On 2 December 2022, the CSSF issued a FAQ (the "CSSF FAQ") in relation to the Sustainable Finance Disclosure Regulation (EU) 2019/2088 of 27 November 2019 on sustainability-related disclosures in the financial services sector ("SFDR") and Commission Delegated Regulation (EU) 2022/1288 ("SFDR RTS"). The CSSF FAQ (i) defines which financial market participants ("FMPs") and which financial products are covered and (ii) aims at providing further clarity on the SFDR. The CSSF FAQ was published a few weeks after the publication of a Q&A on SFDR by the European Supervisory Authorities (the "ESAs").
The FMPs to which the CSSF FAQ applies are alternative investment fund managers, management companies of undertakings for collective investment in transferable securities, managers of a qualifying venture capital fund and managers of a qualifying social entrepreneurship fund. The CSSF FAQ applies further to alternative investment funds (AIFs) and undertakings for collective investment in transferable securities (UCITS).
According to the CSSF, the CSSF FAQ is to be read in conjunction with the Q&A issued by the EU Commission (the "Commission Q&A"), clarifications of the ESAs and CSSF Communiqués on SFDR.
The FAQ in a nutshell
The CSSF FAQ covers the following topics: updates of prospectuses/issuing documents, website disclosures, pre-contractual disclosures and periodic disclosures.
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Updates of prospectus/issuing documents
The CSSF FAQ states that changes follow the same regime as any other changes made to the prospectus/issuing document. The mere introduction of Article 8 and Article 9 SFDR RTS pre-contractual templates following the entry into force of SFDR RTS to a prospectus shall not necessarily be considered as a "material change" . However, a "material change" may occur if the inclusion of the said SFDR RTS annex results in a change to (i) figures such as minimum committed percentages, (ii) the binding elements of the investment strategy and/or (iii) the benchmark. Such changes are assessed on a case-by-case basis by the CSSF. -
Website disclosure
The investment fund manager ("IFM") is and remains responsible for the website disclosure requirements of Article 10 SFDR in relation to the relevant financial product for which its acts as FMP, even if the portfolio management function has been delegated to a portfolio manager. The IFM is also responsible for ensuring that all relevant information under Article 10 of the SFDR is available on its website or on another website if this is where fund-related documentation is usually made available to investors. -
Pre-contractual disclosures
As clarified in the Commission Q&A, the CSSF FAQ clarifies that "sustainable investments" made by funds disclosing under Article 9 SFDR must be qualified as such, in accordance with the conditions of Article 2(17) SFDR, at all times i.e. from the date of the current investment and on an ongoing basis during the life cycle of the fund. Funds disclosing under Article 8 SFDR shall provide a description of how the investment strategy meets the environmental and/or social characteristics. Should only an exclusion strategy be applied as a key element of the ESG strategy applicable to the relevant fund, the CSSF would expect the detailed exclusion strategy to allow investors to understand how the fund’s environmental and/or social characteristics are being met. For funds disclosing under Article 9 SFDR, the sole application of an exclusion strategy is not acceptable. Such funds must invest in "sustainable investments" which requires a positive investment selection process in order to demonstrate how all underlying investments meet the conditions of Article 2(17) SFDR. Minimum thresholds of investment disclosed by funds under Article 8 or Article 9 SFDR in their prospectus shall be considered as binding commitments of the investment strategy of the fund. IFMs must ensure ongoing compliance with all the rules set out in the prospectus/issuing document of the fund they manage, with the depositary being in charge of monitoring the compliance of investment restrictions according to applicable legal provisions. -
Periodic disclosures
The CSSF states that UCITS and AIFs disclosing pursuant to Article 8 or Article 9 SFDR must comply with periodic disclosure requirements under Article 11 SFDR and the SFDR RTS (using the prescribed templates set out in the Annexes to the RTS) in their annual reports issued after 1 January 2023.
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