With less less than 3 months to go until the Sustainable Finance Disclosure Regulation (“SFDR”) comes into force in the EU (on 10 March 2021), the Luxembourg regulator (the « CSSF») published on 16 December 2020 a communication detailing the new regulatory requirements, applying to Luxembourg investment fund managers (“AIFMs”), with respect to transparency on the integration of sustainability risks, on the consideration of adverse sustainability impacts and on the provision of sustainability-related information.
By 10 March 2021, AIFMs will need to:
(i) Perform sustainability risk assessments, disclosing how sustainability risks are integrated in their investment decisions and what could be the likely impact of such risks on the returns of a given fund. Their approach must be described either into UCITS prospectus or, for AIFs, made available to investors. Following a scoping preliminary analysis, this assessments can lead to the following conclusions:
|no sustainability risks deemed to be relevant
|| the reasons should be explained in prospectus
|| make reasons available to investors (negative disclosure statement)
|managers do not consider adverse impacts of investment decisions on sustainability factors
|| adequate disclosures to be included in prospectus
|| inform investors (negative disclosure statement)
|the fund qualifies as financial product that either promote environmental or social characteristics (art.8)
|| potential modification prospectus
|| inform investors in precontractual disclosures
|the fund has sustainable investment as objective (art.9)
The integration of sustainability risks must also be ensured at the level of the AIFM risk management policy.
(ii) Assess their compliance with the requirements related to the publication of information on the websites and to the update of policies and processes related to sustainability risks.
SFDR fast track procedure
In its communication, the CSSF also announces the implementation of a SFDR fast track procedure to support the visa stamping of updated fund prospectus/issuing document. This procedure aims to facilitate the submission of the prospectus/issuing document updates to the CSSF. It will be available for:
- UCITS management companies, who needs to submit an updated prospectus, including all the requested disclosures, for each UCITS they manage by 28 February 2021; and
- AIFMs, who needs to submit updated prospectus/issuing document of AIFs under the form of SIFs and Part II UCIs.
The fast-track procedure will only be valid if (i) the updates are limited to reflect changes required under SFDR and (ii) it includes a confirmation letter certifying the conformity of the prospectus/issuing document update as well as the upgrade of AIFM policies/processes (the “Self-Certification”). This procedure will enable the funds to file the offering document/prospectus without going through the regulatory approval process, provided that the CSSF receives the Self-Certification which will be reviewed within a shortened timeframe.
The Self-Certification includes confirmation of important items in relation to the investor information disclosures, the publication of the related adverse sustainability impacts on a website, the update of the risk management policy to integrate the sustainability risks, the update and publication of the AIFM remuneration policy, which shall all be implemented by the funds and AIFMs by 10 March 2021.
If you wish to have more information on this topic, the full CSSF communication is accessible here. Our experts are also at your disposal to answer any questions you may have.