CSSF's supervisory priorities in the area of sustainable finance

This CSSF communiqué emphasises that while it provides a general overview of the matters to be addressed in the area of sustainable finance, it is not exhaustive due to the evolving nature of the regulatory framework.

The CSSF has laid out its priorities across various sectors, including credit institutions, the asset management industry, investment firms, and issuers. The focus here is on the latter three.

(i) For the asset management industry

The CSSF continues to monitor the investment fund managers' (IFMs) adherence to the Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR), the Commission Delegated Regulation (EU) 2022/1288 with regard to regulatory technical standards (the SFDR RTS), and the Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation).

The CSSF aligns with the ESMA Supervisory Briefing on sustainability risks and disclosures.

Key areas of priorities include:

• Ensuring IFM's organizational arrangements incorporate sustainability risks.
• Assessing and verifying SFDR compliance in pre-contractual and periodic disclosures, consistency of the SFDR disclosures across the fund documentation and marketing materials and compliance of product website disclosures.
• Confirming that fund portfolio holdings accurately reflect the name, investment objectives, strategies, and characteristics displayed in the documentation to investors.

Further the common supervisory action (CSA) launched by the ESMA on 6 July 2023 on the integration of sustainability risks and disclosures in the asset management sector, the CSSF has initiated a phased approach to address greenwashing risks, with the first phase launched in August 2023. A subsequent phase focusing on the integration of sustainability risks and factors in the organisational arrangements of UCITS Managers and AIFMs and on the transparency disclosures at the IFM and product levels is slated for Q1 2024.

IFMs are further reminded to keep their data submissions to the CSSF up-to-date, as these are integral to the CSSF's supervisory activities.

Additionally, the CSSF points to the ESMA's Public Statement from 14 December 2023 regarding the naming of funds, which will soon affect the funds' names using ESG or sustainability-related terms.

(ii) For investment firms

The CSSF's supervisory priorities include:

• Revised transparency and disclosure requirements within the long-form report framework in respect of the SFDR disclosure obligations.
• A gradual approach to supervising ESG risks.
• Adherence to MiFID rules on sustainability, paralleling the standards for credit institutions.

(iii) For issuers

The CSSF emphasizes:

• The importance of climate and environmental considerations in IFRS financial statements and non-financial statements.
• Preparation for the transition from the Non-Financial Reporting Directive (NFRD) to the Corporate Sustainability Reporting Directive (CSRD), referencing a gap analysis published on 2 February 2024.

In addition to the CSSF focus areas in sustainable finance, its international role is emphasizes, by supporting the European Supervisory Authorities (ESAs) and international bodies such as the Basel Committee on Banking Supervision (BCBS), the European Financial Reporting Advisory Group (EFRAG), the International Sustainability Standards Board (ISSB) and the Network for Greening the Financial System (NGFS).

At the European level, the CSSF provides in its communiqué a simplified overview of sustainable finance supervision exercises planned by the ESAs.

For further information, please follow the link.