CSSF updates SFDR FAQ

by Silvia Saccardi 17 March 2023

The CSSF, Luxembourg’s regulator, has published an updated version of its SFDR FAQ.

The revision includes updates to the list of ‘Key European and CSSF publications’ regarding SFDR and adds three new questions to the FAQ.

The new content is as follows and appears in questions seven to nine of the FAQ:

ESG and sustainability-related terminology in investment fund names
The CSSF calls for managers disclosing under 6, 8, or 9 of the SFDR to avoid misrepresentation and misinformation of funds, aligning fund names with fund documentation.

It recognises ESG-related terminology should only be used in investment fund names when supported by material ESG or sustainable characteristics, themes or objectives outlined in pre-contractual disclosures of the fund. Terms include ‘ESG’, ‘green’, ‘sustainable’, ‘social’, ‘ethical’ and ‘impact’. This is in accordance with the ESMA Supervisory Briefing on sustainability risks and disclosures.

The regulator urges managers to keep abreast of European developments in this field, potentially referring to the upcoming ESMA fund names guidelines, which are currently being written.

Disclosing the sustainable investment methodology
The CSSF highlights that the methodology used to determine whether an investment is sustainable should be made available to investors. This can be achieved through a combination of the mandatory pre-contractual templates, issuing document or Article 10 SFDR website disclosures.

Use of efficient portfolio management (EPM) techniques
The FAQ notes that the EPM technique appropriate for hedging purposes should only be used in the ‘remaining portion’ (or not sustainable part) of the investment portfolio of investment funds subject to Article 9.

It outlines that it is the responsibility of the fund manager to assess the purpose of EPM techniques and whether they fall within the ‘remaining portion’.

The updated FAQ further supports the existing regulations in place.

More information on the CSSF’s FAQ can be found here.


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