Sustainable finance: CSSF implements SFDR fast-track procedure

News

Sustainable finance: CSSF implements SFDR fast-track procedure

17 December 2020

Regulatory News Alert

Context and objectives

On 16 December 2020, the Commission de Surveillance du Secteur Financier (CSSF) published a communication on the regulatory requirements and fast-track procedure regarding Regulation (EU) 2019/2088 on the sustainability-related disclosures in the financial services sector (SFDR).

As mentioned in the previous CSSF communication on 6 November 2020, all SFDR application dates remain unchanged; therefore, investment fund managers (IFMs) will need to comply with the SFDR’s high-level principle-based requirements by 10 March 2021.

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SFDR fast-track procedure

The CSSF has implemented a fast-track procedure specifically for the SFDR to facilitate the submission of the prospectus/issuing document updates to the CSSF.

  • Updates must be limited to reflect the changes required under the SFDR.
    • If the modifications to the investment policy and restrictions are material, the fast-track procedure cannot be used.
    • Alternative Investment Fund Managers (AIFMs) will be able to update the prospectus/issuing documents of AIFs under the form of Specialized Investment Funds (SIFs) and Part II Undertakings for Collective Investment (UCIs).
  • To benefit from this fast-track procedure, each updated prospectus/issuing document that requires a visa stamp will have to be accompanied by a confirmation letter.
     

Confirmation letter for CSSF visa stamping

With this confirmation letter, IFMs shall provide a conformity confirmation of the prospectus/issuing document update and an upgrade of IFM policies/processes with the SFDR. Among others, in this letter they must confirm that:

  • Only changes in direct relation to the SFDR’s entry into force have been inserted into this prospectus/issuing document submitted for a visa stamp to the CSSF.
  • The fund’s/sub-fund’s investment objectives and policy have been/not been changed.
  • Disclosures have been made in consideration of SFDR requirements.
  • Disclosures are accurate, fair, clear, not misleading, simple and concise.
  • The changes are compliant and entirely in line with the investor information that the fund must publish in accordance with the SFDR.
  • Information related to adverse sustainability impacts has been (or will be) published at the latest on 10 March 2021, or 30 June 2021 on a website.
  • The remuneration policy has been (or will be) updated, and published on a website at the latest by 10 March 2021.
  • The investment decision process has been reviewed.
  • The risk management process (RMP) has been (or will be) updated at the latest by 10  March 2021.
     

Next steps

By 28 February 2021 at the very latest:

  • UCITS management companies will have to assess their situation regarding the new disclosure obligations and, for each Luxembourg UCITS managed by them, submit an updated UCITS prospectus to the CSSF (including all the requested disclosures).
  • IFMs shall submit to the CSSF an updated prospectus/issuing document version for a visa stamp together with the confirmation letter.
  • This information must also be made available to AIF investors.

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 CSSF issuing a notice requesting the filing of a new revised prospectus/issuing document version.
 

What does this mean for my institution?

Incorporating multiple aspects of the SFDR, this communication plays a central role in the way financial market participants should prepare to overcome climate change hurdles and integrate sustainability.

The SFDR is the first of a series of upcoming ESG regulations to come into force within a short time frame, which does not leave concerned institutions much time to comply. It is part of a larger regulatory context to build and finance a low carbon economy, which includes:

  • The Taxonomy Regulation (Regulation EU 2020/852) to define a common sustainability narrative for investors;
  • The integration of sustainability preferences into the Markets in Financial Instruments Directive (MiFID, Directive 2014/65/EU); and
  • The revision of the EU Non-Financial Reporting Directive (NFRD, Directive 2014/95/EU).

To adapt to the upcoming ESG regulatory changes, concerned institutions will have to undertake an assessment of their organization, identify potential gaps, propose a review of current processes, and prepare to change or modify their business processes, governance and products if needed.
 

How can Deloitte help you?

To help you understand how you are impacted by the SFDR and how to implement the new regulatory requirements, Deloitte has defined a set of frameworks and market practices to accelerate your SFDR journey, both at the entity and product level. Deloitte’s teams are committed to supporting you in the definition of your sustainability risk policy and identification of principal adverse sustainability impacts, as well as updating your precontractual documents and website disclosures.

We can also support you with the new CSSF fast-track self-certification process for product disclosures.

  • If you are starting your SFDR journey: we can create a customized action plan and support your SFDR implementation through action-oriented workshops to meet the March deadline.
  • If you are already advanced in your SFDR regulatory journey: we can share market practices, challenge your positioning compared to your peers, and get you ready for the self-certification of your fund’s prospectus and the fast-track procedure with the CSSF.

Finally, with our Regulatory Watch Kaleidoscope service, Deloitte can also help you stay ahead of the regulatory curve to better manage and plan upcoming regulations.

 

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

Contacts

Subject matter specialists

Pascal Martino
Partner – Banking Leader
Tel : +352 45145 2119
pamartino@deloitte.lu

Francesca Messini
Director – Sustainable Finance Leader
Tel : +352 45145 2791
fmessini@deloitte.lu

Florence Buron
Director – Financial Industry Solutions
Tel : +352 45145 2704
fburon@deloitte.lu

Dario Zambotti
Director – Audit Industry Solutions
Tel : +352 45145 2677
dzambotti@deloitte.lu


Regulatory Watch Kaleidoscope service

Simon Ramos
Partner – IM Advisory & Consulting Leader
Tel : +352 45145 2702
siramos@deloitte.lu

Jean-Philippe Peters
Partner – Risk Advisory
Tel : +352 45145 2276
jppeters@deloitte.lu

Benoit Sauvage
Director – Risk Advisory - Regulatory Watch
Tel : +352 45145 4220
bsauvage@deloitte.lu

Marijana Vuksic
Senior Manager – Risk Advisory - Regulatory Watch
Tel : +352 45145 2311
mvuksic@deloitte.lu

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