Many things have changed in recent times in the human resources sector, with both employers and employees having to adapt to a new way of working, resulting in a new standard beginning to take shape and notable trends emerging.

Thus, the Covid has changed attitudes toward building a career. People seem less interested in finding a paycheck commensurate with their experience, and more keen on flexibility as they search for meaning and purpose in their work lives. The result is a “war for talent”. 

Luxembourg has historically been an ideal location to find a job in financial services. The country has built a financial industry that is uniquely specialised in cross-border activities and has rapidly expanded along the value chain. It attracts individuals looking to work in most sectors of finance: from fund servicing and accounting to insurance, banking, or private equity deal making. The country ranks first worldwide for attracting talent (INSEAD 2021), with the non-Luxembourgers population representing 47,2 % of the total population (STATEC 2021).

However, the job market in Luxembourg is currently undergoing many shocks. While the unemployment rate has been steadily decreasing in recent months, companies are finding it increasingly difficult to recruit the right profiles. 

In this context, a growing trend is observed in the arrival of Spanish professionals to join the Luxembourg labor market, and more specifically in the financial sector. Although there are no concrete figures on the number of Spanish people who have recently joined the Luxembourg financial sector, according to STATEC data, the Spanish population resident in Luxembourg has increased by more than 35% in the last five years (period 2017 – 2022). Spanish talent is highly recognized abroad, and the professional development opportunities offered by Luxembourg in this sector attract qualified profiles looking for international experience in one of the most important financial centers in Europe.

What are the trends affecting the human resources sector in Luxembourg? What does the Luxembourg market offer to attract and keep international talent? What type of profiles and what skills are required to develop a career in the financial sector? What initiatives are being taken by companies to keep talent? What legislative changes are affecting the sector? In this dossier we try to answer these and other questions, thanks to the collaboration of professionals in the field of human resources.

Not very widespread in Luxembourg these last years, the practice of telework has intensified massively in 2020 in the Covid context. In this field, legislation could soon evolve to better adapt to the evolution of current work modes. On a talent acquisition and retention point of view, it is a question of capability for Luxembourgish employers to attract talents, and to guarantee worklife balance for employees . This is more than ever a topical issue, since the Covid-19 legal and fiscal exceptions will end by June, 30th.

In Luxembourg, almost all employees have experienced telework at least once. If for the majority of us, this practice consists in working at home (home working), there are other less known forms. “For example, there is telecenter working, which means working outside the company’s normal premises, in a space rented by the company or by another organization”, explains Joël de Marneffe, Head of Tax & Legal and Legal Expert at SD Worx. In addition, the employee can go to a client’s premises for an appointment and continue to work there, rather than returning home or to the company (mobile teleworking).

A practice based on dialogue

Since March 2020, telework has exploded. For employers who want to make this practice permanent in their company, it is now a question of deciding whether telework at home is implemented on a regular or occasional basis. 

Telework should remain a voluntary practice, i.e. by mutual agreement between the employer and the employee. “I think the best thing is to inform the employees well and to be well informed yourself before implementing such a policy”, explains Joël de Marneffe, Head of tax & legal and legal expert, SD Worx.

In this context, managers have the opportunity to set up a framework within the company that guarantees trust towards employees and maintains links with them, while ensuring that functions that are not predisposed to telework are adapted as much as possible

Adopt more flexible and favorable regulations

In this context, the old and relatively strict legal framework should soon evolve to apply to the current situation and allow people to work more from home. Another constraint for managers concerns cross-border employees. Several obstacles to teleworking exist for them: social security affiliation but also tax tolerance days. “In order to make telework sustainable, you have to ask yourself what kind of regulation to implement, if it is not necessary to impose a ceiling on frontier workers (social ceiling of 25%) and make sure to inform them that tax tolerances exist in terms of taxation but that it is possible and sometimes interesting to go beyond them”.

The Luxembourg and cross-border legal framework

Social security:

Luxembourg and its three neighbouring countries, namely Germany, France and Belgium, have agreed to maintain the exceptional provision of not taking into account the days of teleworking linked to the COVID-19 crisis for the determination of the social security legislation applicable to frontier workers until 30 June 2022.

In concrete terms, this means that a frontier worker who carries out his work from home will continue to be affiliated to the Luxembourg social security system until that date, even if the 25% threshold provided for in the European legislation for the workers concerned is exceeded.

But as from 1 July 2022, and at the time of writing, this tolerance should no longer exist and teleworking days on the State of residence will be included in determining the 25% threshold.

However, it seems that things are moving very fast on this issue and the Administrative Commission for the Coordination of Social Security Systems, composed of a government representative from each Member State, met on 17 June to propose a transitional period from 1 July to 31 December 2022 during which :

there is no need to apply for A1 for cross-border telework and 

telework days are not taken into account in the calculation of the 25%.

Nevertheless, this information was not officially confirmed by the social security institutions of the employees’ countries of residence at the day of writing.

Taxation: 

The days worked at home only because of the measures taken to combat the Covid-19 pandemic are to be excluded from the calculation of the tolerance days provided for in the tax agreements until 30 June 2022.

Due to the COVID-19 pandemic and the restrictions to movement and contact with other people, the financial market rapidly had to adapt its method of working. During the pandemic, the CSSF allowed for a degree of flexibility and leniency. Although the world is still recovering from the effects of the pandemic most financial institutions have adopted telework as the new normal. Staff have become accustomed to the flexibility and many CEOs were positively surprised at how smoothly the somewhat forced transition was.  

Noticing this trend in the market, the Commission de Surveillance du Secteur Financier (the “CSSF”) took the initiative and decided to address potential abuse and other shortcomings or deficiencies of remote working and published a Circular with rules applying across the Luxembourg financial sector. The new rules will apply as of 1 July 2022. 

The Circular provides the framework of governance and security requirements for supervised entities regarding the implementation and use of work processes based on telework solutions. It is addressed to all entities supervised by the CSSF, including their branches in Luxembourg or abroad. The aim of these requirements is to help the supervised entities to adapt to the new work trends while maintaining a prudent management and adequate governance and preserving the information security, which is crucial for the sector and its clients.

Concerned financial institutions who wish to resort to remote working will therefore need to ensure that they have a dedicated policy in place by the end of June. No prior approval by the CSSF is required in order to implement, maintain or extend telework solutions for staff in a supervised entity. 

What is telework?

Telework is defined in the Circular as “a form of organising and/or carrying out work, using information and communication technologies within the framework of an employment contract authorising work, which would ordinarily be carried out on the employer’s premises, to be performed outside the premises of the employer.” 

As key points included in the definition of this concept, the CSSF clarifies that telework can be performed either on a regular or on an occasional basis and must be voluntary, always within the number of working hours settled between the supervised entity and the employee and at a predetermined place that is different from the employer’s premises. The employee will therefore need to indicate to their employer the precise address from which they intend to make use of this flexibility. 

Furthermore, it is explained in the Circular that other forms of remote working such as, for example, during a business trip or when attending conferences or professional training, are not within scope.

Central administration

The Circular stresses the fact that the implementation of the telework regime should not jeopardise the regular operational functioning of a supervised entity, which should maintain, at all times, a robust central administration in Luxembourg and to maintain sufficient substance on its premises. This means ensuring the maintenance of the “decision making centre”, which must include sufficient staff with the necessary skills, knowledge and expertise as well as the technical and administrative infrastructure, to exercise the function or activity. Staff members are also required to be able to return to the supervised entity’s premises on short notice in case of need. This is an an important factor to be taken into account when the employee chooses his remote working location. More strict rules apply to authorised management and employees with key functions. 

Internal organisation and internal control framework

The telework policy is the responsibility of the Board of Directors which is charged with paying particular attention to risk management and identifying the inherent risks, such as operational risks, legal, Information and Communication Technology (ICT), compliance and reputational risks. The Board will also need to develop mitigating controls and measures to keep the residual risks within the acceptable limits, according to the entities’ risk appetite. 

Ongoing monitoring of the use of telework and compliance with the internal policy will become an additional point for the internal audit. 

Compliance with other legal provisions

The CSSF clarifies that it is expected that supervised entities do not attempt to circumvent provisions of the Luxembourg Labour Code and take into account the relevant legal provisions, especially laws and regulations relating to tax (domestic, foreign and international), companies, professional secrecy, data protection and social security while implementing the telework policy. The local legislation will also need to be taken into account for any branches located outside the Grand Duchy. 

New opportunities: how will the Circular impact employees and employers?

The flexibility that the Circular will continue to allow for shows the commitment of the CSSF and the Luxembourg financial sector to create a more efficient and attractive work ecosystem in Luxembourg, which is aligned with the current expectations of workers in the technological age we are living.

Many financial institutions have already put in place policies around remote working and will need to verify that they meet the standards of the CSSF. For the business with a global footprint it will be important to verify the local rules where staff may be employed by branches. Employees of supervised entities will be able to benefit from the flexibility of working from home and the initiative can be considered a starting point of the adaptation of work policies, to a more a more remote working scenario, which is likely to swiftly evolve in the coming years.

It is a fact that during the last year the professional market is more active than ever, and as a direct consequence, companies must reinvent themselves to find, attract and keep the best talent.

In an international market that is becoming not only extremely active but also demanding, it is no longer enough to be the number one in the sector or to have a well-recognized brand. You must reinvent yourself and adapt to the new synergies of the labor market.

Like many other companies, Lombard International Assurance has had to react quickly, identifying trends in both employee and candidate expectations to attract the best talent.

The Covid-19 pandemic has undoubtedly set a precedent in the way we build our expectations, both personally and professionally. Thus, Lombard International Assurance has decided to move in line with this new context.

Having heard our employees, as well as keeping an eye on what is happening in the external market, we are working on the implementation of a Human Resources strategy that keeps the focus on three fundamental pillars for us: recruitment, training and career development; and defining the career path of our employees.

When we talk about recruitment, there are several factors that make this process challenging. However, it is these same factors that make our job offer so interesting to candidates.

Wealth Assurance is competing for talent in the same space as many other financial institutions, and we often face the challenge of developing a business activity that is not as familiar to candidates as, for example, other areas such as banking, consulting, or fund management. 

In any case, this is a well-established and fast-growing segment of the financial services industry, which is very attractive as it is identified as a talent accelerator for ambitious minds that like to be challenged in an enriching and innovative work environment, as well as having the opportunity to learn new and valuable skills while working with a great team of professionals.

Lombard International Assurance operates in an international context that involves a great deal of networking and multicultural coverage. Always aiming to provide an excellent service to our clients, beyond the technical knowledge and professional background of our employees, we are often looking for new colleagues with specific language skills to connect and work with our clients around the world: Spain, Latin America, Portugal, Italy, France, Belgium, Sweden, Finland, Norway, Germany, Switzerland, Asia…

Accordingly, we are establishing partnerships with the main Universities and Business Schools in Spain, with the aim of building a bilateral cooperation that helps their students to find international opportunities for the development of their university internships at the beginning of their careers, as well as connecting with their Alumni to help them in the search for the first job opportunities that best fit their profiles once they graduate. 

Among the more than forty different nationalities that make up Lombard International Group, we count on our Spanish colleagues to develop specific business areas, such as Wealth Planning, Sales or Accounting Management.

Training and career development are fundamental basics to ensure that our employees have access to all the tools that will guarantee their success in a very dynamic context that requires excellent interpersonal communication skills, ambition, and resilience.  

During 2021, our employees dedicated more than 13,000 hours to the development of training on different topics: from learning a new foreign language to team management and other soft skills, as well as other technical and professional skills that will boost their development and ambition to continue evolving to the next step in their professional careers.

As far as 2022 is concerned, we are currently working on the more than 5,000 hours of training that have been requested, which translate into 625 days of training that are specific and customized for each team/employee, depending on their specific activity within the company, area of business and individual preferences.

Beyond these customized trainings, our employees have access to different platforms, such as LinkedIn Learning, where they can find a catalog of courses that they can benefit from according to their professional preferences or even personal interests.

Finally, in connection with the professional development of our colleagues, we make every effort to offer them the opportunity to evolve as much as possible within the company, through a career strategy that allows them to consider natural progressions within their own team and department, but also by enhancing opportunities for further growth in other business areas of the company thanks to our internal mobility program. 

“Regulations, Wave Net Zero, Clean Mobility, Privacy, Technological Progress, Big Data AI, Platform Economy, Cloud and E-Commerce, Sustainability, Climate Change, Sustainable Resources, ESG, Social Changes, Diversity, Inclusion, Citizens, Long-Term Trends …etc.”

 And among all these words, a keyword “transparency”; and a key element “regulation”. 

I do not intend to go into too much regulatory detail, a lot has already been and continues to be written about ESG, with high-quality technical information, but I do try to ask some questions-answers that help us highlight the impact of what the European Green Deal, presented by the European Commission, represent for the financial sector, that is, the impact of implementing a growth strategy for Europe with the aim of making Europe the first climate-neutral continent in 2050. This means, among other things, that investments must be redirected towards long-term investments towards more sustainable technologies and businesses. 

Even if 2050 seems far away to us, the EU agreements on the first deadlines to be met are very close, this includes the deadlines to be met in the EU Sustainable Finance Plan, an ambitious plan with a considerable impact on the financial sector, so based on common definitions (taxonomy) of what sustainable activities are, the plan aims to anchor beliefs and actions in both, the financial sector, and among investors.

So, let’s go to some of the questions:

What are the general regulatory requirements for sustainable finance?

Regarding MiFID II ESG and IDD

• Integration of Sustainability Risks in Policies and procedures.
• Consideration of sustainability preferences: selection process, investment advice, determination of conflicts of interest.
• Inclusion of sustainability factors in the description of the selection process of financial products offered in the investment advice process.
• Integration of sustainability factors in the product’s governance obligation.
• Identification of the potential target market for which the financial instruments are compatible based on the clients’ sustainability preferences.
• Consistency with the target market.
• Transparency of the sustainability factors of financial instruments.

Regarding SFDR (Sustainable Finance Disclosures Regulation) 

• Product classification: Article 6, Article 8, Article 9: Sustainability Risk Policy, PASI Declaration (Comply or Explain) Integration of Sustainability Risks in the Remuneration Policy

Regarding the EU taxonomy

• Product without EU taxonomy alignment, disclosures in pre-contractual and periodic reports:
• For products that invest in investments aligned with the EU taxonomy, as of January 1, 2022:
  • Information on the environmental objectives and description of how and to what extent the investments qualify as EU Taxonomy aligned.
  • Breakdown of the proportion of EU Taxonomy aligned activities by enabling and transitional activities
  • Application of statement (Art. 6), “The do no significant harm” principle applies only to those investments underlying the financial product that take into account the EU criteria for environmetally sustainable economic activities. 
• For products which invest into EU Taxonomy aligned investments, as of 1st January, 2023:
  • Specific requirements embedded into the RTS templates. 

What does sustainability preferences mean?

Taxonomy Alignment, a financial instrument for which the client or potential client determines that a minimum proportion should be invested in environmentally sustainable investments (minimum taxonomy compliance).

What does the EU sustainable financing plan include and the impact on Asset Managers?

Investment firms should, consider the sustainability risks associated with their investments and disclose how they are integrated into investment decisions that have at least some environmental or social characteristics.

The plan includes:

• Common definitions (taxonomy regulation).
• Transparency.
• Consideration of Sustainability risk.
• Strengthen the participation of investors.
• Standards and benchmarks.

Who are the main stakeholders, who have been driving the growth of ESG investing?

• Companies, Awareness of ESG-related risk in competitive advantage, Lower cost of capital if ESG-aligned and more purpose-driven. 
• Government, Greater recognition of the need for standardization of definitions/processes, focus on climate commitments, post-COVID focus on social inequalities.
• Managers, increased availability and transparency of ESG data, more customer-centric delivery, more purpose-driven.
• Investors, generational change in values, perceived performance benefits, increased ability to assess authentic ESG integration.
• Community, Increased scrutiny on capitalism, post-COVID paradigm, Growing vocal engagement with business.
• European regulators drive global regulatory pace, regulation engages stakeholders to create collective action. 

What are the challenges facing Asset Managers and Financial Institutions in adapting?

• Take a responsible investment approach.
• Adopt international standards.
• Apply to labels.
• Adapt the governance model.
• Monitor non-financial KPIs.

What is the key to the Asset Manager?

It is key for asset managers to have access to a reliable ESG database, so they can integrate this ESG data, indices, sustainability risks and opportunities, historical portfolio data, issuer-level analysis, and analysis into their existing investment processes.

Integrated ESG indices (broad and thematic markets) designed to align ESG and investment objectives, while ensuring low tracking error vs. comparable “standard” index.

What is one of the main contributions in this whole process of some key players such as the Asset Manager?

The Asset Managers are committed to incorporating ESG factors into their strategy and to implement the UN 2030 agenda for sustainable development. UHNWIs and managers are increasingly involved in achieving by 2025, and It is considered that at least a third of portfolios to be invested in environment. 

For this reason is necessary a critical contribution of the Asset Manager of the information of the data, the transparency of the data and the alignment of the taxonomy to contribute to the success of this strategy.

We will continue reading and learning with these and many other questions, but I hope that at least these brief ones have made us think about the impact that this growth strategy represents, and that it is not only the responsibility of the main stakeholders, as if we were not part of them,  but of all of us as individuals, and of course of all that play a relevant role in the financial sector such as custodians, private bankers, asset managers, insurance companies, who incorporate an ESG policy into their business strategies.

And now yes, last and not least, like last year around this time, I take the opportunity to wish you all a happy summer holidays!

Sources: Quintet, UN, WHO, Knowledge4policy, IPCC, BNEF, CB Insights, Cybersecurity Ventures, Statista, McKinsey EFA, Deloitte. 

The global pandemic accelerated the focus on ESG considerations and according to Bloomberg, ESG assets under management could reach more than a third of the projected USD 140.5 trillion global total by 2025.

This acceleration brings a series of challenges for asset managers, including navigating the raft of new regulation, the shifting nature of societal expectations around the definitions of ESG and the monumental challenge of the net zero transition given the triple energy challenge of security, affordability, and climate change, all brought into stark focus by the war in Ukraine.

Arguably, data quality is one of the biggest challenges but also a critical tool in addressing these challenges given, according to Bloomberg, one in every three dollars invested will be influenced by ESG data in some way.

As this dependency increases, then bluntly, if the data is not right, neither are the outcomes. As a result, we are rightly seeing increased scrutiny of that data, as well as regulation to help drive better data, such as mandating climate-related disclosure by companies, the recent EU consultation on ESG ratings and the introduction of the EU taxonomy to bring the definition of what is green into sharper focus.

Consistent data are vital, but so too is meaningful interpretation and reporting. ESG ratings conspicuously vary in how they construct assessments on company policies, management systems and disclosures. Comparable quantitative data remains limited and the shift in emphasis from ESG risks to the company to the impact of the company means there is both an urgent need to fully understand and assess the available data and to develop more appropriate indicators.

The EU’s SFDR regulation represents a robust move towards imposing disclosure obligations of so-called ‘principal adverse impact indicators’, which aim to focus on impact of the companies held in portfolios.

For us to be truly effective as an industry, it is imperative that we scrutinise and evolve appropriate data and metrics to inform our investment decisions, while communicating clearly and effectively so clients understand the impact of their investments on our future environment and society.

Asset managers play an important role in achieving ambitious objectives for a green transition; they manage large chunks of the capital needed. Their importance is very clearly reflected in the fast-evolving regulatory requirements for implementation of ESG considerations. However, also civil society demands higher ESG standards and expects asset managers to make ESG considerations part of their fiduciary duty.

An equally significant sign of asset managers important role is the last years’ record inflows in green investment products. Asset managers have reacted to the increase in ESG-investing appetite by expanding the market for sustainable finance products. However, they are also expected to overall manage the capital according to the investors’ increased desire for more sustainability. Investment stewardship plays a key role, allowing asset managers to communicate shareholders’ interests and drive change towards a more sustainable business model. 

Therefore, asset managers are crucial intermediaries for society’s desire to reach carbon neutrality and companies’ transition to net zero. This is a responsible role that requires clear guidance from legislators for the industry to play its part. Exclusionary financial products are not the solution because it requires every company’s contribution to reach a genuine transition. We cannot afford to leave companies behind only because of a larger environmental footprint currently. Instead, these companies require reasonable time, but even more importantly capital, to facilitate their transition. It is therefore short-sighted to divest from some companies which are not able to fulfil our growing sustainability interests right away. Investments should be bound to measurable and reliable transition instead. 

Investment stewardship teams can communicate those requirements and subsequently monitor their implementation progress. It is this function that ultimately makes asset managers the capital vehicle of the green transition.