Updated CSSF supervisory priorities in sustainable finance


On 22 March 2024, the Commission de surveillance du secteur financier (the “CSSF”) published an updated version of its supervisory priorities in sustainable finance, which were initially issued in April 2023[1] (the “Communiqué”).

This update aligns with the objective of the CSSF to proactively support the transition of the financial sector towards a sustainable economy. To this end, the Luxembourg regulator seeks to ensure the integration of the environmental, social and governance (“ESG”) requirements within a current evolving context necessitating a robust and progressively refined risk-based approach to supervision.

Within this framework of continual enhancement, the CSSF reminds a non-exhaustive list of its supervision priorities in sustainable finance for (I.) credit institutions and investment firms, (II.) asset management and (III.) issuers.


I. Credit institutions and investment firms

As for credit institutions, the Communiqué sets out the CSSF’s supervisory priorities in relation to (i) transparency and disclosures, (ii) risk management and governance and (iii) MiFID rules related to sustainability.

 (i) Transparency and disclosures

In the Communiqué, the CSSF reiterates that it will continue ensuring the supervision of disclosure obligations incumbent on credit institutions falling within the scope of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial sector (“SFDR”).

In-scope credit institutions are reminded that this supervision will be carried out via the long form report, which includes in the Self-Assessment Questionnaire a section dedicated to sustainability disclosures.

These credit institutions must also be aware of the CSSF’s intention to conduct additional off-site reviews of SFDR website disclosures (at both entity and product level) on a sample basis and must thus be prepared in this context.

(ii) Risk management and governance

The CSSF reminds that climate-related and environmental risks integration and mitigation remain a top priority for the banking sector.

In that context, the CSSF notably intends to (i) develop and carry out on-site inspections specifically focused on climate-related and environmental risks and (ii) continue carrying out on-site inspections on governance, business models and credit risks which will include such risks.

Credit institutions are also informed of the CSSF’s intention to conduct a sample-based review of their remuneration policies and practices to verify whether these policies have been updated to ensure consistency with the integration of sustainability risks in their governance and business models.

(iii) MiFID rules related to sustainability

In the coming months, the CSSF will also focus on the areas of suitability assessments and product governance processes and procedures. In that respect, the CSSF will be conducting off- and on-site inspections of a sample of firms.

The CSSF will further continue carrying out MiFID on-site inspections in relation to the integration of sustainability in other MiFID requirements such as conflicts of interest, information to clients and internal control functions.

The main takeaway from this Communiqué is that the integration of sustainability is a top priority for the CSSF and it is therefore of utmost importance for credit institutions to efficiently include sustainability risks in their governance, policies and practices. 


II. Asset management

While the CSSF will continue the verification of (a) the compliance with the pre-contractual and periodic sustainability-related disclosures requirements, (b) the consistency with the website disclosures and (c) the consistency of information in fund documentation and marketing material, the CSSF outlines a strong focus on the monitoring of the organizational arrangement of the investment funds managers (IFMs), including with respect to the integration of sustainability risks.

As communicated through the outcome of its Thematic Review in August 2023, IFMs are required to have a robust approach in the integration of sustainability risks into their investment decisions and expected to assess, on an ongoing basis, their compliance with the sustainability-related requirements, taking into account the results of the Thematic Review. The CSSF will make sure that corrective measures, where necessary, are being enforced to achieve compliance.

The CSSF also underlines its implication on the second stage of the common supervisory action launched by the European Securities and Markets Authority (the “ESMA”) on 6 July 2024. To enhance the integration of sustainability risks and disclosures in the asset management sector, the authority issued specific questionnaires to a sample of IFMs on 19 March 2024.

It is to be noted as well that the CSSF intends to supplement the information gathered through pre-contractual and periodic data collection with on-site inspections on the integration of sustainability-related provisions by IFMs in their organisation.

Finally, attention is drawn to ESMA’s Public statement on Guidelines of Funds’ names from 14 December 2023[2], which may impact the regulatory landscape of asset management.


III. Additional supervision focus for issuers

The CSSF expects issuers to consider climate and other environmental matters, which have been identified as a priority for both International Financial Reporting Standards’ (IFRS), when preparing both financial statements and non-financial statements.

This echoes the CSSF’s communication[3] outlining its enforcement priorities for the 2023 annual reports published by issuers subject to the Transparency Law[4]. Additionally, in the context of the implementation of the Corporate Sustainability Reporting Directive (the “CSRD”), the CSSF also published a gap analysis in February 2024[5], highlighting areas that remain to be addressed by issuers in transitioning from the Non-Financial Reporting Directive (NFRD) to the CSRD.

In conclusion, the CSSF reiterates its international role in fostering cooperation in sustainable finance and outlines the schedule of supervision exercises in sustainable finance for 2024, as planned by the European Supervisory Authorities (ESAs).

 Players of the financial market should be aware of the CSSF’s priorities and assess, where appropriate, their compliance with sustainability-related requirements on an ongoing basis. 


For more information on the topic, please do not hesitate to contact our experts, Aurélien Hollard, Julie Pelcé, Aurélia Viémont, Mélanie Poirrier and Clémence Richard.

[1] For more information on this subject please find our article precedent article here.

[2] Public Statement “Update on the guidelines on funds’ names using ESG or sustainability-related terms”, ESMA34-1592494965-554 of 14 December 2023.

[3] “Enforcement of the 2023 Annual reports published by issuers subject to the transparency law” of 8 January 2024.

[4] Luxembourg law of 11 January 2008 on transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market.

[5] « 2022 climate-related disclosures: Gap analysis THEMATIC REVIEW ON ISSUERS’ SUSTAINABILITY STATEMENTS ON THE VERGE OF THE CSRD ENTRY INTO FORCE” of February 2024.