ESG: CSSF Fast Track Procedure and Board SFDR Self-Certification

On 16 December 2020, the CSSF has implemented a specific Sustainable Finance Disclosure ("SFDR") fast track procedure to facilitate the submission of the prospectus/issuing document updates to the CSSF.

AIFMs and Management Companies ("Fund Managers") must assess their situation in respect of the new disclosure obligations and submit to the CSSF, for each Luxembourg regulated fund managed by them, an updated prospectus (including all the requested disclosures) by 28 February 2021.

In order to benefit from this fast track procedure, (i) the updates must be limited to changes required under SFDR, (ii) each updated prospectus/issuing document submitted for visa stamp will have to be filed together with a dedicated CSSF confirmation letter (the "CSSF Confirmation Letter"). However, if the modifications to the investment policy and restrictions are material according to CSSF Circular 14/591, the use of the fast track procedure is not available.

From a practical perspective, the fast track procedure for prospectus/issuing document updates will be operated as follows:

• A conformity confirmation of the prospectus/issuing document update as well as upgrade of Fund Manager policies/processes with SFDR is requested to be evidenced, under the ultimate responsibility of the Fund Manager/fund, by means of the Confirmation Letter duly signed by at least one representative of either the Fund Manager or the legal advisor or another representative of the Fund Manager or the fund.
• The professional duly appointed to submit the updated prospectus/issuing document version for visa stamping by the CSSF must upload the document in clean version, in accordance with CSSF Circular 19/708 relating to the electronic transmission of documents to the CSSF alongside with the said confirmation letter duly filled out and merged with the updated prospectus/issuing document in track change version. Where a notice is foreseen to inform investors on prospectus/issuing document update, this notice shall also be uploaded and submitted as letter.
• Upon satisfactory acceptance by the CSSF, the prospectus/issuing document will be visa stamped and returned through the e-file/Sofie channel. Unsatisfactory filing will result in the return of a notice though e-file/Sofie requesting the filing of a new revised prospectus/issuing document version.

Requirements on transparency with regard to the integration of sustainability risks, the consideration of adverse sustainability impacts and the provision of sustainability-related information

The SFDR requires Fund Managers to comply with harmonised rules on transparency with regard to sustainability risks and the consideration of adverse sustainability impacts and the provision of sustainability-related information.

As outlined in the CSSF Communiqué dated 6 November 2020, all application dates under SFDR are being maintained although the related Regulatory Technical Standards have not yet been published. Fund Managers must comply with the high-level principle-based requirements as laid down in the SFDR by 10 March 2021 where this is required under SFDR.

The SFDR definition of financial products includes funds. Article 6 of SFDR requires that Fund Managers to disclose how sustainability risks are integrated in their investment decisions as well as assess and disclose what could be the likely impact of such risks on the returns of a given fund. The sustainability risk assessment approach and related disclosures feed into UCITS prospectus, respectively are made available to AIF investors in accordance with the Disclosure Requirements. Where the Fund Managers' sustainability risk assessment leads to the conclusion that there are no sustainability risks deemed to be relevant for a given fund, the reasons should be explained in UCITS prospectus respectively be made available to AIF investors in accordance with the Disclosure Requirements.

Fund Managers are further required to put in place adequate disclosures in fund prospectuses and respectively inform AIF investors by 10 March 2021 in relation to Article 7(2) SFDR when such managers do not consider adverse impacts of investment decisions on sustainability factors for a given fund.

In relation to regulated funds that either promote, among other characteristics, environmental or social characteristics, or a combination of those characteristics (Light Green funds) or funds that do have sustainable investment as their objective (Dark Green funds), Fund prospectuses may also need to be modified respectively AIF investors informed in accordance with the provisions of SFDR.

The integration of sustainability risks must also be ensured at the level of the Fund Manager risk management policy.

In this context and in order to comply with the SFDR, Fund Managers shall assess their situation in respect to the new disclosure obligations, plan and implement the update of prospectuses of regulated funds by submitting to the CSSF by 28 February 2021 at the very latest an updated prospectus/issuing document version for visa stamp. For AIF investors, such information should be made available in accordance with the Disclosure Requirements.

Fund Managers should also 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. Adequate measures must be taken in case of gaps. The related disclosures relate mainly to the sustainability risk policies, the investment decision-making process, the adverse sustainability impacts as described under Article 4 SFDR and the remuneration policies.