Thomson Reuters Practical Law - Sustainable Finance — EU SFDR Implementation

Members of Dechert´s financial services practice have provided a compare chart showing how sustainability-related disclosures in the financial services sector has been implemented in Luxembourg, France and Germany. Among other things, the Chart considers whether SFDR implementation has seen any gold plating, whether additional local guidance is available and how document filings operate.

View the French, German and Luxembourg entries below. 

France

Source Information

Law stated as at 01 May 2023 

Has the SFDR been implemented?

Yes

Who is the lead regulator for the SFDR?

French Financial Markets Authority (Autorité des Marchés Financiers (AMF)).

Has implementation seen any gold plating or other divergence from EU requirements?

The Financial Markets Authority (Autorité des Marchés Financiers (AMF)) has published its own rules on the communication by alternative investment fund managers (AIFMs) and UCITS managers on non-financial criteria in funds available to retail investors (Position-Recommendation 2020-03 (AMF Doctrine)). The AMF Doctrine is often seen by the industry as a type of gold plating, as it affects foreign UCITS authorised for marketing in France.

See:

• AMF: DOC-2020-03 .
• AMF: Press Release: Sustainable finance and collective management: the AMF publishes a first policy on investor information .
• AMF: Sustainable finance and collective management: the AMF updates its policy on collective investments incorporating non-financial criteria .
  Additionally, Article 29 of the Energy-Climate Act (in force from 10 March 2021) provides further requirements for French-regulated portfolio management companies (DG Trésor: Consultation on the decree concerning article 29 of the Energy-Climate Act (4 February 2021) (in French) and Légifrance: Decree No 2021-663 of May 27, 2021 pursuant to Article L. 533-22-1 of the Monetary and Financial Code ).

Has any local SFDR guidance been published?

For information about how the Financial Markets Authority (Autorité des Marchés Financiers (AMF)) applies the SFDR, see:

• AMF: Overview of the main provisions of the draft RTS currently undergoing consultation related to the Disclosure Regulation.
• Meeting with trade associations (AFG, ASPIM, AMF, and France Invest: Implementation of European texts in sustainable finance, YouTube, 18 November 2022 (in French)).

Does the local regulator have a simplified process for document filings?

French funds open to professional investors (or assimilated only) are typically not subject to the prior approval of the Financial Markets Authority (Autorité des Marchés Financiers (AMF)), although their prospectus or by-laws are filed with the AMF.

However, the legal documents of French retail funds are subject to the AMF's prior approval. French regulation does not provide for a fast-track procedure and self-certification is not applicable.
The duty to comply with the disclosure requirements under the SFDR and the Taxonomy Regulation ((EU) 2020/852) is covered under regular audits.

To avoid a situation where, on 1 January 2023, an excessive number of investor letters were sent for Article 8 and 9 funds that had not actually modified their underlying non-financial strategy, the AMF modified its doctrine applicable to UCITS and AIFs open to retail investors so that no investor letter was required (AMF: AMF modifies its policy to facilitate the implementation by asset management companies of the Delegated Regulation of the SFDR).

Germany

Source Information

Law stated as at 01 May 2023 

Has the SFDR been implemented?

Yes

Who is the lead regulator for the SFDR?

German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)).

Has implementation seen any gold plating or other divergence from EU requirements?

The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)) published guidance on the European Commission's SFDR Q&As in September 2022 (BaFin: EU Disclosure Regulation: BaFin publishes questions and answers (in German)). Although BaFin's guidance seems to diverge from that of the European Commission on questions around taxonomy alignment and legacy funds, in reality, BaFin has filled an interpretative gap.

The German Investment Code and other regulation was amended to reflect disclosure requirements under the SFDR and the Taxonomy Regulation ((EU) 2020/852). Disclosure requirements are covered under regular audits of German alternative investment fund managers (AIFMs) and UCITS management companies.

Has any local SFDR guidance been published?

See:

• Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin): Open sustainable (15 February 2021) (only available in German).
• BaFin: Guidance Notice on Dealing with Sustainability Risks
• BaFin: EU Disclosure Regulation: BaFin publishes questions and answers (in German).
• BaFin leaders also regularly express views on sustainability-related issues.

Does the local regulator have a simplified process for document filings?

The investment terms and conditions of German retail funds are subject to the approval of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). German statutory provisions do not provide for a fast-track procedure or self-certifications. The duty to comply with the disclosure requirements under the SFDR and the Taxonomy Regulation ((EU) 2020/852) is covered under regular audits.

Luxembourg

Source Information

Law stated as at 01 Jun 2023 

Has the SFDR been implemented?

Yes

Who is the lead regulator for the SFDR?

Luxembourg’s Financial Sector Supervisory Authority (Commission de surveillance du secteur financier (CSSF)) is the lead regulator for any financial product covered by the SFDR and offered in Luxembourg except for any insurance-based investment product (IBIP) and certain institutions for occupational retirement provision (IORP), which are supervised by the Commissariat aux Assurances (CAA).

Has implementation seen any gold plating or other divergence from EU requirements?

There is no gold plating of the SFDR in Luxembourg currently and generally Luxembourg as a country and the two authorities competent for its implementation, that is, the CSSF and the CAA are intent on following and implementing guidance that has been issued at the European level without any further national add-ons.

Has any local SFDR guidance been published?

Local SFDR guidance

The Financial Sector Supervisory Authority (Commission de surveillance du secteur financier (CSSF)) published FAQs on 2 December 2022 to address questions that arose in Luxembourg in relation to the implementation of the SFDR Delegated Regulation ((EU) 2022/1288) (CSSF FAQ Sustainable Finance Disclosure Regulation (SFDR) ). The CSSF FAQs cover:

• Questions on the qualifications of amendments to UCITS or alternative investment fund (AIF) documents.
• Website disclosures.
• Article 9 of the SFDR and the need to have sustainable investments in UCITS or AIFs.
• How to use exclusion strategies.
• The timing of the changes required by the SFDR Delegated Regulation for periodic or annual reports of UCITS or AIFs.

The FAQs have since been updated twice on 13 March 2023 and on 5 May 2023 and two more questions have been added:

• Use of ESG and/or sustainability related terminology in fund names.
• Efficient portfolio management (EPM) techniques in the context of funds disclosing under article 9 of the SFDR.

Reduction in subscription tax (taxe d'abbonement) payments

In addition to the local guidance on the implementation of the SFDR, Luxembourg has introduced reductions of the subscription tax (taxe d'abbonement) it typically levies on certain UCITS and AIFs (that is, any AIF that follows a Luxembourg product regulation, such as part II funds, specialised investment funds (SIFs), and reserved alternative investment funds (RAIFs).

These UCITS and AIFs may benefit from a reduction in the subscription tax (taxe d'abbonement) they may need to pay from 0.05% to up to 0.01% (for retail investor classes of UCITS or AIFs being able to be offered to retail investors) to the extent the relevant fund or sub-fund in question invests in assets, which represent activities qualifying as environmentally sustainable economic activities (within the meaning of that term under Article 3 of the Taxonomy Regulation ((EU) 2020/852)). This rule was introduced in 2020 and continues to apply to UCITS and AIFs (being able to be offered to retail investors) in Luxembourg.

Fines

In June 2022, Luxembourg introduced a law that allows the CSSF and the Commissariat aux Assurances (CAA) to fine financial market participants and financial advisers (as defined by the SFDR) active in Luxembourg for any violations of the rules set out in the SFDR or the Taxonomy Regulation. Fines may amount to up to EUR250,000.

Mandatory data collection exercise

Also note that there is a separate (mandatory) data collection exercise for any Luxembourg UCITS or AIF that is disclosing in line with either Article 8 or 9 of the SFDR: https://www.cssf.lu/en/2023/05/extension-of-the-initial-submission-deadline-for-the-sfdr-data-collection-exercise-on-precontractual-disclosures/

Reporting of the relevant pre-contractual disclosure documents used for any UCITS or AIF that are disclosing in line with either Article 8 or 9 of the SFDR is required by 31 October 2023.

Does the local regulator have a simplified process for document filings?

In relation to any regulated financial products such as UCITS or alternative investment funds (AIFs), any update required by Commission Delegated Regulation (EU) 2023/363 of the relevant pre-contractual documentation for UCITS and AIFs disclosing in line with either Article 8 or 9 of the SFDR may benefit from a streamlined review by the Financial Sector Supervisory Authority (Commission de surveillance du secteur financier (CSSF)). The filing needs to indicate, that other than using the new template required by Commission Delegated Regulation (EU) 2023/363, that no other changes have been made.

The findings were first published by Thomson Reuters- Practical Law.