Sustainable Finance Disclosure Regulation: the CSSF confirms that the compliance date remains 10 March 2021

Luxembourg

The Commission de Surveillance du Secteur Financier (the “CSSF”) has published a press release on 6 November 2020 confirming the dates of application of Regulation (EU) 2019/2088 on the sustainability-related disclosures in the financial services sector (“SFDR”). This press release is addressed to the attention of the financial market participants and financial advisers subject to SFDR established in Luxembourg and subject to the CSSF’s supervision (the “FMPs” and “FAs” as applicable).

The purpose of such CSSF’s press release is twofold: to convey information the European Supervisory Authorities (“ESAs”) received from the European Commission and to ensure FMPs and FAs’ full compliance with the following European Commission’ statements on the application dates of SFDR:

  1. the application of the SFDR is not conditional on the formal adoption and entry into force or application of the regulatory technical standard (“RTS”);
  2.  the RTS which underpin the SFDR will be delayed, until a later date, possibly January 2022 or later despite a first draft of RTS released in April 2020 and initially set to be finalized by year end;
  3. the high level and principles-based requirements contained in the SFDR must be complied with as from 10 March 2021.

For the sake of completeness, the CSSF reminds that, as per the SFDR, the following entities established in Luxembourg subject to the CSSF’s supervision may notably qualify as:

(a) FMPs: alternative investment fund managers (AIFMs), UCITS management companies, managers of a qualifying venture capital fund or a qualifying social entrepreneurship fund, credit institutions or investment firms which provide portfolio management, and institutions for occupational retirement provision (IORP); and

(b) FAs: credit institutions, investment firms, AIFMs, and UCITS management companies which provide investment advice.

SFDR introduces requirements for the EU-based asset managers and for the investment funds they manage and may also have implications for non-EU asset managers, particularly where they have EU affiliates or market their funds or financial products into the EU.

SFDR is designed to apply to all managers and investment funds which are therefore required to consider the impact of SFDR, even though they have no particular focus or agenda on ESG/sustainable finance.

In addition, SFDR sets specific requirements for (i) ESG-labelled investment funds (i.e. investment funds which promote environmental or social characteristics), (ii) sustainable investment funds (i.e. investment funds with a sustainable investment objective) and (iii) carbon reduction investment funds (i.e. investment funds that aim to reduce carbon emissions).

The draft RTS set out requirements relating to the content, methodology and presentation of disclosures under SFDR and a template for principal adverse impacts and metrics or indicators to be used by the FMPs. It is intended that the ESAs will develop templates for precontractual and periodic report disclosures, but they are not included in the draft RTS.

In terms of immediate steps, FMPs and investment funds are required before the 10 March 2021 deadline to make pre-contractual, website and periodic disclosures of specified information on how they integrate sustainability risks in their investment decision making process and advisory processes (including asset due diligence processes) and how they consider the adverse sustainability impacts of their investments.

However, periodic reporting disclosures will start applying in respect of financial years commencing on 1 January 2022.

Disclosure of principal adverse impacts in funds’ offering documents and periodic reports will become applicable as from 30 December 2022.

Our dedicated team will closely monitor the finalization of the RTS and can assist in all phases of this two step compliance process.

For any questions regarding the above, please do not hesitate to contact our specialists.