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On 2 December 2022, Luxembourg’s supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF) published an FAQ1 that seeks to clarify certain items under the Sustainable Finance Disclosure Regulation (SFDR)2.
The CSSF is not the first national supervisory authority in the European Union to publish guidance on SFDR. For example, in September 2022, Germany’s BaFin published guidance that it intended would provide further clarity on various questions of SFDR3. At a first glance, having national guidance as well as EU level guidance on an EU-wide regulation could be perceived as further complicating an already fragmented landscape. However, the FAQ explicitly state that they must be read in conjunction with the Q&A, supervisory statements and clarifications issued by the European Commission and the European Supervisory Authorities (ESAs)4. Importantly, the CSSF’s FAQ does not add any new rules nor does it ‘gold-plate’ existing EU level requirements. It seems the CSSF’s focus is on its main findings from its “accelerated examination” and visa stamping procedure which started on 31 October 20225.
In terms of scope, the FAQ apply to any type of alternative investment funds (AIF) and to undertakings for collective investments in transferable securities (UCITS), segregated investment management mandates and non-discretionary investment advisers in connection with their advisory mandates (referred to in SFDR as Financial Products), as well as to authorized and registered alternative investment fund managers (AIFMs) and UCITS management companies and other in scope financial institutions (referred to in SFDR as Financial Market Participants, or FMPs).
The FAQ cover the following broad themes: updates of prospectuses/issuing documents; website disclosures; pre-contractual disclosures; and periodic disclosures.
To highlight some of the key points from the FAQ:
The fact that the CSSF thought it necessary to publish FAQ highlights that the obligations are not simple and are open to interpretation. In addition to the FAQ and previous EU level Guidance and Q&As, the European Commission has stated11 that it intends to publish a set of Q&As on the SFDR early in 2023, and that it plans to publish over 200 FAQs intended to support businesses with reporting obligations under the Taxonomy Regulation12. It remains to be seen whether all these additional pieces of information combined will provide FMPs with desired additional clarity.
For more information, please visit our ESG for Asset Managers hub.
1. The FAQ are available here.
2. Regulation (EU) 2019/2088 on sustainability-related disclosure requirements in the financial services sector, as amended.
3. See our OnPoint “The German Financial Regulator BaFin Clarifies the EU Commission’s Q&As Regarding SFDR” available here.
4. The ESAs comprise the European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority.
5. The CSSF communication is available here. See our OnPoint “CSSF announces Fast Track Approval Process for SFDR Level 2 disclosures” available here.
6. The RTS being Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports, is available here.
7. Luxembourg act of 17 December 2010 on undertakings for collective investment, as amended.
8. Recital 16 of the RTS requires financial market participants to confirm to investors any commitment in terms of excluded investments, in particular as contractually binding elements of the investment strategy, in the information provided on asset allocation and in the information on the sustainability indicator used to measure the effects of such strategies.
9. Per Article 2(17) of SFDR, ‘sustainable investment’ means an investment in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy, or an investment in an economic activity that contributes to a social objective, in particular an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance.
10. The European Commission’s July 2021 Q&A is available here.
11. This statement was made in a speech given by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union, on 5 December 2022. The speech is available here.
12. Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment.