Funds Struggling to Prove ESG Progress Miss Out on Tax Break (1)

In the world’s biggest hub for ESG asset managers, firms have been unable to take advantage of a tax break intended to reward their efforts to do more sustainable investing.

Luxembourg offers tax relief to retail funds based on how much of their portfolio adheres to Europe’s green taxonomy. According to analysts at Goldman Sachs Group Inc., it’s the first example of a direct financial incentive for investors to follow the EU’s sustainable investing rulebook and, if done right, has the potential to steer more cash into ESG funds.

The problem is there’s not yet enough reliable environmental, social ...