definitely intend to expand and we want to, you know, follow the market trends. It's very important to see What do our clients need and what do we need to put out there to satisfy these clients and to help push this transition? You know, and there are a lot of other labeling agencies. We don't see them as competitors because we do believe that it's all about collaboration. The more we are and the more we can ensure transparency in the sector, the better it'll be for everyone because we do want to avoid greenwashing.
Do you envisage that different labels would emerge in the near future?
Yeah, I mean, for sure, you never know, but I think it might more happen on a country basis because, you know, there's very different regulations. But at the European level, I do see some kind of more global label emerging. But sometimes I think it's better to have more specific labels because then you avoid having this huge amount of data and so many criteria that it's so hard to follow. You know, this is where I see Luxflag kind of has that added value and that advantage as we are very specific.
And I can imagine being close to a market also means that you're close to those that are investing. So it's also more easy, I guess, to follow up.
Yes, exactly. And it's easy to see what people are needing in the moment and what the market is requiring.
Interesting. Well, you're here today at the Investment Summit. You said you're looking for new clients. Are you also here for some insights or some other reasons? What would be that for this event?
Yes, of course. I mean, 3 of us are here today from our team and, you know, we're We're excited to go see some of the panels and the conferences, but it is also to connect and to see, to talk about Luxflag because unfortunately, you know, some people don't know about us. And I think it's good to get out there and, you know, expand our clientele in Benelux, but also learn about these new trends because these are the type of conference that people talk about the relevant things. So it's very important.
Yeah. And that's one of the main reasons why I'm happy to have you in In our podcast. Maybe one last question. If an asset manager, and there are many of them here today, if they want to get started, you already told us the process, but where do they literally start? Which email address, which website do they have to go?
Yes, so we have our website luxflag.com.
How obvious.
We have all of the information there. They can contact our operations team. We have a marketing team. There's many ways to reach us. So yes, I would say mainly go through our websites. We have everything on there.
Thank you so much for having you in our podcast.
Thank you for having me. It was an honor.
The pleasure was mine. Thank you very much also to the audience. And please stay tuned because more news out of the financial industry will come. Thank you so much.
Thank you.
Thanks for listening to another episode of the Connector Podcast. To connect and keep up to date with all the latest, head over to www.koenvanderhoydonk.com. Jointheconnector.com or hit subscribe via your podcast streaming platform.
