Lhoft and SNT launch AI-driven research to support sustainable finance compliance in Luxembourg

Lhoft and SNT Partner to Develop AI Tools for Sustainable Finance

Luxembourg's financial sector is stepping up efforts to meet rising EU sustainability requirements through a new AI-driven research initiative. The Luxembourg House of Financial Technology (Lhoft) and the University of Luxembourg’s Interdisciplinary Centre for Security, Reliability and Trust (SNT) have joined forces to create artificial intelligence applications focused on ESG data processing, regulatory compliance, and cost of capital modelling.

Launched on 2 July 2025, this project addresses growing demands on financial institutions to integrate environmental, social, and governance (ESG) metrics into their investment strategies. With increasing regulatory pressure, the collaboration aims to deliver practical tools that improve data quality and streamline compliance processes.

Meeting Regulatory Demands with AI

Financial institutions in Luxembourg are adapting to a complex set of EU regulations, including the Sustainable Finance Disclosure Regulation (SFDR), Principal Adverse Impact (PAI) indicators, and the European Sustainability Reporting Standards (ESRS). The project focuses on helping these institutions comply efficiently while enhancing ESG data usability for investment decisions.

The research targets four key areas:

• ESG data acquisition: Using natural language processing to extract sustainability insights from unstructured sources.
• Automated regulatory reporting: Aligning AI solutions with SFDR RTS, PAI, and ESRS standards for streamlined compliance.
• Predictive ESG analytics: Applying advanced models to forecast how ESG practices influence financial outcomes.
• Causal AI and simulation: Testing the impact of ESG compliance on the cost of capital across different economic scenarios.

Academic and Industry Collaboration

The project is led by Professor Radu State from the University of Luxembourg and guided by Oriane Kesmann, research manager at the Lhoft. Support comes from the Luxembourg Sustainable Finance Initiative (LSFI) and the Luxembourg Stock Exchange (LuxSE), ensuring the research stays aligned with industry needs.

Professor State highlights the interdisciplinary approach, combining finance, computer science, and sustainability expertise to create solutions that can transition from research to practical application. Nicoletta Centofanti, CEO of LSFI, emphasizes that AI-driven fintech tools will be essential in addressing data challenges and regulatory alignment for financial players.

Nasir Zubairi, CEO of the Lhoft Foundation, states the collaboration aims to provide scalable, actionable tools that help financial institutions meet ESG obligations effectively. This initiative reinforces Luxembourg’s position as a hub for sustainable finance innovation.

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