Luxembourg: A European Gateway for Sustainable and Islamic Finance
In a global environment marked by geopolitical uncertainty, macroeconomic transformation and rising investor expectations, financial centres that offer stability, international connectivity, cross-border expertise and regulatory certainty have become increasingly attractive. Luxembourg has long occupied such a position. As one of the world’s leading international financial centres, it has built a reputation for connecting investors and issuers across borders while providing a sophisticated ecosystem for allowing global capital to flow seamlessly.
This international outlook is particularly relevant at a time when economies across the globe pursue diversification strategies. In the Middle East, ambitious programmes such as Saudi Arabia's Green Financing Framework and Vision 2030 and the United Arab Emirates' Green Agenda 2030 reflect a clear direction of travel and a strong dynamic that is reshaping regional financial markets and driving investment opportunities, despite the recent turbulences in the region. Sustainability considerations are also becoming increasingly embedded in investment decisions, reflecting both climate-related risk management and the growth opportunities associated with the transition to a more sustainable economy.
Luxembourg’s Commitment to Sustainable Finance
In recent years, sustainable finance has moved from a niche segment of the financial industry to a core component of global capital markets. Governments, financial institutions, corporates and investors are increasingly seeking financing and investment solutions that support long-term economic resilience while contributing to environmental and social objectives.
Luxembourg has emerged as a global leader in this field. The country has developed a comprehensive sustainable finance ecosystem encompassing investment funds, financial institutions, service providers and capital markets infrastructure. Its expertise spans a broad range of sustainable financing solutions and reflects a long-standing commitment to mobilising private capital in support of global sustainability objectives.
A key milestone came in 2016 when the Luxembourg Stock Exchange (LuxSE) launched the Luxembourg Green Exchange (LGX), the world's first platform dedicated exclusively to sustainable securities. Today, LGX encompasses more than 2,500 sustainable bonds from 340 issuers across 60 countries, raising EUR 1.3 trillion for sustainable investment projects worldwide, and hosted 41% of all newly issued international sustainable bonds in 2025, reinforcing its position as global market leader.
Bridging Sustainable Finance and Islamic Finance
The growing interest in Islamic finance investment products has highlighted its natural alignment with sustainable finance. The two investment models share core principles, notably the avoidance of harm and a focus on ethical, long-term oriented financial practices. As global demand for sustainable investment solutions continues to rise, Islamic finance is increasingly being recognised as a complementary framework capable of supporting broader sustainability objectives. The result is a growing market for products that combine environmental, social and governance (ESG) considerations with Shariah-compliant financial structures.
According to Fitch Ratings in January 2026, global outstanding ESG sukuk was on track to surpass USD 70 billion as early as the end of this year. ESG sukuk issuance increased by more than 60% in 2025, reaching USD 18.5 billion.
Notably, the growing share of sustainable financial instruments in Shariah-compliant form, such as green or social sukuks, have the potential to stimulate the growth of a more responsible global financial system by leveraging the common ground between the two formats. This natural convergence is broadening opportunities for issuers and investors alike and, more subtly, closing the gap between fundamentals.
Decades of Islamic Finance Expertise
Luxembourg is uniquely positioned to support this development. The country has a long-standing commitment to Islamic finance. In 1978, Luxembourg became the first western nation to host an Islamic finance institution, and, in 2014, it became the first sovereign issuer of a euro-denominated sukuk. In terms of capital markets infrastructure, LuxSE became the first European exchange to list a sukuk in 2002, helping establish a benchmark for Islamic finance within European capital markets.
Luxembourg's open and pragmatic regulatory environment, combined with extensive international expertise, has enabled the financial centre to build strong relationships across the global Islamic finance ecosystem. Its established regulatory framework and the CSSF’s experience in supervising Islamic finance structures provide the flexibility and legal certainty needed to accommodate Shariah-compliant transactions within the existing legal and supervisory framework. Today, Luxembourg continues to support the international sukuk market by providing issuers with efficient access to a global investor base and a well-established capital markets infrastructure.
To illustrate this growing interest: Luxembourg-domiciled sukuk issuance went from zero in the 2000s to USD 37.2 billion in the 2010s to USD 93.9 billion in the 2020s (up to April 2025), and its share of Eurosukuk domiciliation rose from 23% in 2015 to over 28% in 2024, according to PwC's December 2025 brochure: Luxembourg: A leading hub for international Sukuk.
Gateway to the EU and Beyond
Today, Luxembourg is widely recognised as the world's leading centre for the listing of international debt securities and sustainable debt instruments, it and is among the most advanced jurisdictions providing a global platform for Islamic finance to flourish. This combination of expertise in international capital markets, sustainable finance and Islamic finance places the country in a distinctive position as demand for these structures continue to converge. By providing visibility, transparency and access to international investors, Luxembourg helps facilitate the growth of Shariah-compliant financial products while supporting the broader transition toward more sustainable financial systems.
At LuxSE, issuers can choose to have their debt securities listed and admitted to trading on different markets and segments. Non-European issuers usually access international investors through the Euro MTF, an innovative and highly regarded exchange-regulated market that is well suited to sukuk issuances and offers exemptions and streamlined procedures for certain types of issuances. The Euro MTF strikes the right balance between credibility, investor protection and ease of listing. Moreover, sovereign or state-guaranteed sukuk issuers as well as issuers of sukuk listed on a number of recognised exchanges, including the Abu Dhabi Exchange (ADX), benefit from additional alleviations, optimising efficiency and go to market timing.
On the Euro MTF, sukuk are treated in the same way as conventional bonds, with no requirement to disclose the underlying assets unless the instrument is structured as an asset-backed security. Prospectus approval exemptions are available for sovereign-issued or sovereign-guaranteed sukuk, alongside the FastLane route, while the EM3S professional segment accommodates deals offered exclusively to professional investors. Moreover, earlier this year, LuxSE has published a comprehensive FAQ providing assistance and regulatory clarity to issuers on the process of listing sukuk on the Euro MTF.
Once listed on the EuroMTF, sustainable sukuk that meet the relevant eligibility criteria may also be displayed on the Luxembourg Green Exchange, further enhancing their visibility among international sustainable investors at no additional cost.
As sustainable and ethical investing continue to gain momentum worldwide, the relationship between Islamic finance and sustainable finance is likely to deepen further. For issuers seeking access to European and international investors, and for investors looking for solutions that combine financial performance with responsible investment principles, Luxembourg offers a transparent and established gateway to international capital markets, even in times of global uncertainty.
This blog post has been adapted from an article first published in IFN Volume 23 Issue 27 dated 8 July 2026.
