SFDR | CSSF Communication and Fast Track Procedure

Evelyn MaherPartner, Bonn Steichen & Partners


On 16 December 2020, the CSSF issued a communication covering both new regulatory requirements on transparency with regard to the integration of sustainability risks, the consideration of adverse sustainability impacts and the provision of sustainability – related information, as well as the adoption of a fast track procedure.

Regulatory requirements

Regulation (EU) 2019/2088, of 27 November 2019 on sustainability – related disclosures in the financial sector (“SFDR”), requires investment fund managers (“IFM”) of undertakings for collective investment in transferable securities (“UCITS”) and alternative investment funds (“AIF”) 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.

IFMs need to comply with the high – level principle –based requirements as laid down in the SFDR by10 March 2021, although the related Regulatory Technical Standards (specifying the detailed requirements on the content, methodologies and presentation of sustainability–related disclosures) have not yet been published. This was outlined in the CSSF communication dated 6 November 2020.

As funds are included in the definition of market participants provided under SFDR, IFM must 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 fund. Such disclosure has to be made to investors on a pre-contractual basis, in the prospectus for UCITS and as part of the disclosure required for AIFs pursuant to article 23 of the AIFMD.

If the IFM’s sustainability risk assessment concludes that there are no sustainability risks deemed to be relevant for a given fund, this should also be disclosed in the same manner.

In accordance with article 7 of SFDR, if the IFM does not consider the adverse impacts of investment decisions on sustainability factors for a given fund, this should also be adequately disclosed by 10 March 2021.

Funds that either promote, among other characteristics, environmental or social characteristics, or a combination thereof (article 8), or funds that have sustainable investment as their objective (article 9) may also need to proceed with an update of the prospectus (UCITS) or relevant disclosure document (for AIFs). Whether the fund qualifies as an article 8 or article 9 product under SFDR should be assessed prior to the update of such information.

The integration of sustainability risks must be ensured at the level of the IFM’s risk management policy as well.

In order to comply with SFDR, the CSSF is advising IFM’s to assess the situation under the new disclosure obligations, and submit to the CSSF by 28 February 2021 at the latest, updated prospectus / issuing document for UCITS for visa stamp. AIF investors should be informed by updating the disclosure made pursuant to article 23 (1) of the AIFMD. IFM’s should also asses their compliance with SFDR as regards the publication of information on their website (which should be kept up-to-date) as well as the update of their policies and processes related to sustainability risks. Adequate measures must be taken in case of gaps.

The new related disclosure requirements mainly relate to sustainability risk policies, the investment decision making process, the adverse sustainability impact (article 4 SFDR) and the remuneration policies.

Fast track procedure to support visa stamping of fund prospectus /issuing document

Starting 16 December 2020 the CSSF has implemented a specific fast track procedure to facilitate the submission of the prospectus/ issuing document updates to the CSSF. The fast track procedure is available for UCITS as well as for Part II undertakings for collective investment and specialised investment funds.

In order to benefit from the fast track procedure, updates must be limited to changes required under SFDR. Material changes to the investment policy and investment restrictions as defined in CSSF circular 14/591 cannot benefit from the fast track procedure.

In order to benefit from this fast track procedure, each updated prospectus / issuing document submitted for visa stamp will have to be accompanied by a confirmation letter. A template of said confirmation letter is available here (CSSF’s website).

The self-certification letter must be signed by an authorised representative of the IFM, the fund or another representative of the IFM or the fund duly appointed. In this self-certification letter, the representative confirms one-by-one that all relevant changes required under SFDR have been implemented (or will be implemented at the latest by 10 March 2021).