CSSF launches second stage of its supervisory examinations and updates its supervisory priorities in sustainable finance

On 22 March 2024, the Commission de Surveillance du Secteur Financier (CSSF), Luxembourg’s financial regulator, published two significant Communiqués on sustainable finance:

  • A Communiqué on the second stage of the European Securities and Markets Authority’s (ESMA) Common Supervisory Action (CSA) on sustainability risks and disclosures in the investment fund sector
  • A Communiqué on the update of the CSSF’s supervisory priorities in sustainable finance


In summer 2023, ESMA announced the launch of a CSA on sustainability-related disclosures and the integration of sustainability risks in the investment fund sector with three main objectives:

  • To assess whether market participants adhere to applicable rules and standards in practice
  • To gather further information on greenwashing risks in the investment management sector
  • To identify further relevant supervisory and regulatory intervention to address the issue

In this context, the CSSF announced in September 2023 its plan to follow a two-stage process to complete this regulatory examination mandated by ESMA:

  • In the first stage, it requests that UCITS Managers and AIFMs complete a questionnaire focusing more closely on greenwashing risks
  • In the second stage, it requests that UCITS Managers and AIFMs complete a questionnaire on the integration of sustainability risks and factors in the organisational arrangements of UCITS Managers and AIFMs and on the transparency disclosures at Investment Fund Manager (IFM) and product level

Key information and expectations

Now that the first stage is complete, the CSSF’s Communiqué of 22 March announces the start of the second stage of the CSA.

Similar to the process followed for the first stage, on March 19, the CSSF contacted a selected sample of in-scope IFMs by email.

The selected entities have been asked to complete a questionnaire on:

  • The integration of sustainability risks and factors in their organisational arrangements (including questions on policies and procedures in place, internal reporting to senior management, retention of relevant resources and ongoing training on the topic, KPIs, etc.).
  • Compliance with the SFDR transparency disclosures at IFM website level (e.g. remuneration policy, PAI statement) and at product level (e.g. precontractual, website and periodic SFDR disclosures).

The CSSF and other EU financial regulators will continue to conduct these inspections until Q3 2024, as announced by ESMA, which plans to draft its final report on this CSA in Q1 2025.

Access the full Communiqué here_

The CSSF took the opportunity provided by the above Communiqué to update and reiterate its supervisory priorities in sustainable finance and to confirm that it will continue with its risk-based approach to supervision. At the same time, the CSSF also stressed that the primary responsibility of ensuring compliance with applicable requirements lies with the supervised entities and their board members.

The priorities announced are consistent with those from 2023, with a focus on:

  • Organisational arrangements of IFM, notably on the integration of sustainability risks
  • Verifying the compliance of precontractual, website and periodic SFDR disclosures (keep in mind the CSSF’s recent data collection exercises, which are now ongoing reporting requirements) and
  • Verifying the consistency of information in the SFDR disclosures with other marketing documents, as well as with the portfolio compositions.

In this context, the CSSF draws the market’s attention to the ESMA public statement on guidelines for fund names.

In its Communiqué, the CSSF also outlines other key focus areas that will drive its supervisory activities for other groups of market participants, such as:

For credit institutions

To ensure the supervision of transparency and disclosure obligations, additional off-site reviews of SFDR website disclosures at entity and product level will be performed on a sample basis.

  • To ensure proper alignment with the CSSF’s expectations on the integration and mitigation of climate-related and environmental risks, on-site inspections will be carried out from 2024. Furthermore, on-site inspections on depositary banks will also consider ESG aspects.
  • The CSSF also plans to conduct a sample-based review of credit institutions' remuneration policies and practices to assess the integration of sustainability risks in their governance and business models (cf. ESMA Supervisory Briefing_, Circular CSSF 21/773_).
  • In July 2024, the CSSF will conduct off- and on-site inspections of a sample of credit institutions and investment firms as part of the ESMA CSA on the integration of sustainability in firms’ suitability assessment and product governance processes and procedures (cf. ESMA guidelines on MiFID II suitability requirements_, ESMA guidelines on MiFID II product governance_).
  • The CSSF will continue to conduct MiFID on-site inspections covering sustainability-related obligations and further update its internal control plan to cover the SFDR product disclosure requirements applying to supervised entities providing discretionary portfolio management services.

For investment firms

In light of the transparency and disclosure obligations applicable under SFDR, the framework of the long form report applicable to investment firms has been revised in order to allow for gradual implementation (cf. Circular CSSF 24/853).

For issuers

  • Climate and environmental matters have been singled out as priorities for both IFRS financial and non-financial statements (cf. CSSF communication 8 January 2024_).
  • The implementation of Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive, CSRD), starting from 1 January 2024 for annual reports published in 2025, includes significant preparation requirements for issuers currently under the Non-Financial Reporting Directive (NFRD). As the CSRD's implementation unfolds in the coming years, it will encompass a broader range of issuers compared to the NFRD (cf. CSSF Report on climate-related disclosures_).

Access the full Communiqué here_

Next steps

Like many other financial regulators around the world, the CSSF is expected to continue and strengthen its supervision of financial market participants in Luxembourg under growing pressure from ESMA.

ESG compliance should not be seen as merely an exercise of product-level disclosures but instead as an internal governance project that requires the implementation of specific policies and procedures, the amendment of those already in place, and supported by specific skills and resources (incl. data and new tools).

ESG compliance should not be associated with the management, distribution or other advice of financial products falling under Article 8 or 9 of the SFDR. Many of the requirements described above apply to all financial market participants, regardless of the nature of the financial products that they manage and regardless of the sustainability commitments they may or may not have made.