Head of investment fund supervision Marco Zwick says the CSSF will launch a fast-track procedure for updating fund prospectuses to help asset managers meet the deadline of March 10 for compliance with the EU’s Sustainable Finance Disclosure Regulation (SFDR). He says boards of directors will have to certify that funds meet the SFDR requirements to disclose sustainability risks in their portfolios, and the CSSF will conduct sample checks. However, the regulator recognises that asset managers lack details about the rules since the European Commission has not yet published regulatory technical standards, and in many cases may struggle to obtain needed information from companies in which funds have invested.

Source: Lux regulator to “fast track” ESG disclosures (available here)

Luxembourg’s Finance Ministry has placed before the Chamber of Deputies draft law 7433, which is designed to encourage the establishment in the grand duchy of sustainable investment vehicles and funds that follow environmental, social responsibility and governance strategies.

The legislation amends Luxembourg’s UCITS law by reducing the rate of the annual subscription tax on assets from 0.05% to 0.01% for funds with a sustainability certification and ESG, green or social purpose incorporated into their investment process. Compliance with these conditions should to be certified by an independent auditor.

The Finance Ministry says it is committed to giving a further boost to what is already a booming sector in Luxembourg and to be a precursor in offering more favourable taxation to encourage sustainable finance.

The ministry says the legislation is in line with proposals drawn up by the European Union to expand the role of sustainable finance and the government’s conviction that as a leading international financial centre, Luxembourg should be in the forefront of efforts to build a more sustainable economic system.

The sustainability criteria are to operate at two levels. One is the fund’s investment strategy, for example impact investing. The strategy must be clearly and precisely defined in terms of ESG, green or social purpose criteria, and the fund’s adherence to these principles must be certified annually by an independent auditor.

The fund must also have a sustainability certificate. While a harmonised labelling system does not yet exist at European level, funds should use widely accepted certification systems such as ISR, TEEC, Nordic Swan, Österreichisches Umweltzeichen, Luxembourg’s LuxFLAG and FNG. The conditions for benefiting from the reduced 0.01% subscription tax will be set out in a grand-ducal decree.

The fund must submit an application to Luxembourg’s indirect tax authority (AED) including certification by an accredited auditor of the fund’s adherence to an eligible investment strategy, and at least one sustainability certification from the list of providers to be set out in the decree.

For further information, you may contact Olivier Sciales at oliviersciales@cs-avocats.lu.