To that end, the CSSF is offering a priority processing procedure (PPP) for funds that submit their revised prospectus or issuing document updated solely to changes driven by the new requirements under the Circular. This submission should include a completed confirmation letter detailing the amendments, the board of directors' signed resolutions, and an informative notice to the shareholders.
Our experts are available to assist you in navigating these new requirements, providing guidance on compliance with ESMA guidelines and the Circular, ensuring that fund names, disclosures, and marketing materials accurately reflect their sustainable investment strategies and facilitating the whole PPP to streamline your compliance process.
Key takeaways
Scope of the Circular
The Circular applies to all Luxembourg-based investment funds, including UCITS management companies (as well as UCITS that have not designated a UCITS management company), alternative investment fund managers including internally managed AIFs, EuVECA, EuSEF and ELTIF and money market fund managers.
It is designed to protect investors from misleading fund names and ensure that funds genuinely align with their ESG or sustainability claims. In its communiqué, the CSSF highlighted its commitment to closely monitoring compliance with these standards, underscoring the importance of trustworthy fund labels in Luxembourg's sustainable finance sector.
Minimum investment thresholds
Funds using terms like "transition", "social", "governance", "environmental", "impact", or "sustainability" must meet an 80% investment threshold for assets aligned with their ESG or sustainability objectives. These investments should be part of the binding strategy elements disclosed according to Annexes II and III of the Commission Delegated Regulation (EU) 2022/1288.
Exclusion criteria
Funds must exclude investments in companies involved in certain activities, as outlined in the Commission Delegated Regulation (EU) 2020/1818, such as fossil fuel-related sectors, to maintain alignment with environmental or social objectives.
Meaningful sustainable investment
Funds incorporating "sustainability" in their names must allocate a "meaningful" portion to sustainable assets, as defined by Article 2(17) of the Sustainable Finance Disclosure Regulation (SFDR), and must demonstrate measurable positive impacts alongside financial returns.
Cumulative application for combined terms
If a fund name combines multiple terms (e.g., "social" and "environmental"), it must meet the criteria for each term. However, for names involving "transition," specific transition-related provisions will apply.
Clear path for impact and transition terms
Funds using terms like "transition" or "impact" must ensure that investments contribute to a measurable path toward social or environmental improvement or aim for positive, measurable impacts.
Supervisory expectations
The CSSF expects ongoing adherence to these standards, with any passive breaches to be corrected in the investors' best interests if not due to deliberate choice.
Fund naming confirmation letter requirement and PPP
Fund managers are required to submit a fund naming confirmation letter when filing an updated fund prospectus. This letter, accompanying the submission under the PPP, confirms that all changes directly relate to ESMA guidelines, affirming that fund disclosures are accurate, clear, and meet investor expectations.
Eligible updates include a name change of at least one sub-fund or minor adjustments to a fund's or sub-fund's ESG engagement or SFDR precontractual disclosure.
Changes beyond these parameters will be excluded from the PPP and must proceed through the standard CSSF approval process.
